EOG Resources, Inc. (EOG) Earnings Call Transcript & Summary

Thanks for joining us for our next session. We're really happy to have EOG Resources joining us today with CEO, Bill Thomas, as you can see. Those of you who've had the benefit of interacting with Bill will appreciate that he really truly has a deep and highly technical understanding of the upstream and unconventional resources specifically, but he's also a true culture carrier of EOG, an organization that has unique, but also very consistent corporate culture through cycle. And we think there's very few of those in E&P. So Bill, thanks for joining us today. Bill has some prepared slides and about 15 minutes of commentary. And then we'll move to Q&A. [Operator Instructions] So over to you, Bill.

Well, thank you very much, Steve. We appreciate you and we appreciate Evercore and the opportunity to be able to interact and present this morning. And I'm going to tell you, particularly, we're thankful for everybody that's tuned in and for your interest in EOG and our industry. And we appreciate your support. So as we move into '21, we have a very core corporate culture and a very focused business model, and I think it's proven very sustainable throughout the cycles. And so as you know, the company, anything about EOG, we're focused on returns. That is the #1 thing that we focus on all the time. And improving returns every year is where we are and where we're headed. And we have a very, I think, strong track record of disciplined growth. We've been one of the most disciplined reinvestment ratio companies in the business, and we'll talk more about that, and significant free cash flow. We moved into very significant free cash flow over the past 5 years, and we're heading in even more free cash flow potential in the upcoming years. And we're very committed to giving a significant part of that back to the shareholders. And I think we are a sustainability leader. We're very innovative, technology-driven. And we've got great historical metrics. And we've set some new goals, and we'll talk about those in a minute. So if you look back at 2021, it was a very -- obviously, a challenging year, but it's a remarkable year. We refocused the company, and we high-graded. A lot of double premium-type of wells were drilled last year. And we had the highest after-tax direct rate of return that we ever had in the history of the company on reinvestment. We reduced our well cost by a record 15%. That's the most we've ever done. And we reduced our operating cost by 4%. We maintained discipline. We shut in production. We deferred it to higher prices, and that was a big uplift on value there. We also didn't take our focus off adding new things to the company. We added a very prolific, very huge 21 Tcf natural gas play in the U.S. And we think it will be one of the lowest-cost, highest-margin gas plays in the U.S. We generated $1.6 billion of free cash flow. We increased the dividend by 30%. And we ended the year with a record net debt-to-total cap ratio of 11%. We think that's one of the best in the whole industry. And we had very strong ESG performance, 30% reduction in methane, 8% reduction in GHG. And we used 40% less free -- fresh water than we did the year before. So 2021, our focus is just like it always is, is to increase total shareholder value, increase returns. And so we're shifting permanently now to double premium. And I'll talk more about what that shift looks like with a slide that we've added here in a few minutes. So these are wells that generate a 60% rate of return at $40 flat. So it doubles the premium standard. And it'll dramatically increase the financial results of the company going forward. We have line of sight for continued well cost reduction, very sustainable well cost reduction this year. And we're really focused on lowering our base decline rate. And we'll talk about that in a few minutes. We're not going to grow production this year. We're going to maintain our exit rate of 440,000 barrels of oil per day. And we're not going to increase CapEx and no matter what oil prices do this year. We're leasing and testing on some of the new plays that we've been developing over the last few years. And those are very high-impact plays, double premium kind of plays, and we'll talk more about that in a minute. We're set to generate enormous amount of free cash flow, $2.4 billion at $50, obviously, a lot more at $60. We've already increased the regular dividend by 10%. And we have -- didn't refinance the $750 million bond that came due in the first quarter. So we've already committed $1.7 billion of our free cash flow just in those 2 items. And that's the primary way that we want to use free cash flow going forward. We raised the bar on ESG performance. We've now set a goal to eliminate routine flaring by 2025. I think we're one of the leaders in reducing flaring over the years, and now we're going to just eliminate it by 2025. We've got an ambition to go to net 0 on scope 1 and 2 by 2040, a very realistic plan that's low-cost and return-friendly and very technology and innovation supported inside the company. So we'll talk more about each one of these in a little bit. So when you think about double premium, what does that mean? It just means we're kind of raising the bar again on our investment returns. And those are the things that have really driven the exceptional financial performance of the company over the last 3 years. And as we raise it going forward and drill more double premium wells, it's going to impact it even more. You can see, on that chart, the historical premium era wells in 2016 and '20. There's where they ranked on the rate of return chart. The median is about 60% rate of return. And the new plays we're working on are even better than that. So we've got 5,700 of these, and these are going to be really the focus -- full focus of our company going forward. And this is just a comparison of the average EUR in the cumulative oil production over 2 years from a premium well versus double premium well. So you get 39% more oil in the first 2 years. And you can see, there's a big uplift on the per well EUR. And this is a chart that shows how drilling more of these kind of wells has affected the bottom line for EOG. So this is the number of premium wells -- net premium wells from 2014 up to this year. So it's increasing generally every year. So we're going to -- last year, it was a little over 50% double premium. This year, it's about 75%. Our target, hopefully, will be better than that. But you can see, we reduced the price of oil needed to generate a 10% ROCE all the way from $80, now we're down to $50. And we're headed below $50, sub-$50. As we get more and more of these double premium wells into our reserve base, there are super-low finding costs and they are lower decline than what we've been drilling in the past. So this is just our 2021 CapEx breakdown. We can breakeven on CapEx at $32 oil. And then we generate $2.4 billion at $50. We've already talked about -- we've already increased the dividend and paid off a bond and reduced our debt. So the $3.9 million is over our maintenance capital, and that's the fund some of these exploration plays that we've got, about $300 million in exploration plays. I think about $100 million in international plays that we're drilling and then about $100 million in ESG projects. So this is a slide that we've added, and we would just want to have some clarity on what we're thinking about before we move into our growth mode. We're not growing this year, because the market is not balanced. There's a lot of oil held off the market, cropping up process right now. So this is not a time to be thinking about growing. We need to let the market rebalance. So no growth until the market clearly needs the barrels. And growth will -- for EOG will be dependent on market fundamentals, not the price of oil. It's the fundamentals, not the price that remain drivers of when we'll move into a growth mode again. So what we're looking for is demand recovery to pre-COVID levels. There's different outlooks on that. Our outlook, and I think it agrees with a lot of commodity groups, is that we believe demand is significantly increasing, particularly in the second half of this year. We believe that could be by the end of the year, on a spot basis, like December, demand levels could be pre-COVID levels. And then certainly, we think it's very realistic that demand could be pre-COVID levels into 2020 as we go forward. We're also looking for inventories to be at or below the 5-year average. As everybody knows, this is the world inventories, U.S. inventory, they're dropping very significantly over time. And we think that will accelerate in the second half of the year, and you're going to be -- you're going to see very consistent, very strong inventory reduction over time. And we will be, we believe, below the 5-year average before the end of the year. And then low spare capacity. And that just means there's not a lot of oil shut-in trying to keep prices up. OPEC has obviously got a lot of oil shut-in right now. So we need to let them get their oil back on the market and get that spare capacity down. And so when all those big 3 things are aligned, which we have, I think, very high hopes that, that could be next year, then we'll begin growth again. And -- but if that doesn't happen, we're going to moderate our growth rate. We may not grow at all. We may grow at a smaller rate than the 8% to 10% outlook that we've given. But we're going to be market-driven and not price-driven and make sure that we don't put oil into the market that doesn't need the oil. So EOG has consistently been, over the last several years since 2017, generated a lot of free cash flow. We've been one of the most disciplined operators in the industry. And so you can see there where we rank in the large-cap peer group, we've averaged about 76% reinvestment ratio. So when we look at the company going forward, we're shifting to be even more disciplined maybe than we've been in the past. Next. And we delivered, over the last several years, a lot of free cash flow, $6.2 billion of free cash flow. We got our net debt down to 11%. And we've increased the dividend 124%. So we've delivered a lot of free cash flow, and we put it to the right place, in our view. And our free cash flow priorities have not changed. Sustainable dividend growth, that's the primary way, strengthening the balance sheet. We are definitely considering and committed to doing other cash return options like a supplemental dividend, in certain opportunistic situations, a share repurchase. And then we also look at low-cost bolt-on, high-return acquisition possibilities, not really corporate M&A. We really have a hard time making those high returns. But certainly, the small bolt-on-type acreage positions that have very strong upside on the drilling potential, those are things we're interested in doing. Our sustainable dividend growth, we've averaged a 20% compounded annual growth rate over 20 years. And so we're very committed to the regular dividend and continuing to grow that, and we never ever cut the dividend. That's why you want a strong balance sheet, so you don't ever want to get to a situation where you have to cut the dividend. And reducing debt, we've got a goal to get it down to $3.7 billion. And we really only have one more lever to pull on that, that's in 2023. It's a $1.2 billion bond. And so we would love to take that off and get that debt down to even a lower level. And then on our sustainability ambitions, like I said, in 2025, we've got a goal to reduce routine flaring. And then by 2040, net 0 scope 1 and 2 ambitions. And finally, the last slide is just what really drives EOG? It's the culture. It's the people. It's not a top-down-driven company. The value in EOG comes from every person in the company. They're all business people. They have the data. They have the ability to make decisions. And we let them do that. They're very technically astute. They're very innovative, very creative. And so all that means that our business model is going to continue to pursue great results. It's been -- we don't have to do a deal to fix the company. Our [ fleet ] folks inside of EOG are the ones that's making a difference. They're our most valued assets. We didn't lay off anybody. We didn't close any offices last year. We did that on purpose, because we want to come out of this downturn fully engaged and fully equipped to continue to make the company better going forward. So we're emerging a much, much stronger company. And we've got a lot of upside to continue to get better in the future because of our culture, because of our organization and because of the people at EOG. So Steve, that's my opening remarks, and so I'll turn it back over to you.

Great. Thanks, Bill. Appreciate the thoughts and delving into a lot of that. Perhaps we could start with the topic of the day, which is growth. And I know you didn't -- you weren't as bold enough to put the slide saying that you would start growing -- what you'd start growing the business at, again, when the price is there. But I appreciate the fact that you gave these kind of qualification points on you're certainly not growing this year and you're reserving the right to next year. I think the disconnect, it seems to us is that the Street and the market seems very skeptical of the incremental returns on additional drilling, right? Like we heard from one of your competitors yesterday, who said effectively that F&D is going to be rising if the oil cycle is sustainable and service costs in the U.S. will come back. And so growing into that up cycle is probably returns-dilutive. And this is a company with a pretty high-quality asset, similar to yours. So where do you think that disconnects kind of -- can you -- where do you think that -- how do you address that disconnect over time, I guess, is the question, right? There seems to be -- and to some extent, it feels like it would be easier for you just to go along and say, okay, everybody, I won't grow, and then wait for everybody to ask you to grow again, and then you'll be able to grow again. There seems to be a bit of a game theory here around grow or no grow. But maybe just think of -- the results are what they are. But maybe you could just address, you clearly see the return profile of your asset differently than some people do. And again, I know it's a broad question. But that seems to be kind of the crux of this growth, no growth kind of debate here around the stock.

Yes. I think, Steve, first of all, I want to make sure everybody understands, we're not going to be forcing oil in an oversupplied and unbalanced market. So we will adapt our growth rate based on what we see in 2022 happening from a market condition. So we may end up growing 2% or 3% or 5% or whatever. We see 8% to 10% when we model the company. Inside the company, we see 8% to 10% is the optimal speed for EOG to grow. And that means we optimize returns, which means return on capital employed, earnings per share, cash flow potential, which we believe -- that's what we hear from investors, especially generalist investors, that's what they're looking for. They're looking for companies they can optimize their returns and deliver consistent earnings and cash flow per share growth. And so that's a big, big focus of it. It'll just -- 8% to 10% optimizes that, and that's a rate that we can add barrels and grow our company and still improve the improvements, the capital efficiency, the reduction in funding costs, the lowering of our base decline rate. We can consistently improve all those metrics while growing at 8% to 10%. And a lot of that is the culture of the company. We have real-time data. We're always experimenting and making changes all the time. If you go too slow, you can't implement those changes and reap the benefits of those improvements. And so there's a good pace. You have to have a certain amount of pace, momentum to kind of get those things and compound those benefits. And then a 8% to 10% rate -- growth rate for us when we model the company gives us the same amount of free cash flow as 5% growth. So the -- we're not really [ dinging ] our ability to generate free cash flow and our opportunity to give that back to shareholders by growing 8% to 10% versus 5%. So we generate the same amount of free cash flow, but we get the benefits of adding significant more business value growing at a little bit faster pace than, say, at 5%. So that's what it is. It's an optimal pace. Every company, I think, has a different pace they can grow at, they can perform at. Because of our decentralized organization and multiple plays, we spread that capital out a little bit more evenly than trying to put it all like at one spot. And it's more manageable. It's more controlled. And each one of those areas are not growing at 8% to 10%. They're growing at a pace that's slower. But the combined group is growing at that rate. So we have a lot of built in, I think, cultural and structural advantages. And of course, asset quality is like super-high. And that's a very moderate and very comfortable growth rate for us. So that's why we picked it. That's the optimal rate. You can kind of think about next year in EOG, if the things I just explained about the market happened and we're free to grow, and that we want to be able to create the most amount of business value and that we may grow 8% to 10%. If the opportunity is not there, we're going to adjust. We're very, very committed to making sure that we don't force the oil and put pressure on the market, but we don't need to.

Right. If the market remains skeptical about the value of that growth, Bill, is there a place -- I know you defined debt reduction and dividend growth as priorities. But the question is, I guess, if the market doesn't value that growth, even though you're creating -- look at your financials and the retained earnings are growing and you're growing the business and you're growing intrinsic value. But if intrinsic value diverges from the stock price for an extended period of time because of this, is there a place for -- I know it's a 4-letter word, but buybacks or some way to kind of secure that value for shareholders? And again, this is more of a theoretical in terms of -- because like I said, I think there -- this seems to be the central issue in the market right now is the market is unwilling to credit your stock for that future growth potential, and that could persist for a while.

Yes, yes. I think we've always had the belief that -- could you give me some more water -- that if you create a good core business value at some point, the market will reward you for that. If that doesn't come about, that's why we haven't put in a more, I think, narrow plan to how we're going to use our free cash flow. We want the flexibility to consider share buybacks if that doesn't happen. So we want to -- we're committed to giving significant amount of money back to the shareholders in one way or the other, whether it's a supplemental dividend or share buybacks or maybe adding something very significant to the company through a bolt-on. And we want the opportunity to use that money to generate the highest returns for the shareholders.

Right, right. Okay. Maybe talk a little bit about -- exploration is also something that you really don't hear from many of your peers or maybe the industry in general. And as you think about that -- I mean it would be very easy for you to fold that $300 million into your broader budget and just not talk about it. But you do call it out. And you do -- so when you deploy those dollars, how do you think about the return on those dollars? Obviously, they're at higher risk and higher return. And I'm assuming you do look-backs on what was the return on dollars invested in the exploration program over time at EOG. And I think that's the other thing, which is people struggle with is what am I getting for that other -- in this year's, the $500 million, which is the $400 million of total global exploration plus the $100 million of carbon mitigation.

Yes. The reason we go exploration -- we've chosen, at least in this cycle, to go exploration versus acquisition or M&A, is that returns are higher. Because we're looking for testing plays that we believe will be very additive to the quality of the inventory we currently have. And we're not drilling in areas where we are expecting to drill dry holes at all. These are very low-risk plays, and they're very high-return plays. So of the $300 million in the domestic exploration expenditure, the bulk of that is drilling. So these wells are going to like, drill them, and we're going to put online, and they're going to make a really good return. They're really not that much different than the wells we're drilling anywhere else. And hopefully, there'll be significantly better -- some of them will be significantly better and give us an opportunity to improve the company in the future. So they're very high return, very low risk. We're not drilling in areas where there's never been any oil production. So there's regional takeaway. We don't have to spend huge amounts of money on infrastructure upfront, et cetera, et cetera. So these are low-cost, high-return investments, and we expect them to be very additive very quickly.

Right, right. Okay. I appreciate that. And then on the portfolio, it's been -- it's hard to imagine, it's been 5 years, I guess, since -- plus since Yates -- or 5 years since Yates, and it was the last major headline transaction that you all then -- it was probably the best transaction of that cycle. You sat out the big M&A cycle in 2020. As you think about the portfolio -- as I think about EOG, even though you have these, at different times, 7 or 8 operating regions, really the driver of the investment dollars, the growth and the returns has really been -- it went from the Bakken to the Eagle Ford. And you've been kind of in this Eagle Ford to Delaware kind of transition in the last couple of years. Is that the right way to think about EOG going forward? Is that it's smaller growth off of multiple more fields and kind of a diversification going forward? Or ultimately, at the right, if you do choose to grow the business in 2021, is that a really leaning into the Delaware is where you would do that? So maybe can you just talk about the portfolio is going to change from that perspective, and there's a different risk profile of that too.

Yes. The multiple offices and multiple plays is an enormous advantage on redistributing the capital and keeping the learning curve and the improvements going inside the company and having a very sustainable business model. It is a core competency, a core advantage. And -- because when you redistribute the capital at a lower rate per area, the amount of capital, you can slow down the growth in each one of those areas. You're not trying to force all the capital at one area, one spot. And you also redistribute the learning. You speed up the learning process, because all those different areas are trying different things. They're reducing costs in different ways. And they're improving well productivity in different ways. So you get results that transfer back and forth between plays and divisions. And so your learning curve is a lot faster. So that's one of the things, I think, some people don't understand about EOG is how do we have a sustainable learning curve, how do we have a sustainable cost reduction, how do we continue to replace our inventory with better inventory every year and drill better wells every year. It's through that process of having multiple plays and also looking for additional plays with those groups at the same time and adding better stuff. I think when you think about EOG, when I think about EOG, we have all the advantages and opportunities that any -- better than most of generating significant free cash flow, because we are allocating capital back at a level that's competitive or lower than most of the industry. So we're going to have a lot of free cash flow and the opportunity to give that back to shareholders in meaningful ways. We have all that built in. Plus we're going to get better, faster than the rest of the industry, there's no question in my mind. When you look at EOG in 3 to 5 years, our well productivity is going to -- it's already the best in the industry. It's going to be much, much better than the rest of the industry, because we've invested in these areas that are continually making better wells and reducing costs. And we're not so tied to the service industry fluctuations in prices, because the improvement, 75% of all the cost reduction inside the company, is EOG generating. It's not related to service things. So one example this year that's a really big one is pipe. If anybody has checked on pipe prices and availability lately in the industry, you're going to find out, it's like crazy high, and there's not any pipe. Well, we bought all the inventory we needed last year. So we're fully stocked. We bought it at the bottom of the market, and we're going to see a huge reduction in well cost, just because our pipe is cheaper this year than last year. That's just a countercyclic way we think and the way we do our business. The same thing on sand. We have a big line of sight that our sand costs are going to go way down from where they were last year. We've got the whole new way of processing the sand, delivering the sand at a lot lower cost, et cetera. Water is the same way. And you can just go down the list. There's just item after item after item, very granular, all throughout the company. That's really not driven by the service industry or other things. It's really driven by what we do inside of the EOG. And that gives us a sustainable business model to continually get better every year. So I am so confident -- I've been with the company for decades. Every year I'm going, we're going to have to peak out at some point. I'm going like this can't go on, but it does. And it's truly remarkable to be able to watch it inside the company. It's a tremendous -- it's the biggest asset that we have. So that's why we're excited about where we're going. We offer all the competitive things that all of our competitors are offering in free cash flow. But we also offer, I think, the ability to get better, faster and more sustainable than anybody else in the industry.

Right, right. Okay. That's great. I've got a couple of questions that come in off the service here online. I just want to hit them relatively quickly. A follow-up on exploration, Bill. Is production from the drilling of exploration wells, is that -- I'm assuming that's including your guidance, but it's just risked differently than a development play? Is that the right way to think about it?

Yes. There is some of it included in the guidance, and of course, we don't count on it until we actually see it. So when we -- but we're committed to the 440 million. So we'll adjust -- as we have success in the exploration areas, we'll adjust our other programs to where we maintain that production and not really grow this year. So they'll be -- it will only be beneficial to just make it easier.

But beyond those, just philosophically, how do you think about exploration as though that's additive to -- it's just a higher risk number in the production guidance? Is that the right way to think about it? Is that how you kind of operate?

Yes. There's some of it in there, but it is a little bit higher risk, because that's why we're testing it, is to make sure we can get repeatability and get more confidence in what kind of wells we're making. We have expectations, though, that they'll be better than what's in the numbers. If they come out like that, then we'll just simply reduce volume somewhere else on the lower part of the curve.

Okay. There's also a question on the line about Dorado, and I'll use that to segue into one of the questions I had to ask about ESG and carbon. But -- so you've identified this prospect. You've identified the resource, very, very low carbon emission, methane -- dry methane, I'm assuming. What's the development plan for that? I think the question here was like, what's the development plan for that? Is it -- do you link this to an LNG project and sell it internationally instead of just selling it at hub? And is that what you need to move forward with full-scale development on that? Is it gas price-dependent? Is it not? And then also I would probably ask, too, is there -- we're all dealing with this idea of kind of a green premium to some extent. So I think a lot of people are talking that the lowest flaring or the lowest emission in natural cash should actually trade at a premium to Henry Hub. So just wondering how you think about that. So just a couple of questions on Dorado there.

Yes. All those things you talked about are really important. It is dry gas. So you don't have a lot of infrastructure. And since we're starting greenfield here, we've got a lot of opportunity to build it out right and get it very super low emission. So that will be some of the places we'll be trying some of the new technology, carbon capture and some things like that. So we think it will be the lowest -- some of the lowest emissions, gas really anywhere in the world. The -- particularly the Austin Chalk wells are double premium or better at $2.50 gas, $2.50 flat gas. So that's our premium price deck is $40 flat oil and $2.50 flat gas. So a large percentage of the Austin Chalk wells are double premium. So they're very competitive with our oil inventory on returns. And what we're doing this year, we've got about 15 wells we're going to be drilling this year. And so these first couple of years, we want to get the cost down as fast as possible. So we're learning very quickly, translating data across plays and different ideas to get the cost down really quickly. As soon as we get the cost down, we'll have more room, I think, to more confidence in accelerating that. And then it will be a situation inside the company, just like we're talking about all these multiple plays and multiple offices, how to distribute that cash and generate the highest returns every year. So it will be competitive. It will be more than competitive, we think, on returns. And we have to watch the gas market, just like we do the oil market. And so we're not super-bullish on gas, but we're not bearish either. We see, I think, the long-term gas price closer to $3, maybe $3.50. We think gas will be a very significant part of the energy transition in the future going down the road. And so if that happens, the returns go way up, and we would accelerate it. We also, as you mentioned, we're in located there in South Texas, so where we got Mexico, we've got, obviously, Henry Hub and the developments going on, on the Gulf Coast for markets. And then we've got very close to LNG. And we're working LNG contracts. We've got 140 million a day deal, JKM-tied contract now. And we want to increase that, hopefully, over time, to get more exposure to potential upside on LNG as that develops over time. So all those things, we are very beneficial. They give us a lot of options. And so we think the asset will be very competitive, but it also gives us exposure and options to a lot of upside. And we have the flexibility to increase it and grow it if the opportunities there are kind of grow it at a moderate rate and [ weigh ] when the opportunities develop.

Okay. I just want to be clear, so is there a scenario where you would develop the field and just sell the gas at hub domestically? Or is some sort of export agreement or some sort of offtake to an LNG player or international kind of, is that necessary to kind of see full field development if you want to?

No, no, it's not necessary at all. So I mean it's very competitive at $2.50 gas. It's all I'm saying. So it just gives us another opportunity, another -- a way of adding value to the company, even if it's $2.50 gas. So -- but we would be more prone to accelerate it if, of course, we had $3 or $3.50 gas or we had a better LNG deal. So it gives us a lot of upside opportunities.

Got it. On -- and again, this is more than a 5-minute question, but there's -- we have about 5 minutes left. But I spent a little bit of time last summer with my colleagues, James, with Sandeep to sort of really taking in -- he was pretty generous this time and really understanding EOG's approach to technology and what you do in-house, a lot of people don't. I have to imagine that all of that has just put you really far ahead of other people in terms of thinking about scope 1 and scope 2 emissions, just because you're so intent on measuring things. One, is that true -- I mean I'm assuming that's true. And then the question here is, is there ever a time at which EOG gets into adjacent business, like you're -- you can do this for other people? It's always a question on the technology front is like why not either partner with somebody or just build out a -- you're in a technology business, not an oil and gas business, and that's a real business for EOG. Is there a future where that happens?

Yes. I wouldn't want to close the door on anything as long as it's super high returns. We're open anyway of generating really high returns. Right now, you're correct, Sandeep and his group are developing our information technology system to benefit our emissions reduction, just like we have everything, cost reductions and productivity increases all over the company. I mean his group is engaged in -- every group, even in the headquarters groups, every group has got Sandeep technology, IT technology embedded in it. And in ESG, I think it's going to be a big benefit, because we're getting very -- developing a system where we can get very granular, very specific site, whether it's at a well site or a facility to identify where all these emissions are coming from and be able to develop unique solutions to reducing emissions in each one of these sites. It -- sometimes, it's not one big thing you do, but it's a lot of little things in different areas to reduce these emissions all over the company. So we think that's going to be a huge part. That is a huge part of our net 0 process, and we're excited about that. And we push it all down to the -- again, just like we do the well cost reduction, everything else is going to be, push it down the division level and people and employees. They're excited about it. They're on it. They're very technically astute, and they're very creative. They're very innovative. And so that's going to really help us be a leader in ESG metrics going forward. So -- but we'll look -- we're always looking and thinking about how do we generate the highest returns for our shareholders. We don't -- we're not stuck. We try to keep an open mind. We do keep an open mind, and we evaluate all kinds of things, including M&A, including all the corporate M&A deals. We evaluated all of those way before they happen. So we look at everything. And our commitment to shareholders is, when we spend money, we want it to generate the highest return possible. And that's what EOG is about. We are so focused on returns, and that's what drives us, and I believe that's what makes us successful. And I think that's what's going to make us better in the future. So anyhow, a long answer to that question.

No, that's great. As usual, Bill, it's never hard filling half hour or 45 minutes of time with you. I really appreciate your attendance and your honesty, your candor and everything that you brought to the presentation today. And look forward to catching up and seeing how the year progresses. And hard to believe when we're talking about 2022 before we know it. But be well, and thanks.

Well, thank you. I think we're entering a new era. Really I think we're going to have more stable prices and more opportunities than we've had certainly in the last 5 years. So we're excited about the business and where we're headed. And we appreciate everybody. Appreciate you tuning in and listening.

Great. Thanks, Bill.