Lifted by rising oil prices Houston-based EOG Resources Inc. (NYSE: EOG) saw its first-quarter 2018 profit soar to $639.6 million, far above the $28.5 million earned a year ago, as its premium drilling strategy and technical advances grew production across its North American assets.

“The power of premium-only drilling strategy is reflected in our first-quarter performance,” EOG CEO Bill Thomas said May 4 on an earnings call. “We earned a company record direct after-tax rate of return of 150% on $1.5 billion in total investment capital,” he added, calling the feat “remarkable compared to any standard.”

Revenues for the independent E&P—which has assets in the Eagle Ford, Austin Chalk, Delaware, Woodford, Bakken and other Rockies plays in the U.S.—jumped about 41% to $3.68 billion. Production also rose by 15%, totaling about 59.4 MMboe.

EOG saw its per-unit depreciation, depletion and amortization expenses fall 21%.

Oil and gas companies are capitalizing on rising oil prices that have rebounded from lows of about $46 per barrel (WTI) about this time last year to about $69.73 Friday morning.

The improving market conditions have had a positive impact on quarterly results for shale producers so far. Apache Corp. (NYSE: APA), Continental Resources Inc. (NYSE: CLR) and Pioneer Natural Resources Co. (NYSE: PXD)—all active in U.S. shale plays—posted this week better-than-expected quarterly profits.

RELATED: Apache, Continental, Pioneer Beat Profit Estimates

Wells capable of earning at least a 30% direct after-tax rate of return at $40 crude oil and $2.50 natural gas prices remain EOG’s focus.

“Disciplined investment in premium wells defined as having strong returns at $40 oil allows EOG to deliver strong oil growth with free cash flow at $50 oil and substantial cash flow at $60 oil,” Thomas said before turning to company’s priorities for utilizing cash flow. This includes reinvesting in high-return wells, lowering debt and targeting dividend growth while increasing cash flow and oil production, which remains on a 16% to 20% growth track.

But don’t expect the company to partake in any high-dollar M&A transactions.

“We have no interest in expensive corporate M&A in any commodity price environment,” Thomas said. “EOG is an organic exploration company with an ability to continually add premium drilling through low-cost organic leasing and low-cost tactical property additions.”

EOG’s last major deal was in 2016 with its $2.5 billion purchase of Yates Petroleum Corp. The acquisition, which at the time Thomas called “a really big bolt-on,” grew the company’s presence in the Permian, Powder River Basin and Northwest Shelf plays

Today focus also remains on delivering double-digit return on capital employed, something EOG believes it can accomplish as longer laterals and staggered patterns add value in the Eagle Ford, drilling and completion times improve in the Bakken and other Rockies plays, and work progresses on its new oil play in the Eastern Anadarko Basin’s Woodford Formation.

EOG has moved to larger packages of wells with longer laterals for its larger development programs. The company completed more than 150 net wells for the quarter, EOG COO Billy Helms said after noting EOG plans to run nearly 40 rigs this year.

Most of EOG’s planned production growth is expected in the third quarter.

“About two-thirds of the wells in the Delaware Basin were packages of six wells or more. In the Eagle Ford over half of the wells were in packages of five wells or more,” Helms said. “In the coming quarter, we will be completing several six- to 10-well packages in both plays, which will improve our operational efficiency and maximize the net present value of our acreage.”

As the company continues to focus on optimal well spacing and package size, it also aims to lower costs by 5%. First-quarter efforts included increasing the number of wells completed per month, which gave the company an option to reduce pressure pumping equipment utilized, Helms said. Sand, water, flowback and facility costs also fell.

“Controlling cost is key to a successful commodities business,” Helms said before turning to 2019. EOG looks to “lock in services by proactive engagement with our suppliers, continue to optimize well package size and increase the use of multiwell pads and zipper frack, which will speed operations and well transitions.”

EOG also sees an opportunity to optimize its sand program, he continued, and accelerate water reuse in an effort to bring down costs further.

Velda Addison can be reached at