Yesterday, we declared a $1 per share special dividend to demonstrate our commitment to returning cash to shareholders.
Combined with a regular dividend, we expect to return $1.5 billion to our shareholders through dividends in 2021.
This quarter, we generated a quarterly record $1.1 billion of free cash flow and earned $1.62 per share of adjusted net income, the second-highest quarterly earnings in company history.
In 2016, during the last downturn, we established our premium investment strategy which requires a 30% direct after-tax rate of return at $40 oil and $2.50 natural gas.
It is the reason we entered 2020 in a position of operational and financial strength, which enabled us to generate positive adjusted net income and free cash flow in a year of unprecedented oil volatility and prices that averaged just $39.
This year, we increased the return hurdle once again, doubling it to 60% at $40 oil and $2.50 natural gas.
5,700 double-premium locations is more than 10 years' worth of inventory at our current pace of drilling and is more than we had when we made the transition of premium five years ago.
Our exploration program is focused exclusively on prospects that will improve on that 60% median return.
In fact, our anticipated return on the current slate of new exploration plays is more than 80%.
As we replace our production base by drilling locations with higher well level returns, the price required to earn 10% return on capital employed continues to fall.
Prior to establishing premium, EOG required oil prices upwards of $80 to earn a 10% ROCE.
As the premium strategy matured, the oil price needed to earn 10% ROCE came down and averaged just $58 the last four years.
For 2021, that price is just $50 and we're not stopping there.
We more than doubled the dividend over the last four years and improved our balance sheet, reducing net debt by nearly $3.
As a result, net debt to total capital at the end of last year was just 11%.
As a result, our first-quarter daily production declined just 3% compared to the fourth quarter last year.
Our capital for the quarter came in under our forecasted target by 6%, mainly due to improvements in well costs across the company.
The savings realized during the first quarter are in addition to the tremendous 15% reduction last year.
EOG is on track to reduce well costs another 5% this year despite some potential inflationary pressure as industry activity resumes.
The savings we realized by installing water-reuse pipelines and facilities saves about 7% of well costs compared to third-party sourcing and disposal.
The number of wells one lease operator can maintain has increased by as much as 80% by optimizing the use of innovative software designed and built by EOG.
Since 2017, the dividend has grown from $0.67 per share to a $1.65 per share.
Now, an annual commitment of almost $1 billion.
Since the shift to premium, we have also retired bond maturities totaling about $2 billion with plans to retire another $1.25 billion in 2023 when the bond matures.
Net debt to total capitalization was 8% at the end of the first quarter.
Strong balance sheet extends to ensuring ample liquidity, which we have also secured with no near-term debt maturities, $3.4 billion of cash on hand, and a $2 billion unsecured line of credit.
The $1 per share special dividend falls through -- these consistent long-tailed priorities.
At $600 million, the special dividend is a meaningful amount while also aligning with our other priorities.
After paying the special dividend, we will have $2.8 billion of cash on hand, a full $800 million above our minimum cash target.
This is a healthy down payment on the $1.25 billion bond maturing in two years.

Summary:
This quarter, we generated a quarterly record $1.1 billion of free cash flow and earned $1.62 per share of adjusted net income, the second-highest quarterly earnings in company history.