We earned record net income of $4.7 billion, generated a record $5.5 billion of free cash flow, which funded record cash return of $2.7 billion to shareholders.
We doubled our regular dividend rate and paid two special dividends, paying out about 30% of cash from operations.
And we are continuing to deliver on our free cash flow priorities this year with an additional special dividend announced yesterday of $1 per share.
We earned $5.32 per share while oil averaged $93.
Last year, we shattered that record earning $7.09 per share with $68 oil.
That's 50% higher earnings with a 27% lower oil price.
Premium is our internal investment hurdle rate that uses low fixed commodity prices to calculate the returns that drive our capital allocation decisions, $40 and $2.50 natural gas for the life of the well.
Our hurdle rate increased from 30% to a minimum of 60% direct after-tax rate of return using the same low fixed prices of $40 oil and $2.50 natural gas.
We were able to successfully offset emerging inflationary pressures during the year to lower well costs by 7%.
We announced our 2040 net-zero ambition and added our goal to eliminate routine flaring by 2025 to our existing near-term targets for greenhouse gas and methane emissions rates.
Our stellar fourth quarter performance allowed us to further strengthen the balance sheet, and we are returning cash to shareholders with the $1 per share special dividend declared yesterday.
Combined with our $3 per share regular dividend, we have already committed to return $2.3 billion of cash to shareholders in 2022.
1 value driver of EOG's success.
EOG generated record financial results in the fourth quarter with adjusted earnings of $1.8 billion and free cash flow of $2 billion.
Capital expenditures of $1.1 billion were right in line with our forecast while production volumes finished above target.
For the full year, adjusted earnings were a record $5 billion or $8.61 per share.
This yielded return on capital employed of 23%, while oil prices for the year averaged $68 per barrel.
ROCE would have been 10% or better at oil prices as low as $44.
Keep in mind that back in 2016, when the premium investment standard was introduced, the oil price required for 10% ROCE was in excess of $80 per barrel.
Our goal is to position the company to earn economic returns at the bottom of the cycle, less than $40 oil and generate returns that are better than the broader market on a full cycle basis.
Free cash flow in 2021 was a record $5.5 billion, and we deployed this cash consistent with our long-standing free cash flow priorities.
We doubled the regular dividend rate, which now stands at an annual $3 per share and represents a 2.7% yield at the current share price.
We paid two special dividends for a combined $3 per share.
We also refreshed our buyback authorization, which now stands at $5 billion.
In total, EOG returned $2.7 billion of cash to shareholders in 2021.
This represents 28% of discretionary cash flow and 49% of free cash flow, putting EOG among E&P industry leaders for cash returned in 2021.
Looking ahead to 2022, our disciplined capital plan and regular dividend can be funded at $44 oil.
At $80 oil, we expect to generate about $11 billion of cash flow from operations before working capital.
The $4.5 billion capital plan represents about a 40% reinvestment ratio, resulting in more than $6 billion in free cash flow.
EOG declared a $0.75 regular dividend yesterday, which is our highest priority for returning cash to shareholders.
To support our renewed $5 billion buyback authorization and prepare to take advantage of other countercyclical opportunities, we plan to build and carry a higher cash balance going forward.
Finally, we also announced an additional cash return to shareholders yesterday with a $1 per share special dividend to be paid in March.
Along with the regular dividend, EOG has already committed to return $2.3 billion of cash to shareholders in 2022.
Our operations teams continue to innovate and find opportunities to increase efficiencies and lowered the average well cost by 7%, beating the 5% target we set at the start of the year.
For example, in our Delaware Basin Wolfcamp play, our teams have improved days to drill by 42% since 2018.
In our Eagle Ford oil play, after drilling several thousand wells, our teams continue to refine the drilling operation to drive consistent performance from our rig fleet, resulting in a 21% reduction in the drilling costs since 2018.
Preliminary calculations indicate that we reduced our methane emissions percentage by about 25% and our total recordable incident rate by 10%.
We also achieved a 99.8% target for wellhead gas capture and increased water resource from reuse to 55%.
Over 90% of our drilling fleet and over 50% of our frac fleets needed to execute this year's program are covered under existing term agreements with multiple providers.
For example, we expect to utilize our Super Zipper technique on about 60% of our wells, increasing the amount of treated lateral per day.
Last year, we replaced more than two times what we produced and reduced our finding and development costs by 17%.
Our 2021 reserve replacement was 208% for a finding and development cost of just $5.81 per barrel of oil equivalent, excluding revisions due to commodity price changes.
Since 2014, prior to the last downturn and the implementation of our premium strategy, we have reduced finding and development cost by more than 55%.
With our double premium standard and the high grading of our future development schedule, we grew our reserve base in 2021 by over 500 million barrels of oil equivalent for total booked reserves of over 3.7 billion barrels of oil equivalent.
This represents a 16% increase in reserves year over year.
In terms of future well locations, we added over 700 net double premium locations across multiple basins to our inventory in 2021, replacing the 410 drilled last year by 170%.
With this in mind, our double premium inventory now accounts for 6,000 of the 11,500 total premium locations in our inventory, representing more than 11 years of drilling at the current pace.
We demonstrated this through the return of nearly 50% of free cash flow last year, and this quarter's special dividend, our third in less than a year, doubling our regular dividend rate indicates our confidence in the durability of our future performance.

Summary:
We earned record net income of $4.7 billion, generated a record $5.5 billion of free cash flow, which funded record cash return of $2.7 billion to shareholders.