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EOG Resources, Inc. Reports Third Quarter 1999 Net Income Of $512.9 Million Including A $575.1 Million Net Gain From Share Exchange And As Adjusted Net Income Of $32.5 Million Versus $0.6 Million A Year Ago

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FOR IMMEDIATE RELEASE: Tuesday, October 19, 1999

HOUSTON – EOG Resources, Inc. (EOG Resources) today reported third quarter 1999 net income of $512.9 million, including a net gain on the share exchange transaction completed with Enron Corp.

On an as adjusted basis, excluding operations in India and China (which were transferred to Enron Corp. as part of the share exchange) and various non-recurring items associated with the share exchange agreement, third quarter 1999 net income was $32.5 million, or $.27 per share. This compares to adjusted net income of $0.6 million, or $.01 per share, for the comparable period a year ago.

As a result of the share exchange and a contemporaneous equity offering, the public float has increased 66 percent from 71.6 to 119.2 million shares, including the EXG mandatorily exchangeable notes issued by Enron Corp., while the number of shares outstanding has been reduced from 153.9 million at June 30, 1999 to 119.2 million at September 30, 1999.

"We are off to a strong start as EOG Resources," said Mark G. Papa, EOG Resources chairman and chief executive officer. "During the quarter, we successfully completed the share exchange transaction and realized a $575 million tax free net gain from the transfer of our India and China operations and reduced the number of total shares outstanding while continuing the company’s focus on increasing return on capital."

Discretionary cash flow, as adjusted, increased from $96.2 million in the third quarter of 1998 to $153.2 million in the third quarter of 1999. Net operating revenues, as adjusted, increased to $215.5 million in the third quarter of 1999 compared to $173.3 million a year ago.

During the third quarter, EOG Resources had a number of significant discoveries onshore in North America. The Sutherland No. 1 well in the South Texas division, in which EOG Resources owns a 50 percent working interest, encountered 76 feet of net pay and is currently producing approximately 25 million cubic feet per day (MMcf/d) of natural gas and 450 barrels per day of condensate. The Sutherland discovery is located near the two significant Savage well discoveries made by EOG Resources in 1998. Based upon initial estimates, gross reserves for the Sutherland discovery are expected to be approximately 15 billion cubic feet equivalent (Bcfe). EOG Resources had another significant third quarter discovery in the South Texas division. EOG Resources holds a 50 percent working interest in this discovery and is currently completing the well which is expected to produce at a 25 - 40 MMcf/d rate when it comes on line this week. In the Rockies division, the Cepo-Lewis 21-18, in which EOG Resources holds a 100 percent working interest, currently is producing over 9 MMcf/d. A number of offset locations have been identified and are currently being drilled. During the quarter, EOG Resources Canada set a new production record of 139 million cubic feet equivalent per day (MMcfe/d) compared to 129 MMcfe/d in the third quarter a year ago.

"These discoveries, in addition to our past performance, demonstrate our ability to continue to grow. We are very excited about our platform for future growth in North America, Trinidad and over time, internationally," said Papa.

Reported net income for the third quarter of 1999 included a $575.1 million tax free gain (net of $14.4 million of fees related to the share exchange transaction) from the share exchange, which transferred EOG Resources’ India and China operations to Enron Corp. Partially offsetting this gain was approximately $95 million in after tax, non-recurring items including:

  • $89 million of charges primarily related to assets no longer central to the company’s business. These charges, of which $51 million is related to domestic assets and $38 million is related to international operations, resulted from the substantial completion of the previously disclosed evaluation of the company’s overall portfolio of projects given the new independent focus of the company and the change in the company’s portfolio of assets subsequent to the share exchange.
  • $6 million of other general and administrative expenses related to the completion of the share exchange transaction.

The overall evaluation of the company’s portfolio has been completed with the exception of the Madison deep Paleozoic reserves in Wyoming, which are undergoing additional study. In the event a decision should be made to not pursue development of these reserves in the near term, it would not result in a further impairment charge, nor would it impact cash expenses; however, it would result in approximately an 8 percent increase in depreciation, depletion and amortization expense (calculated on an as adjusted basis for the third quarter).
EOG Resources, Inc. (formerly Enron Oil & Gas Company) is one of the largest independent (non-integrated) oil and gas companies in the United States and is the operator of substantial proved reserves in the U.S., Canada and offshore Trinidad. EOG Resources is listed on the New York Stock Exchange and is traded under the ticker symbol, "EOG."

This press release includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although EOG believes that its expectations are based on reasonable assumptions, it can give no assurance that such expectations will be achieved. Important factors that could cause actual results to differ materially from those in the forward looking statements herein include, but are not limited to, the timing and extent of changes in commodity prices for crude oil, natural gas and related products and interest rates, the extent of EOG’s success in discovering, developing, producing and marketing reserves and in acquiring oil and gas properties, political developments around the world and conditions of the capital and equity markets during the periods covered by the forward looking statements.

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