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EOG Resources Reports Second Quarter 2003 Net Income Available to Common Of $106 Million
PRNewswire-FirstCall
HOUSTON

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FOR IMMEDIATE RELEASE: Tuesday, August 5, 2003 

EOG Resources, Inc. today reported second quarter 2003 net income available to common of $106.0 million, or $0.91 per share. This compares to second quarter 2002 net income available to common of $35.4 million, or $0.30 per share.

The results for second quarter 2003 included a previously disclosed $15.8 million ($10.2 million after tax, or $0.09 per share) loss on the mark- to-market of commodity price transactions. During the quarter, the net cash outflow from the settlement of commodity price transactions was $11.2 million ($7.2 million after tax, or $0.06 per share). Consistent with some analysts' practice of matching realizations to settlement months, adjusted non-GAAP net income available to common for the quarter was $109.0 million, or $0.94 per share. Similarly, EOG's second quarter 2002 results included a $0.7 million ($0.5 million after tax, or less than $0.01 per share) gain on mark-to-market commodity price transactions and net cash outflows from the settlement of commodity price transactions of $19.8 million ($12.8 million after tax, or $0.11 per share). Reflecting these items, second quarter 2002 adjusted non- GAAP net income available to common was $22.1 million, or $0.19 per share. (Please refer to the attached table for the reconciliation of net income to adjusted non-GAAP net income.)

Consistent with its emphasis on financial strength and flexibility, EOG further reduced its debt-to-total capitalization ratio to 33.8 percent at June 30, 2003 from 40.6 percent at year-end 2002. During the second quarter, EOG repaid $33 million of debt and increased cash by $144 million. In the first half of this year, EOG reduced debt by $134 million and increased cash by $141 million.

Operational Highlights

"EOG's North America and Trinidad programs continue to generate the expected results, and we anticipate that organic North American natural gas volumes will ramp up both in the third and, more substantially, the fourth quarter," said Mark G. Papa, Chairman and Chief Executive Officer.

In Canada, the 1,000-well shallow natural gas drilling program planned for 2003 is underway with current drilling activity more than double that of the first quarter. EOG anticipates Canadian natural gas production will increase during the third quarter with the most significant growth expected during the fourth quarter when the new wells are put on sales.

Additional fourth quarter production growth is expected from recent onshore natural gas drilling success. In the South Texas Division, the Raquel Gutierrez #1 and the Hignio Gutierrez #2 were drilled to 10,000 feet, testing the Roleta Formation in the Charco Field. While the Hignio Gutierrez #2 is still awaiting completion, the Raquel Gutierrez #1 is producing over 10 million cubic feet per day (MMcfd) of natural gas. EOG has a 100 percent working interest in this acreage. EOG plans to drill six offset wells in the Charco Field prior to year-end.

In the Oklahoma City Division, the Alexander 467 #2R encountered over 50 feet of pay in the Morrow Formation. Production is expected to increase from the current rate of 20 MMcfd to 25 MMcfd in mid-August when new pipeline capacity is added. EOG has a 75 percent working interest in the well.

In West Texas, EOG's horizontal Devonian program continues to be successful. Year-to-date, EOG has drilled nine horizontal wells in this play. In the ATM area, the recently completed Blue Topaz 102-1H is producing 4.1 MMcfd and 350 barrels of oil per day (Bopd) at a restricted rate, and the Windham 108 #2H is producing 6 MMcfd and 600 Bopd. EOG has a 100 and 96 percent working interest in these wells, respectively.

"This is a unique time in the industry," said Papa. "At a time of high commodity prices, EOG's suite of drilling prospects in the U.S. onshore arena is increasing. EOG is pursuing attractive farm-in and lease and property acquisition opportunities that didn't exist even a year ago."

Natural Gas Supply Outlook

"It is our view that natural gas fundamentals will remain relatively tight during the second half of 2003 reflecting the industry's inability to significantly address declining production levels. EOG's concentration in natural gas, as well as our demonstrated track record of consistent performance, will continue to be important to the nation's supply of natural gas and our investors."

Conference Call Scheduled for August 6, 2003

EOG's second quarter 2003 conference call will be available via live audio webcast at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) Wednesday, August 6, 2003. To listen to this webcast, log on to www.eogresources.com . The webcast will be archived on EOG's website through August 20, 2003.

EOG Resources, Inc. is one of the largest independent (non-integrated) oil and natural gas companies in the United States and is the operator of substantial proved reserves in the U.S., Canada and offshore Trinidad. EOG Resources, Inc. 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. Forward-looking statements are not guarantees of performance. Although EOG believes its expectations reflected in forward- looking statements are based on reasonable assumptions, no assurance can be given that these expectations will be achieved. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include, among others: the timing and extent of changes in commodity prices for crude oil, natural gas and related products, foreign currency exchange rates and interest rates; the timing and impact of liquefied natural gas imports; the extent and effect of any hedging activities engaged in by EOG; the extent of EOG's success in discovering, developing, marketing and producing reserves and in acquiring oil and gas properties; the accuracy of reserve estimates, which by their nature involve the exercise of professional judgment and may therefore be imprecise; political developments around the world, including terrorist activities and responses to terrorist activities; acts of war; and financial market conditions. In light of these risks, uncertainties and assumptions, the events anticipated by EOG's forward- looking statements might not occur. EOG undertakes no obligations to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

                           EOG RESOURCES, INC.
                             FINANCIAL REPORT
                (Unaudited; in millions except per share)

                                           Quarter            Six Months
                                         Ended June 30       Ended June 30
                                         2003      2002      2003     2002
  Net Operating Revenues                $424.8    $290.2    $889.4   $476.7
  Net Income Available to Common        $106.0     $35.4    $232.7     $8.4
  Net Income Per Share Available to
   Common
    Basic                                $0.93     $0.31     $2.03    $0.07
    Diluted                              $0.91     $0.30     $2.00    $0.07
  Average Number of Shares
   Outstanding
    Basic                                114.4     115.7     114.4    115.6
    Diluted                              116.1     117.7     116.2    117.4


                        SUMMARY INCOME STATEMENTS
                        (Unaudited; in thousands)

                                    Quarter                Six Months
                                  Ended June 30           Ended June 30
                                 2003        2002        2003       2002
  Net Operating Revenues
    Natural Gas                $377,643    $231,272    $811,734   $407,856
    Crude Oil, Condensate
     and Natural Gas Liquids     61,471      56,635     136,979    103,410
    Gains (Losses) on Mark-
     to-market Commodity
     Derivative Contracts       (15,753)        693     (60,974)   (33,602)
    Other, Net                    1,393       1,563       1,684       (938)
      Total                     424,754     290,163     889,423    476,726
  Operating Expenses
    Lease and Well               53,620      43,638     101,959     84,229
    Exploration Costs            22,139      15,754      39,597     28,690
    Dry Hole Costs                3,436      12,836      10,056     23,242
    Impairments                  25,475      10,683      37,431     22,746
    Depreciation, Depletion
     and Amortization           106,587      97,956     210,140    192,416
    General and
     Administrative              24,934      21,988      45,355     42,701
    Taxes Other Than Income      11,695      18,008      41,888     34,048
      Total                     247,886     220,863     486,426    428,072
  Operating Income              176,868      69,300     402,997     48,654

  Other Income (Expense), Net     2,680         437       2,832     (2,726)

  Income Before Interest
   Expense and Income Taxes     179,548      69,737     405,829     45,928

  Interest Expense, Net          13,807      14,182      29,125     26,233

  Income Before Income Taxes    165,741      55,555     376,704     19,695

  Income Tax Provision           56,950      17,447     131,357      5,828

  Net Income Before
   Cumulative Effect of
    Change in Accounting
     Principle                  108,791      38,108     245,347     13,867

  Cumulative Effect of
   Change in Accounting
    Principle, Net of Tax           ---         ---      (7,131)       ---

  Net Income                    108,791      38,108     238,216     13,867

  Preferred Stock Dividends       2,758       2,758       5,516      5,516

  Net Income Available to
   Common                      $106,033     $35,350    $232,700     $8,351


                           EOG RESOURCES, INC.
                           OPERATING HIGHLIGHTS
                               (Unaudited)

                                             Quarter           Six Months
                                          Ended June 30       Ended June 30
                                          2003      2002      2003     2002
  Wellhead Volumes and Prices
  Natural Gas Volumes (MMcf/d)
    United States                          636       628       639      631
    Canada                                 153       159       155      152
      North America                        789       787       794      783
    Trinidad                               148       111       152      110
      Total                                937       898       946      893

  Average Natural Gas Prices ($/Mcf)
    United States                        $5.06     $3.05     $5.49    $2.65
    Canada                                4.77      2.76      4.97     2.54
      North America Composite             5.00      2.99      5.39     2.63
    Trinidad                              1.32      1.27      1.32     1.27
      Composite                           4.42      2.77      4.74     2.46

  Crude Oil/Condensate Volumes (MBD)
    United States                         17.3      19.2      17.8     19.6
    Canada                                 2.3       2.0       2.2      1.9
      North America                       19.6      21.2      20.0     21.5
    Trinidad                               2.3       1.9       2.4      1.9
      Total                               21.9      23.1      22.4     23.4

  Average Crude Oil/Condensate Prices
   ($/Bbl)
    United States                       $28.18    $24.86    $30.63   $22.42
    Canada                               27.00     23.93     29.26    21.66
      North America Composite            28.04     24.77     30.48    22.36
    Trinidad                             26.31     24.46     29.82    21.11
      Composite                          27.86     24.74     30.41    22.26

  Natural Gas Liquids Volumes (MBD)
    United States                          3.0       2.9       3.1      3.4
    Canada                                 0.4       0.7       0.5      0.7
      Total                                3.4       3.6       3.6      4.1

  Average Natural Gas Liquids Prices
   ($/Bbl)
    United States                       $19.63    $14.86    $21.46   $12.83
    Canada                               14.15     10.53     19.22     9.51
      Composite                          19.00     13.95     21.13    12.21

  Natural Gas Equivalent Volumes
   (MMcfe/d)
    United States                          757       760       764      769
    Canada                                 170       175       172      168
      North America                        927       935       936      937
    Trinidad                               162       124       166      121
      Total                              1,089     1,059     1,102    1,058

  Total Bcfe Deliveries                   99.1      96.3     199.4    191.5


                           EOG RESOURCES, INC.
                          SUMMARY BALANCE SHEETS
                        (Unaudited; in thousands)

                                                June 30,        December 31,
                                                  2003              2002

                                     ASSETS
  Current Assets
    Cash and Cash Equivalents                    $150,967            $9,848
    Accounts Receivable, net                      303,804           259,308
    Inventories                                    18,972            18,928
    Other                                          79,038           106,708
    Total                                         552,781           394,792

  Oil and Gas Properties (Successful
   Efforts Method)                              7,269,638         6,750,095
    Less:  Accumulated Depreciation,
     Depletion and Amortization                (3,674,781)       (3,428,547)
      Net Oil and Gas Properties                3,594,857         3,321,548
  Other Assets                                     92,703            97,666
  Total Assets                                 $4,240,341        $3,814,006


                      LIABILITIES AND SHAREHOLDERS' EQUITY
  Current Liabilities
    Accounts Payable                             $226,408          $201,931
    Accrued Taxes Payable                          29,781            23,170
    Dividends Payable                               6,151             5,007
    Liabilities from Price Risk
     Management Activities                         27,700             5,939
    Other                                          33,080            40,304
    Total                                         323,120           276,351

  Long-Term Debt                                1,010,822         1,145,132
  Other Liabilities                               158,064            59,180
  Deferred Income Taxes                           766,531           660,948

  Shareholders' Equity
    Preferred Stock, $.01 Par, 10,000,000
     Shares Authorized:
       Series B, 100,000 Shares Issued,
        Cumulative, $100,000,000 Liquidation
         Preference                                98,471            98,352
       Series D, 500 Shares Issued,
        Cumulative, $50,000,000 Liquidation
         Preference                                49,736            49,647
    Common Stock, $.01 Par, 320,000,000
     Shares Authorized and
       124,730,000 Shares Issued                  201,247           201,247
    Additional Paid In Capital                         29               ---
    Unearned Compensation                         (17,227)          (15,033)
    Accumulated Other Comprehensive Gain (Loss)    37,546           (49,877)
    Retained Earnings                           1,946,331         1,723,948
    Common Stock Held in Treasury,
     9,853,722 shares at June 30, 2003
      and 10,009,740 shares
       at December 31, 2002                      (334,329)         (335,889)
       Total Shareholders' Equity               1,981,804         1,672,395
  Total Liabilities and Shareholders' Equity   $4,240,341        $3,814,006


                           EOG RESOURCES, INC.
                     SUMMARY STATEMENTS OF CASH FLOWS
                        (Unaudited; in thousands)


                                          Quarter            Six Months
                                       Ended June 30       Ended June 30
                                       2003      2002      2003      2002
  CASH FLOWS FROM OPERATING
   ACTIVITIES
  Reconciliation of Net Income to
   Net Operating Cash Inflows:
    Net Income                       $108,791   $38,108  $238,216   $13,867
    Items Not Requiring Cash
      Depreciation, Depletion and
       Amortization                   106,587    97,956   210,140   192,416
      Impairments                      25,475    10,683    37,431    22,746
      Deferred Income Taxes            29,534    13,568    79,975     3,724
      Cumulative Effect of Change in
       Accounting Principle               ---       ---     7,131       ---
      Other, Net                        1,354     2,361     3,965     6,386
    Exploration Costs                  22,139    15,754    39,597    28,690
    Dry Hole Costs                      3,436    12,836    10,056    23,242
    Mark-to-market Commodity
     Derivative Contracts
      Total (Gains) Losses             15,753      (693)   60,974    33,602
      Realized Losses                 (11,160)  (19,842)  (39,089)   (8,828)
    Tax Benefits From Stock Options
     Exercised                          1,843       865     4,802     2,403
    Other, Net                          3,430       798     3,499     1,014
    Changes in Components of Working
     Capital and Other Liabilities
      Accounts Receivable              66,614   (18,827)  (44,420)   (9,722)
      Inventories                        (690)    1,244       (44)    1,813
      Accounts Payable                  3,683     2,032    24,353   (50,786)
      Accrued Taxes Payable            (7,063)    8,441    16,371    (3,591)
      Other Liabilities                   381    (2,785)   (1,151)   (1,455)
      Other, Net                       12,306   (12,011)    8,337   (25,927)
    Changes in Components of Working
     Capital Associated with
      Investing and Financing
       Activities                     (15,763)    2,159    (6,931)   44,497
  NET OPERATING CASH INFLOWS          366,650   152,647   653,212   274,091

  INVESTING CASH FLOWS
    Additions to Oil and Gas
     Properties                      (184,833) (179,317) (325,046) (351,761)
    Exploration Costs                 (22,139)  (15,754)  (39,597)  (28,690)
    Dry Hole Costs                     (3,436)  (12,836)  (10,056)  (23,242)
    Proceeds from Sales of Assets       2,430     2,848     9,750     4,620
    Changes in Components of Working
     Capital Associated with
       Investing Activities            15,739    (2,824)    6,879   (45,050)
    Other, Net                          3,049     4,879     1,279       212
  NET INVESTING CASH OUTFLOWS        (189,190) (203,004) (356,791) (443,911)

  FINANCING CASH FLOWS
    Long-Term Debt Borrowings
     (Repayments)                     (33,386)   60,181  (134,310)  179,874
    Dividends Paid                     (7,239)   (7,295)  (14,480)  (14,577)
    Treasury Stock Purchased              ---       ---   (21,295)      ---
    Proceeds from Sales of Treasury
     Stock                              7,274     3,113    14,730    13,073
    Other, Net                             25    (1,839)       53    (1,856)
  NET FINANCING CASH INFLOWS
   (OUTFLOWS)                         (33,326)   54,160  (155,302)  176,514

  INCREASE IN CASH AND CASH
   EQUIVALENTS                        144,134     3,803   141,119     6,694
  CASH AND CASH EQUIVALENTS AT
   BEGINNING OF PERIOD                  6,833     5,403     9,848     2,512
  CASH AND CASH EQUIVALENTS AT END
   OF PERIOD                         $150,967    $9,206  $150,967    $9,206


                           EOG RESOURCES, INC.
    ADJUSTED (Non-GAAP) NET INCOME AVAILABLE TO COMMON RECONCILIATION
                (Unaudited; in thousands except per share)

The following chart adjusts reported second quarter and six months ended June 30 net income to reflect actual cash realized from previously disclosed oil and gas hedges, to eliminate the mark-to-market loss or gain from these previously disclosed oil and gas hedges and to eliminate the after tax impact of the cumulative effect of change in accounting principle. EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who adjust reported company earnings to match realizations to production settlement months and exclude the impact of one-time items. EOG management uses this information for comparative purposes within the industry.

                                            Quarter          Six Months
                                         Ended June 30      Ended June 30
                                         2003     2002      2003     2002
  Reported Net Income Available to
   Common                              $106,033  $35,350  $232,700   $8,351

  Add:  Mark-to-Market (MTM) Commodity
   Derivative Contracts Impact
     Total (Gains) Losses                15,753     (693)   60,974   33,602
     Realized Losses                    (11,160) (19,842)  (39,089)  (8,828)
       Subtotal                           4,593  (20,535)   21,885   24,774

     After tax MTM Impact                 2,956  (13,214)   14,083   15,942

  Add: Cumulative Effect of Change in
   Accounting Principle, Net of Tax         ---      ---     7,131      ---

  Adjusted Net Income Available to
   Common for MTM
     Commodity Derivative Contracts
      and Change in
     Accounting Principle Impacts      $108,989  $22,136  $253,914  $24,293

  Adjusted Net Income Per Share
   Available to Common
     Basic                                $0.95    $0.19     $2.22    $0.21
     Diluted                              $0.94    $0.19     $2.18    $0.21

  Average Number of Shares Outstanding
     Basic                              114,382  115,737   114,430  115,553
     Diluted                            116,131  117,689   116,212  117,397


                           EOG RESOURCES, INC.
            DISCRETIONARY CASH FLOW RECONCILIATION (Non-GAAP)
                        (Unaudited; in thousands)

The following chart reconciles second quarter and six months ended June 30 net operating cash flows to discretionary cash flow available to common. EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who adjust operating cash inflows for changes in components of working capital, other liabilities and preferred stock dividends. EOG management uses this information for comparative purposes within the industry.

                                          Quarter            Six Months
                                       Ended June 30       Ended June 30
                                       2003      2002      2003      2002
  Net Operating Cash Inflows         $366,650  $152,647  $653,212  $274,091

  Adjustments
     Changes in Components of
      Working Capital and Other
      Liabilities
       Accounts Receivable            (66,614)   18,827    44,420     9,722
       Inventories                        690    (1,244)       44    (1,813)
       Accounts Payable                (3,683)   (2,032)  (24,353)   50,786
       Accrued Taxes Payable            7,063    (8,441)  (16,371)    3,591
       Other Liabilities                 (381)    2,785     1,151     1,455
       Other, Net                     (12,306)   12,011    (8,337)   25,927
     Changes in Components of
      Working Capital Associated
       with Investing and Financing
        Activities                     15,763    (2,159)    6,931   (44,497)
     Preferred Dividends               (2,758)   (2,758)   (5,516)   (5,516)

  Discretionary Cash Flow Available
   to Common                         $304,424  $169,636  $651,181  $313,746

 

 
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