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EOG Resources Reports First Quarter 2004 Results, Increases 2004 Production Growth Targets, Reduces Unit Cost Guidance and Announces Success in Texas Barnett Shale Natural Gas Play
PRNewswire-FirstCall
HOUSTON

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FOR IMMEDIATE RELEASE: Sunday, May 2, 2004

EOG Resources, Inc. (EOG) today reported first quarter 2004 net income available to common of $98.1 million, or $0.83 per share. This compares to first quarter 2003 net income available to common of $126.7 million, or $1.09 per share. EOG increased 2004 production growth targets, reduced unit cost guidance and announced drilling success in Texas' Barnett Shale Play.

"EOG is raising its previously announced 2004 total company production growth target from 6.5 to 8 percent. With this increase, our three-year total growth target is now 27 percent -- 8 percent in 2004, 10 percent in 2005 and 7 percent in 2006. In addition, based on our early drilling success and to- date 2004 actual results and commodity prices, EOG has reduced its 2004 full year unit cost guidance as outlined in our most recent 8-K filing," said Mark G. Papa, Chairman and Chief Executive Officer.

The results for first quarter 2004 included a previously disclosed $44.5 million ($28.6 million after tax, or $0.24 per share) loss on the mark- to-market of commodity price transactions. During the quarter, net cash outflows from the settlement of commodity price transactions were $2.3 million ($1.5 million after tax, or $0.01 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 $125.2 million, or $1.06 per share. Similarly, EOG's first quarter 2003 results included a $45.2 million ($29.1 million after tax, or $0.25 per share) loss on mark-to-market commodity price transactions, net cash outflows from the settlement of commodity price transactions of $27.9 million ($18.0 million after tax, or $0.15 per share) and a one-time cumulative after-tax charge of $7.1 million ($0.06 per share) from a change in accounting principle to adopt Statement of Financial Accounting Standards No. 143 relating to asset retirement obligations of oil and gas properties. Reflecting these items, first quarter 2003 adjusted non- GAAP net income available to common was $144.9 million, or $1.25 per share. (Please refer to the table below for the reconciliation of net income available to common to adjusted non-GAAP net income available to common.)

Operational Highlights

"Results from our U.S. and Canada singles and doubles drilling programs have surpassed original expectations and we are pleased to announce success with our horizontal Barnett Shale program in Johnson County, Texas. Additionally, our Trinidad and U.K. North Sea programs continue to be on track," said Papa.

In the Barnett Shale Play, EOG has acquired approximately 175,000 acres at essentially 100 percent working interest over the last three years. To date, EOG has drilled nine horizontal wells, focusing on optimizing drilling and completion methodologies. Since completing its initial horizontal well in the play, EOG has decreased drilling time from 30 to 10 days and reduced total well costs by over 50 percent. The Evans Unit #1H and the River Hills #2H wells recently came on-line and are producing around 2.6 and 3.2 million cubic feet per day (MMcfd), respectively. With 400 to 800 potential net well locations, EOG expects to increase drilling activity in the play beginning mid-2004.

"This play is expected to have a very significant impact on EOG's U.S. natural gas production growth, reserve additions and reinvestment rate of return," said Papa.

Results from EOG's South Texas drilling program in the Roleta, Frio and Wilcox Plays continue to be strong. In the Roleta formation, EOG drilled two key vertical wells during the first quarter. The Marshall State #5 and #6 are currently being completed and initial production is expected to be 10 to 15 MMcfd from each well. EOG has 50 percent working interest in these wells.

In Trinidad, the Parula #2 and #3 development wells were successfully drilled on the SECC Block. Combined with the Parula #1 discovery, the three wells are expected to have total deliverability of 300 MMcfd. Natural gas production from these wells and other sources will supply existing gas contracts including new ammonia and methanol plants that are scheduled to commence operations in mid-2004 and 2005, respectively.

Capital

During the quarter, EOG generated $114 million of free cash flow that was used to decrease debt by $23 million and increase cash and cash equivalents by $91 million. (Please refer to the table below for the reconciliation of net operating cash inflows to free cash flow.)

Conference Call Scheduled for May 3, 2004

EOG's first quarter 2004 conference call will be available via live audio webcast at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) Monday, May 3, 2004. To listen to this webcast, log on to www.eogresources.com . The webcast will be archived on EOG's website through May 17, 2004.

EOG Resources, Inc. is one of the largest independent (non-integrated) oil and natural gas companies in the United States with substantial proved reserves in the U.S., Canada, offshore Trinidad and, to a lesser extent, the United Kingdom North Sea. 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 and changes in demand or prices for ammonia or methanol; 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; the extent to which EOG can replicate on its other Barnett Shale acreage the results of its most recent Barnett Shale wells; political developments around the world; acts of war and terrorism and responses to these acts; 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.

The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. As noted above, statements of proved reserves are only estimates and may be imprecise. Any reserve estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include not only proved reserves, but also other categories of reserves that the SEC's guidelines strictly prohibit EOG from including in filings with the SEC. Investors are urged to consider closely the disclosure in EOG's Form 10-K for fiscal year ended December 31, 2003, available from EOG at P.O. Box 4362, Houston, Texas 77210-4362 (Attn: Investor Relations). You can also obtain this form from the SEC by calling 1-800-SEC-0330. In addition, reconciliation schedules for Non-GAAP Financial Measures referred to in this presentation can be found on the EOG Resources website at www.eogresources.com .

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

                                                          Quarter
                                                       Ended March 31
                                                   2004              2003
  Net Operating Revenues                       $   464.3         $   464.7
  Net Income Available to Common               $    98.1         $   126.7
  Net Income Per Share Available to Common
      Basic                                    $    0.85         $    1.11
      Diluted                                  $    0.83         $    1.09
  Average Number of Shares Outstanding
      Basic                                        115.6             114.4
      Diluted                                      117.6             116.2

                        SUMMARY INCOME STATEMENTS
                        (Unaudited; in thousands)
                                                          Quarter
                                                       Ended March 31
                                                   2004              2003
  Net Operating Revenues
      Natural Gas                              $ 417,389         $ 434,091
      Crude Oil, Condensate and
       Natural Gas Liquids                        90,458            75,508
      Losses on Mark-to-Market Commodity
       Derivative Contracts                      (44,455)          (45,221)
      Other, Net                                     928               291
          Total                                  464,320           464,669
  Operating Expenses
      Lease and Well                              64,417            48,339
      Exploration Costs                           25,996            17,458
      Dry Hole Costs                              10,027             6,620
      Impairments                                 17,648            11,956
      Depreciation, Depletion
       and Amortization                          113,797           103,553
      General and Administrative                  24,915            20,421
      Taxes Other Than Income                     36,084            30,193
          Total                                  292,884           238,540
  Operating Income                               171,436           226,129

  Other Income (Expense), Net                     (2,729)              152

  Income Before Interest Expense
   and Income Taxes                              168,707           226,281

  Interest Expense, Net                           16,683            15,318

  Income Before Income Taxes                     152,024           210,963

  Income Tax Provision                            51,171            74,407

  Net Income Before Cumulative Effect
   of Change in Accounting Principle             100,853           136,556

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

  Net Income                                     100,853           129,425

  Preferred Stock Dividends                        2,758             2,758

  Net Income Available to Common               $  98,095         $ 126,667


                           EOG RESOURCES, INC.
                           OPERATING HIGHLIGHTS
                               (Unaudited)
                                                           Quarter
                                                        Ended March 31
                                                   2004              2003
  Wellhead Volumes and Prices
  Natural Gas Volumes (MMcf/d)
      United States                                  618               642
      Canada                                         203               158
          United States & Canada                     821               800
      Trinidad                                       154               154
          Total                                      975               954

  Average Natural Gas Prices ($/Mcf)
      United States                            $    5.40         $    5.92
      Canada                                        4.98              5.18
          United States & Canada Composite          5.30              5.77
      Trinidad                                      1.49              1.32
          Composite                                 4.70              5.05

  Crude Oil/Condensate Volumes (MBD)
      United States                                 20.0              18.4
      Canada                                         2.6               2.1
          United States & Canada                    22.6              20.5
      Trinidad                                       2.6               2.3
          Total                                     25.2              22.8

  Average Crude Oil/Condensate Prices ($/Bbl)
      United States                            $   34.76         $   32.96
      Canada                                       31.72             31.78
          United States & Canada Composite         34.41             32.84
      Trinidad                                     32.91             33.27
          Composite                                34.25             32.89

  Natural Gas Liquids Volumes (MBD)
      United States                                  4.8               3.1
      Canada                                         0.6               0.7
          Total                                      5.4               3.8

  Average Natural Gas Liquids Prices ($/Bbl)
      United States                            $   24.71         $   23.24
      Canada                                       20.14             22.09
          Composite                                24.21             23.04

  Natural Gas Equivalent Volumes (MMcfe/d)
      United States                                  767               771
      Canada                                         222               174
          United States & Canada                     989               945
      Trinidad                                       169               169
          Total                                    1,158             1,114

  Total Bcfe Deliveries                            105.4             100.3


                           EOG RESOURCES, INC.
                          SUMMARY BALANCE SHEETS
                    (In thousands, except share data)

                                                 March 31,      December 31,
                                                   2004              2003
                                                (Unaudited)
                                  ASSETS
  Current Assets
      Cash and Cash Equivalents              $    95,717       $     4,443
      Accounts Receivable, Net                   303,566           295,118
      Inventories                                 23,758            21,922
      Deferred Income Taxes                       46,515            31,548
      Other                                       34,288            42,983
            Total                                503,844           396,014

  Oil and Gas Properties (Successful
   Efforts Method)                             8,384,989         8,189,062
      Less:  Accumulated Depreciation,
       Depletion and Amortization             (4,048,682)       (3,940,145)
         Net Oil and Gas Properties            4,336,307         4,248,917
  Other Assets                                   114,902           104,084
  Total Assets                               $ 4,955,053       $ 4,749,015


                   LIABILITIES AND SHAREHOLDERS' EQUITY
  Current Liabilities
      Accounts Payable                       $   296,457       $   282,379
      Accrued Taxes Payable                       51,305            33,276
      Dividends Payable                            7,377             6,175
      Liabilities from Price Risk
       Management Activities                      80,196            37,779
      Deferred Income Taxes                       14,274            73,611
      Other                                       43,415            43,299
          Total                                  493,024           476,519


  Long-Term Debt                               1,085,822         1,108,872
  Other Liabilities                              180,729           171,115
  Deferred Income Taxes                          879,921           769,128

  Shareholders' Equity
      Preferred Stock, $.01 Par,
       10,000,000 Shares Authorized:
          Series B, 100,000 Shares Issued,
           Cumulative, $100,000,000
           Liquidation Preference                 98,648            98,589
          Series D, 500 Shares Issued,
           Cumulative, $50,000,000
           Liquidation Preference                 49,872            49,827
      Common Stock, $.01 Par, 320,000,000
       Shares Authorized and 124,730,000
       Shares Issued                             201,247           201,247
      Additional Paid In Capital                   8,180             1,625
      Unearned Compensation                      (29,411)          (23,473)
      Accumulated Other Comprehensive Income      61,761            73,934
      Retained Earnings                        2,212,300         2,121,214
      Common Stock Held in Treasury,
       8,452,475 shares at March 31, 2004
       and 8,819,600 shares at
       December 31, 2003                        (287,040)         (299,582)
            Total Shareholders' Equity         2,315,557         2,223,381

  Total Liabilities and
   Shareholders' Equity                      $ 4,955,053       $ 4,749,015


                           EOG RESOURCES, INC.
                     SUMMARY STATEMENTS OF CASH FLOWS
                        (Unaudited; in thousands)
                                                          Quarter
                                                       Ended March 31
                                                   2004              2003
  Cash Flows From Operating Activities
  Reconciliation of Net Income to Net
   Operating Cash Inflows:
      Net Income                               $ 100,853         $ 129,425
      Items Not Requiring Cash
          Depreciation, Depletion
           and Amortization                      113,797           103,553
          Impairments                             17,648            11,956
          Deferred Income Taxes                   32,016            50,441
          Cumulative Effect of Change
           in Accounting Principle                   ---             7,131
          Other, Net                               7,432             2,611
      Exploration Costs                           25,996            17,458
      Dry Hole Costs                              10,027             6,620
      Mark-to-Market Commodity Derivative
       Contracts
          Total Losses                            44,455            45,221
          Realized Losses                         (2,342)          (27,929)
      Tax Benefits From Stock Options
       Exercised                                   2,419             2,959
      Other, Net                                    (825)               69
      Changes in Components of Working
       Capital and Other Liabilities
          Accounts Receivable                     (8,404)         (111,034)
          Inventories                             (1,836)              646
          Accounts Payable                        14,382            20,670
          Accrued Taxes Payable                   23,946            23,872
          Other Liabilities                        4,603            (1,532)
          Other, Net                               2,815              (698)
      Changes in Components of Working
       Capital Associated with Investing
       and Financing Activities                   10,306             8,832
  Net Operating Cash Inflows                     397,288           290,271

  Investing Cash Flows
      Additions to Oil and Gas Properties       (230,516)         (140,213)
      Exploration Costs                          (25,996)          (17,458)
      Dry Hole Costs                             (10,027)           (6,620)
      Proceeds from Sales of Assets                5,954             7,320
      Changes in Components of Working
       Capital Associated with Investing
       Activities                                (11,892)           (8,860)
      Other, Net                                 (11,032)           (5,479)
  Net Investing Cash Outflows                   (283,509)         (171,310)

  Financing Cash Flows
      Long-Term Debt Repayments                  (23,050)         (100,924)
      Dividends Paid                              (8,461)           (7,241)
      Treasury Stock Purchased                       ---           (21,295)
      Proceeds from Stock Options Exercised        8,775             7,456
      Other, Net                                     231                28
  Net Financing Cash Outflows                    (22,505)         (121,976)

  Increase (Decrease) in Cash
   and Cash Equivalents                           91,274            (3,015)
  Cash and Cash Equivalents
   at Beginning of Period                          4,443             9,848
  Cash and Cash Equivalents at End of Period   $  95,717         $   6,833



                           EOG RESOURCES, INC.
  Quantitative Reconciliation of Adjusted Net Income Available to Common
           (Non-GAAP) to Net Income Available to Common (GAAP)
           (Unaudited; in thousands, except per share amounts)

   The following chart adjusts reported quarters ended March 31 net income
   available to common to reflect actual cash realized from previously
   disclosed oil and gas hedges and to eliminate the mark-to-market loss
   from these previously disclosed oil and gas hedges and 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
                                                       Ended March 31
                                                   2004              2003

  Reported Net Income Available to Common      $  98,095         $ 126,667

  Mark-to-Market (MTM) Commodity Derivative
   Contracts Impact
      Total Losses                                44,455            45,221
      Realized Losses                             (2,342)          (27,929)
          Subtotal                                42,113            17,292

      After Tax MTM Impact                        27,100            11,127

  Impact of One-Time Items
      Add: Cumulative Effect of Change
       in Accounting Principle,
       Net of Income Tax                             ---             7,131

  Adjusted Non-GAAP Net Income
   Available to Common                         $ 125,195         $ 144,925

  Adjusted Non-GAAP Net Income Per
   Share Available to Common
      Basic                                    $    1.08         $    1.27
      Diluted                                  $    1.06         $    1.25

  Average Number of Shares Outstanding
      Basic                                      115,645           114,441
      Diluted                                    117,621           116,224


                           EOG RESOURCES, INC.
     Quantitative Reconciliation of Discretionary Cash Flow Available
        to Common (Non-GAAP) to Net Operating Cash Inflows (GAAP)
                        (Unaudited; in thousands)

   The following chart reconciles quarters ended March 31 net operating cash
   inflows 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
                                                       Ended March 31
                                                   2004              2003

  Net Operating Cash Inflows                   $ 397,288         $ 290,271

  Adjustments
      Changes in Components of Working
       Capital and Other Liabilities
          Accounts Receivable                      8,404           111,034
          Inventories                              1,836              (646)
          Accounts Payable                       (14,382)          (20,670)
          Accrued Taxes Payable                  (23,946)          (23,872)
          Other Liabilities                       (4,603)            1,532
          Other, Net                              (2,815)              698
      Changes in Components of Working
       Capital Associated with Investing
       and Financing Activities                  (10,306)           (8,832)
      Preferred Dividends                         (2,758)           (2,758)

  Discretionary Cash Flow Available to Common  $ 348,718         $ 346,757


EOG RESOURCES, INC. Quantitative Reconciliation of Free Cash Flow (Non-GAAP) to Net Operating Cash

                              Inflows (GAAP)
                        (Unaudited; in thousands)

   The following chart reconciles quarter ended March 31, 2004 net operating
   cash inflows to free cash flow.  EOG believes this presentation may be
   useful to investors who follow the practice of some industry analysts who
   use free cash flow as a measure of corporate financial flexibility and as
   a valuation parameter.  EOG management uses this information for
   comparative purposes within the industry.

                                             Quarter Ended
                                            March 31, 2004

  Net Operating Cash Inflows                   $ 397,288

  Net Investing Cash Outflows                   (283,509)
  Dividends Paid                                  (8,461)
  Proceeds from Stock Options Exercised            8,775
  Financing Other, Net                               231

  Free Cash Flow                               $ 114,324

 

 
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