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EOG Resources Reports Second Quarter 2004 Results and Continued Success From Operations
PRNewswire-FirstCall
HOUSTON

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FOR IMMEDIATE RELEASE: Monday, August 2, 2004 

EOG Resources, Inc. (EOG) today reported second quarter 2004 net income available to common of $142.2 million, or $1.20 per share. This compares to second quarter 2003 net income available to common of $106.0 million, or $0.91 per share.

The results for second quarter 2004 included a tax benefit of $5.3 million ($0.04 per share) from a reduction in the corporate tax rate in Alberta, Canada and a previously disclosed $14.6 million ($9.4 million after tax, or $0.08 per share) loss on the mark-to-market of financial commodity price transactions. During the quarter, the net cash outflow from the settlement of financial commodity price transactions was $35.9 million ($23.2 million after tax, or $0.20 per share). Consistent with some analysts' practice of matching realizations to settlement months and excluding the Canadian tax benefit, adjusted non-GAAP net income available to common for the quarter was $123.1 million, or $1.04 per share. Similarly, EOG's second quarter 2003 results included a $15.8 million ($10.2 million after tax, or $0.09 per share) loss on the mark-to-market of financial commodity price transactions and net cash outflow from the settlement of financial commodity price transactions of $11.2 million ($7.2 million after tax, or $0.06 per share). Reflecting these items, second quarter 2003 adjusted non-GAAP net income available to common was $109.0 million, or $0.94 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

In the second quarter, total company production increased 7.6 percent versus the second quarter last year. Production from the United States and Canada rose 6.9 percent while production from Trinidad increased 11.7 percent.

"EOG posted solid results for the second quarter, and based on data gathered in the last three months, we continue to be enthusiastic about our position in the non-core area of the Barnett Shale Play in the Fort Worth Basin. In addition, during the second quarter, EOG's operations across the company once again showed consistent performance," said Mark G. Papa, Chairman and Chief Executive Officer.

Through an ongoing focus on leasing activity in the Barnett Shale Play, the company has increased its holdings to 258,000 net acres. Although this acreage position is held primarily in six counties, all drilling activity to date has been centered in Johnson County. To date, EOG has drilled and completed 15 horizontal wells. An additional five wells have been drilled and are waiting on completion. Production is currently limited by pipeline constraints, which are expected to be resolved by year-end.

In South Texas, EOG continues to report excellent results in all geologic plays, with recent success in the Frio and Roleta Formations. The Brooks #3 well was recently completed in the Frio Formation and tested 10 million cubic feet per day (MMcfd) and 840 barrels of condensate per day. EOG has a 59 percent working interest in this well. Also in the Frio Formation, EOG has a 100 percent working interest in the Ponderosa Ranch #1 well in Matagorda County, which encountered 75 feet of pay and is expected to produce 10 MMcfd when sales commence in September. In the Roleta Formation, EOG also has a 100 percent working interest in the Slator Ranch H-3 well, which currently is flowing to sales at a rate of 10 MMcfd.

"In addition to the Barnett Shale and South Texas, we expect strong second half results with production increases coming from the Mid Continent, East Texas and the Rocky Mountains in the U.S. as well as the tie-in of shallow natural gas wells in Canada. In Trinidad, the new ammonia plant is scheduled to begin taking natural gas at full capacity in the third quarter and the first production from the U.K. North Sea should begin this month," said Papa.

Commissioning started ahead of schedule in July on Trinidad's Nitrogen (2000) Unlimited Ammonia Plant with full plant productivity scheduled during August. Under a 15-year contract, EOG will initially supply approximately 45 MMcfd, net, of natural gas to the plant from the U(a) Block. This will increase the company's current natural gas production in Trinidad by 28 percent.

The first production of at least 20 MMcfd, net, from the Valkyrie well, EOG's first discovery to come on-line in the U.K. North Sea, is expected during August. Additional natural gas production of over 20 MMcfd, net, is scheduled from the Arthur #1 well in November. EOG entered the North Sea during 2002 through drilling ventures with major oil companies.

Capital Structure

At June 30, 2004, EOG's total debt outstanding was approximately $1,086 million and cash on the balance sheet was $68 million. The company's debt-to-total capitalization ratio at June 30 was 30.5 percent, down from 33.3 percent at December 31, 2003. Factoring in recent commodity prices, expected production and capital expenditure levels, EOG's debt-to-total capitalization ratio at year-end is projected to be less than 30 percent.

Conference Call Scheduled for August 3, 2004

EOG's second quarter 2004 conference call will be available via live audio webcast at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) Tuesday, August 3, 2004. To listen to this webcast, log on to http://www.eogresources.com/ . The webcast will be archived on EOG's website through August 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 United States, 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 http://www.eogresources.com/ .

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

                                           Quarter            Six Months
                                        Ended June 30       Ended June 30
                                        2004     2003       2004      2003
  Net Operating Revenues              $ 519.0   $ 424.8   $ 983.3   $ 889.4
  Net Income Available to Common      $ 142.2   $ 106.0   $ 240.3   $ 232.7
  Net Income Per Share Available to
   Common
     Basic                            $  1.22   $  0.93   $  2.07   $  2.03
     Diluted                          $  1.20   $  0.91   $  2.03   $  2.00
  Average Number of Shares Outstanding
     Basic                              116.4     114.4     116.1     114.4
     Diluted                            118.7     116.1     118.2     116.2


                        SUMMARY INCOME STATEMENTS
                        (Unaudited; in thousands)

                                      Quarter               Six Months
                                   Ended June 30           Ended June 30
                                 2004        2003        2004        2003
  Net Operating Revenues
    Natural Gas              $ 430,532   $ 377,643   $ 847,921   $ 811,734
    Crude Oil, Condensate
     and Natural Gas
     Liquids                   102,401      61,471     192,859     136,979
    Losses on Mark-to-
     Market Commodity
     Derivative Contracts      (14,563)    (15,753)    (59,018)    (60,974)
    Other, Net                     651       1,393       1,579       1,684
       Total                   519,021     424,754     983,341     889,423
  Operating Expenses
    Lease and Well              65,532      53,620     129,949     101,959
    Exploration Costs           19,596      22,139      45,592      39,597
    Dry Hole Costs              19,064       3,436      29,091      10,056
    Impairments                 15,711      25,475      33,359      37,431
    Depreciation, Depletion
     and Amortization          116,224     106,587     230,021     210,140
    General and
     Administrative             26,370      24,934      51,285      45,355
    Taxes Other Than Income     29,788      11,695      65,872      41,888
       Total                   292,285     247,886     585,169     486,426
  Operating Income             226,736     176,868     398,172     402,997

  Other Income (Expense), Net    1,425       2,680      (1,304)      2,832

  Income Before Interest
   Expense and Income Taxes    228,161     179,548     396,868     405,829

  Interest Expense, Net         15,416      13,807      32,099      29,125

  Income Before Income Taxes   212,745     165,741     364,769     376,704

  Income Tax Provision          67,808      56,950     118,979     131,357

  Net Income Before Cumulative
   Effect of Change in
   Accounting Principle        144,937     108,791     245,790     245,347

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

  Net Income                   144,937     108,791     245,790     238,216

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

  Net Income Available to
   Common                    $ 142,179   $ 106,033   $ 240,274   $ 232,700


                           EOG RESOURCES, INC.
                           OPERATING HIGHLIGHTS
                               (Unaudited)

                                              Quarter          Six Months
                                           Ended June 30      Ended June 30
                                          2004      2003      2004     2003
  Wellhead Volumes and Prices

  Natural Gas Volumes (MMcf/d)
    United States                          619       636       618      639
    Canada                                 197       153       201      155
      United States & Canada               816       789       819      794
    Trinidad                               162       148       158      152
      Total                                978       937       977      946

  Average Natural Gas Prices ($/Mcf)
    United States                      $  5.67   $  5.06   $  5.54  $  5.49
    Canada                                5.04      4.77      5.01     4.97
      United States & Canada Composite    5.52      5.00      5.41     5.39
    Trinidad                              1.36      1.32      1.42     1.32
      Composite                           4.83      4.42      4.77     4.74

  Crude Oil and Condensate Volumes (MBD)
    United States                         21.0      17.3      20.5     17.8
    Canada                                 2.6       2.3       2.6      2.2
      United States & Canada              23.6      19.6      23.1     20.0
    Trinidad                               3.1       2.3       2.8      2.4
      Total                               26.7      21.9      25.9     22.4

  Average Crude Oil and Condensate
   Prices ($/Bbl)
    United States                      $ 37.39   $ 28.18   $ 36.11  $ 30.63
    Canada                               35.59     27.00     33.63    29.26
      United States & Canada Composite   37.19     28.04     35.83    30.48
    Trinidad                             37.69     26.31     35.52    29.82
      Composite                          37.25     27.86     35.80    30.41

  Natural Gas Liquids Volumes (MBD)
    United States                          5.0       3.0       4.9      3.1
    Canada                                 0.6       0.4       0.6      0.5
      Total                                5.6       3.4       5.5      3.6

  Average Natural Gas Liquids Prices
   ($/Bbl)
    United States                      $ 23.78   $ 19.63   $ 24.24  $ 21.46
    Canada                               20.35     14.15     20.25    19.22
      Composite                          23.40     19.00     23.80    21.13

  Natural Gas Equivalent Volumes (MMcfe/d)
    United States                          775       757       771      764
    Canada                                 216       170       219      172
      United States & Canada               991       927       990      936
    Trinidad                               181       162       175      166
      Total                              1,172     1,089     1,165    1,102

  Total Bcfe Deliveries                  106.6      99.1     212.1    199.4


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

                                                  June 30,     December 31,
                                                    2004           2003
                                                (Unaudited)
                                  ASSETS
  Current Assets
    Cash and Cash Equivalents                 $    67,839    $     4,443
    Accounts Receivable, Net                      355,662        295,118
    Inventories                                    30,253         21,922
    Deferred Income Taxes                          39,564         31,548
    Other                                          57,106         42,983
         Total                                    550,424        396,014

  Oil and Gas Properties (Successful
   Efforts Method)                              8,616,115      8,189,062
    Less:  Accumulated Depreciation,
     Depletion and Amortization                (4,149,096)    (3,940,145)
      Net Oil and Gas Properties                4,467,019      4,248,917
  Other Assets                                    109,523        104,084

  Total Assets                                $ 5,126,966    $ 4,749,015


                   LIABILITIES AND SHAREHOLDERS' EQUITY
  Current Liabilities
    Accounts Payable                          $   319,535    $   282,379
    Accrued Taxes Payable                          50,165         33,276
    Dividends Payable                               7,425          6,175
    Liabilities from Price Risk
     Management Activities                         58,601         37,779
    Deferred Income Taxes                          36,260         73,611
    Other                                          34,078         43,299
         Total                                    506,064        476,519


  Long-Term Debt                                1,085,822      1,108,872
  Other Liabilities                               180,743        171,115
  Deferred Income Taxes                           876,406        769,128

  Shareholders' Equity
    Preferred Stock, $.01 Par,
     10,000,000 Shares Authorized:
       Series B, 100,000 Shares Issued,
        Cumulative, $100,000 Liquidation
        Preference                                 98,707         98,589
       Series D, 500 Shares Issued,
        Cumulative, $50,000 Liquidation
        Preference                                 49,918         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                      7,478          1,625
    Unearned Compensation                         (27,978)       (23,473)
    Accumulated Other Comprehensive Income         41,473         73,934
    Retained Earnings                           2,347,446      2,121,214
    Common Stock Held in Treasury,
     7,044,550 shares at June 30, 2004 and
     8,819,600 shares at December 31, 2003       (240,360)      (299,582)
            Total Shareholders' Equity          2,477,931      2,223,381

  Total Liabilities and Shareholders' Equity  $ 5,126,966    $ 4,749,015


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

                                          Quarter           Six Months
                                       Ended June 30       Ended June 30
                                       2004      2003      2004      2003
  Cash Flows From Operating
   Activities
  Reconciliation of Net Income to
   Net Cash Provided by Operating
   Activities:
    Net Income                      $ 144,937 $ 108,791 $ 245,790 $ 238,216
    Items Not Requiring Cash
      Depreciation, Depletion and
       Amortization                   116,224   106,587   230,021   210,140
      Impairments                      15,711    25,475    33,359    37,431
      Deferred Income Taxes            52,200    29,534    84,216    79,975
      Cumulative Effect of Change in
       Accounting Principle               ---       ---       ---     7,131
      Other, Net                        5,857     1,354    13,289     3,965
    Exploration Costs                  19,596    22,139    45,592    39,597
    Dry Hole Costs                     19,064     3,436    29,091    10,056
    Mark-to-Market Commodity
     Derivative Contracts
      Total Losses                     14,563    15,753    59,018    60,974
      Realized Losses                 (35,869)  (11,160)  (38,211)  (39,089)
    Tax Benefits From Stock Options
     Exercised                         11,373     1,843    13,792     4,802
    Other, Net                         (1,046)    3,430    (1,273)    3,499
    Changes in Components of Working
     Capital and Other Liabilities
      Accounts Receivable             (52,054)   66,614   (60,458)  (44,420)
      Inventories                      (6,495)     (690)   (8,331)      (44)
      Accounts Payable                 22,789     3,683    37,171    24,353
      Accrued Taxes Payable           (28,396)   (7,063)   (4,450)   16,809
      Other Liabilities                (4,346)      381       257    (1,151)
      Other, Net                       (6,280)   12,306    (3,465)    7,899
    Changes in Components of Working
     Capital Associated with
     Investing and Financing
     Activities                         6,430   (15,763)   16,736    (6,931)
  Net Cash Provided By Operating
   Activities                         294,258   366,650   692,144   653,212

  Investing Cash Flows
    Additions to Oil and Gas
     Properties                      (304,024) (184,833) (534,540) (325,046)
    Exploration Costs                 (19,596)  (22,139)  (45,592)  (39,597)
    Dry Hole Costs                    (19,064)   (3,436)  (29,091)  (10,056)
    Proceeds from Sales of Assets       3,808     2,430     9,762     9,750
    Changes in Components of Working
     Capital Associated with
     Investing Activities              (4,096)   15,739   (15,988)    6,879
    Other, Net                         (1,511)    3,049   (13,139)    1,279
  Net Cash Used in Investing
   Activities                        (344,483) (189,190) (628,588) (356,791)

  Financing Cash Flows
    Long-Term Debt Borrowings             ---       ---   150,000       ---
    Long-Term Debt Repayments             ---   (33,386) (173,050) (134,310)
    Dividends Paid                     (9,638)   (7,239)  (18,099)  (14,480)
    Treasury Stock Purchased              ---       ---       ---   (21,295)
    Proceeds from Stock Options
     Exercised                         34,415     7,274    43,190    14,730
    Other, Net                         (2,430)       25    (2,201)       53
  Net Cash Provided (Used) in
   Financing Activities                22,347   (33,326)     (160) (155,302)

  Increase (Decrease) in Cash and
   Cash Equivalents                   (27,878)  144,134    63,396   141,119
  Cash and Cash Equivalents at
   Beginning of Period                 95,717     6,833     4,443     9,848
  Cash and Cash Equivalents at End
   of Period                        $  67,839 $ 150,967 $  67,839 $ 150,967


                           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 second quarter and six months ended June 30 net income available to common to reflect actual cash realized from previously disclosed oil and gas hedges, to eliminate the mark-to-market loss from these previously disclosed oil and gas hedges and to eliminate the after tax impact of the cumulative effect of change in accounting principle and the tax benefit related to the Alberta (Canada) corporate tax rate reduction. 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
                                     2004       2003       2004       2003

  Reported Net Income Available
   to Common                     $ 142,179  $ 106,033  $ 240,274  $ 232,700

  Mark-to-Market (MTM) Commodity
   Derivative Contracts Impact
    Total Losses                    14,563     15,753     59,018     60,974
    Realized Losses                (35,869)   (11,160)   (38,211)   (39,089)
       Subtotal                    (21,306)     4,593     20,807     21,885

    After Tax MTM Impact           (13,710)     2,956     13,389     14,083

  Impact of One-Time Items
    Add: Cumulative Effect of
     Change in Accounting
     Principle, Net of Income Tax      ---        ---        ---      7,131
    Less: 2004 Tax Benefit
     related to the Alberta
     (Canada) Corporate
           Tax Rate Reduction       (5,335)       ---     (5,335)       ---

  Adjusted Non-GAAP Net Income
   Available to Common           $ 123,134  $ 108,989  $ 248,328  $ 253,914

  Adjusted Non-GAAP Net Income
   Per Share Available to Common
    Basic                        $    1.06  $    0.95  $    2.14  $    2.22
    Diluted                      $    1.04  $    0.94  $    2.10  $    2.18

  Average Number of Shares
   Outstanding
    Basic                          116,388    114,382    116,052    114,430
    Diluted                        118,709    116,131    118,227    116,212


                           EOG RESOURCES, INC.
QUANTITATIVE RECONCILIATION OF DISCRETIONARY CASH FLOW AVAILABLE TO COMMON
                                (NON-GAAP)
           TO NET CASH PROVIDED BY OPERATING ACTIVITIES (GAAP)
                        (Unaudited; in thousands)

The following chart reconciles second quarter and six months ended June 30 net cash provided by operating activities 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 net cash provided by operating activities 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
                                      2004        2003       2004      2003

  Net Cash Provided by Operating
   Activities                     $ 294,258   $ 366,650 $ 692,144 $ 653,212

  Adjustments
    Changes in Components of
     Working Capital and Other
     Liabilities
      Accounts Receivable            52,054     (66,614)   60,458    44,420
      Inventories                     6,495         690     8,331        44
      Accounts Payable              (22,789)     (3,683)  (37,171)  (24,353)
      Accrued Taxes Payable          28,396       7,063     4,450   (16,809)
      Other Liabilities               4,346        (381)     (257)    1,151
      Other, Net                      6,280     (12,306)    3,465    (7,899)
    Changes in Components of
     Working Capital Associated
      with Investing and
      Financing Activities           (6,430)     15,763   (16,736)    6,931
    Preferred Dividends              (2,758)     (2,758)   (5,516)   (5,516)

  Discretionary Cash Flow
   Available to Common            $ 359,852   $ 304,424 $ 709,168 $ 651,181

 

Investors
Maire A. Baldwin
(713) 651-6EOG (651-6364)

Media and Investors
Elizabeth M. Ivers
(713) 651-7132

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