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EOG Resources Reports Strong Third Quarter 2004 Results
* 12 Percent Production Growth
* Increases 2004 Production Growth Target to 9.5 Percent
PRNewswire-FirstCall
HOUSTON

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FOR IMMEDIATE RELEASE: Tuesday, October 26, 2004

EOG Resources, Inc. today reported third quarter 2004 net income available to common of $169.6 million, or $1.42 per share. This compares to third quarter 2003 net income available to common of $114.7 million, or $0.99 per share.

The results for third quarter 2004 included a previously disclosed $22.7 million ($14.6 million after tax, or $0.12 per share) gain 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 $32.3 million ($20.9 million after tax, or $0.18 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 $134.1 million, or $1.12 per share. Similarly, EOG's third quarter 2003 results included a $23.6 million ($15.2 million after tax, or $0.13 per share) gain on the mark-to-market of financial commodity price transactions and net cash outflow from the settlement of financial commodity price transactions and premium payments associated with certain natural gas financial collar contracts of $10.0 million ($6.5 million after tax, or $0.06 per share). Reflecting these items, third quarter 2003 adjusted non-GAAP net income available to common was $93.0 million, or $0.80 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

Total company production increased 12 percent as compared to the third quarter last year. Production from the United States and Canada increased over 7 percent while production from Trinidad and the U.K. North Sea increased 38 percent. Based on third quarter operating results, EOG increased its 2004 total production growth target from the previous 9.0 percent to 9.5 percent.

In the United States, the most significant increases came from the Rocky Mountain and South Texas areas. Natural gas production increased in the Rockies from successful drilling results in Wyoming's Moxa Arch and Utah's Uinta Basin. EOG also reported increased oil production from the horizontal Bakken oil play in Montana.

EOG continues to report drilling success from the deep Wilcox Trend in South Texas. The Buck Hamilton #10 in Duval County, in which EOG has a 65 percent working interest, is currently producing 24 million cubic feet per day (MMcfd), gross, of natural gas. In the Lobo/Roleta Trend in Webb County, the Slator Ranch L-1 logged 100 feet of net pay and tested at 8 MMcfd. EOG has a 100 percent working interest in the well. In San Patricio County, EOG is currently completing the Bell Farms #2. The well encountered 290 feet of net pay and is expected to produce approximately 8 MMcfd of natural gas and 600 barrels of condensate per day, gross. EOG has a 77.5 percent working interest in the well.

In northeastern Louisiana, the Davis Brothers 20-1 well, in which EOG has a 50 percent working interest, was drilled to 16,000 feet in Bienville Parish. The well encountered over 450 feet of pay and is currently producing natural gas at a stable rate of approximately 4 MMcfd, gross. EOG plans to add a second rig in the area to drill two additional wells in the play prior to year-end.

"We are steadily increasing production from the key areas we highlighted at our recent analyst conference," said Mark G. Papa, Chairman and Chief Executive Officer. "Based on results to date, EOG is well positioned to meet its three-year production growth target of 34 percent through 2006."

Another significant operating area for EOG is the Barnett Shale Play in Central Texas where the company's land holdings have increased to approximately 345,000 net acres, all in the non-core area. During the third quarter, pipeline restrictions in Johnson County were alleviated, allowing EOG to produce natural gas at a current rate of 17 MMcfd, net. The targeted year- end exit rate from the Barnett Shale is 30 to 40 MMcfd, net. A recent well, the Fricks #3H, went to sales at an initial rate of 5.8 MMcfd of natural gas, gross. EOG has a 87.5 percent working interest in the well. Production results reflect continued improvement in well enhancements and completion technology. After recently increasing its drilling activities in the Barnett Shale Play from one to four rigs, EOG plans to drill approximately 90 wells in the play during 2005.

"Our well results in the Barnett Shale continue to improve. The production rate and expected reserves of the Fricks completion indicate it may be one of the better wells that the industry has drilled in Johnson County, which is the focus of our current drilling activity," said Papa.

Outside of the United States and Canada, production increased from both Trinidad and the U.K. North Sea. In Trinidad, the Nitro 2000 Ammonia Plant was commissioned during the third quarter, reaching full plant capacity during August. EOG is supplying natural gas to the plant at an average rate of 50 MMcfd, net, from the U(a) Block. In the U.K. North Sea, the Valkyrie well came on-line in August and is producing 19 MMcfd of natural gas, net, representing EOG's first production from this recently added international venue. Production from a second well, the Arthur #1, is expected in early December.

Capital Structure

At September 30, 2004, EOG's total debt outstanding was $1,063 million and cash on the balance sheet was $82 million. The company's debt-to-total capitalization ratio was 28 percent at September 30, 2004, down from 33 percent at December 31, 2003.

Conference Call Scheduled for October 27, 2004

EOG's third quarter 2004 conference call will be available via live audio webcast at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) Wednesday, October 27, 2004. To listen to this webcast, log on to http://www.eogresources.com/ . The webcast will be archived on EOG's website through November 10, 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 U.K. 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 availability and cost of drilling rigs, experienced drilling crews and tubular steel; the availability of pipeline transportation capacity; the extent to which EOG can replicate on its other Barnett Shale acreage the results of its most recent Barnett Shale wells; the results of wells yet to be drilled that are necessary to test whether substantial Barnett Shale acreage positions in Erath, Somervell, Hood, Jack, Palo Pinto and Hill Counties, Texas, contain suitable drilling prospects; whether EOG is successful in its efforts to more densely develop its acreage in the Barnett Shale and other production areas; 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              Nine Months
                                 Ended September 30     Ended September 30
                                   2004     2003         2004        2003
  Net Operating Revenues          $594.2    $458.7    $1,577.6    $1,348.1
  Net Income Available to
   Common                         $169.6    $114.7    $  409.8    $  347.4
  Net Income Per Share
   Available to Common
    Basic                         $ 1.44    $ 1.00    $   3.52    $   3.03
    Diluted                       $ 1.42    $ 0.99    $   3.45    $   2.99
  Average Number of Shares
   Outstanding
    Basic                          117.4     114.6       116.5       114.5
    Diluted                        119.7     116.4       118.7       116.3


                        SUMMARY INCOME STATEMENTS
                        (Unaudited; in thousands)

                                  Quarter                 Nine Months
                             Ended September 30        Ended September 30
                              2004        2003         2004          2003
  Net Operating Revenues
    Natural Gas            $448,131    $365,064    $1,296,052    $1,176,798
    Crude Oil,
     Condensate and
     Natural Gas Liquids    123,379      67,664       316,238       204,643
    Gains (Losses) on
     Mark-to-Market
     Commodity
     Derivative
     Contracts               22,743      23,628       (36,275)      (37,346)
    Other, Net                  (23)      2,368         1,556         4,052
       Total                594,230     458,724     1,577,571     1,348,147
  Operating Expenses
    Lease and Well           69,027      54,431       198,976       156,390
    Exploration Costs        21,874      17,812        67,466        57,409
    Dry Hole Costs           21,114       8,876        50,205        18,932
    Impairments              17,930      26,117        51,289        63,548
    Depreciation,
     Depletion and
     Amortization           130,257     110,438       360,278       320,578
    General and
     Administrative          29,576      26,379        80,861        71,734
    Taxes Other Than
     Income                  29,952      21,359        95,824        63,247
       Total                319,730     265,412       904,899       751,838
  Operating Income          274,500     193,312       672,672       596,309

  Other Income, Net           3,953       1,924         2,649         4,756

  Income Before Interest
   Expense and Income
   Taxes                    278,453     195,236       675,321       601,065

  Interest Expense, Net      16,110      15,632        48,209        44,757

  Income Before Income
   Taxes                    262,343     179,604       627,112       556,308

  Income Tax Provision       90,033      62,185       209,012       193,542

  Net Income Before
   Cumulative Effect of
   Change in Accounting
   Principle                172,310     117,419       418,100       362,766

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

  Net Income                172,310     117,419       418,100       355,635

  Preferred Stock
   Dividends                  2,758       2,758         8,274         8,274

  Net Income Available
   to Common               $169,552    $114,661    $  409,826    $  347,361


                           EOG RESOURCES, INC.
                           OPERATING HIGHLIGHTS
                               (Unaudited)

                                          Quarter            Nine Months
                                     Ended September 30   Ended September 30
                                       2004      2003       2004     2003
  Wellhead Volumes and Prices
  Natural Gas Volumes (MMcf/d)
    United States                       623       644       620      641
    Canada                              211       152       204      154
      United States & Canada            834       796       824      795
    Trinidad                            203       155       173      152
    United Kingdom                        8       ---         3      ---
      Total                           1,045       951     1,000      947

  Average Natural Gas Prices ($/Mcf)
    United States                    $ 5.57    $ 4.78    $ 5.55   $ 5.25
    Canada                             4.99      4.47      5.00     4.80
      United States & Canada
       Composite                       5.42      4.72      5.41     5.16
    Trinidad                           1.50      1.34      1.46     1.33
    United Kingdom                     5.30       ---      5.30      ---
      Composite                        4.66      4.17      4.73     4.54

  Crude Oil and Condensate Volumes
   (MBD)
    United States                      21.0      18.0      20.7     17.9
    Canada                              2.7       2.3       2.6      2.2
      United States & Canada           23.7      20.3      23.3     20.1
    Trinidad                            4.0       2.5       3.2      2.4
      Total                            27.7      22.8      26.5     22.5

  Average Crude Oil and Condensate
   Prices ($/Bbl)
    United States                    $43.30    $29.43    $38.57   $30.22
    Canada                            40.17     28.11     35.89    28.86
      United States & Canada
       Composite                      42.94     29.28     38.26    30.07
    Trinidad                          42.06     26.80     38.19    28.75
      Composite                       42.81     29.01     38.26    29.93

  Natural Gas Liquids Volumes (MBD)
    United States                       4.4       2.9       4.7      3.0
    Canada                              0.9       0.8       0.7      0.6
      Total                             5.3       3.7       5.4      3.6

  Average Natural Gas Liquids Prices
   ($/Bbl)
    United States                    $30.07    $20.53    $26.09   $21.16
    Canada                            23.58     18.23     21.65    18.80
      Composite                       29.02     20.06     25.52    20.76

  Natural Gas Equivalent Volumes
   (MMcfe/d)
    United States                       775       770       772      766
    Canada                              233       170       224      172
      United States & Canada          1,008       940       996      938
    Trinidad                            227       170       192      166
    United Kingdom                        8       ---         3      ---
      Total                           1,243     1,110     1,191    1,104

  Total Bcfe Deliveries               114.4     102.1     326.5    301.5


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

                                               September 30,    December 31,
                                                    2004            2003
                                                (Unaudited)
                                    ASSETS
  Current Assets
    Cash and Cash Equivalents                  $   81,908      $    4,443
    Accounts Receivable, Net                      350,170         295,118
    Inventories                                    30,739          21,922
    Deferred Income Taxes                          22,560          31,548
    Other                                          72,302          42,983
         Total                                    557,679         396,014

  Oil and Gas Properties (Successful
   Efforts Method)                              9,069,633       8,189,062
    Less:  Accumulated Depreciation,
     Depletion and Amortization                (4,311,597)     (3,940,145)
      Net Oil and Gas Properties                4,758,036       4,248,917
  Other Assets                                    108,882         104,084
  Total Assets                                 $5,424,597      $4,749,015



               LIABILITIES AND SHAREHOLDERS' EQUITY
  Current Liabilities
    Accounts Payable                           $  339,303      $  282,379
    Accrued Taxes Payable                          59,168          33,276
    Dividends Payable                               7,497           6,175
    Liabilities from Price Risk
     Management Activities                          4,736          37,779
    Deferred Income Taxes                          66,746          73,611
    Other                                          46,978          43,299
         Total                                    524,428         476,519


  Long-Term Debt                                1,062,972       1,108,872
  Other Liabilities                               195,482         171,115
  Deferred Income Taxes                           915,803         769,128

  Shareholders' Equity
    Preferred Stock, $.01 Par,
     10,000,000 Shares Authorized:
       Series B, 100,000 Shares Issued,
        Cumulative, $100,000 Liquidation
        Preference                                 98,767          98,589
       Series D, 500 Shares Issued,
        Cumulative, $50,000 Liquidation
        Preference                                 49,962          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                     15,586           1,625
    Unearned Compensation                         (32,555)        (23,473)
    Accumulated Other Comprehensive
     Income                                       100,194          73,934
    Retained Earnings                           2,509,851       2,121,214
    Common Stock Held in Treasury,
     6,363,820 shares at September 30, 2004
     and 8,819,600 shares at December 31, 2003   (217,140)       (299,582)
            Total Shareholders' Equity          2,725,912       2,223,381

  Total Liabilities and Shareholders'
   Equity                                      $5,424,597      $4,749,015


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


                                        Quarter            Nine Months
                                   Ended September 30   Ended September 30
                                     2004      2003      2004       2003
  Cash Flows from Operating
   Activities
  Reconciliation of Net Income to
   Net Cash Provided by Operating
   Activities:
    Net Income                     $172,310  $117,419   $418,100   $355,635
    Items Not Requiring Cash
      Depreciation, Depletion and
       Amortization                 130,257   110,438    360,278    320,578
      Impairments                    17,930    26,117     51,289     63,548
      Deferred Income Taxes          74,000    43,456    158,216    123,431
      Cumulative Effect of Change
       in Accounting Principle          ---       ---        ---      7,131
      Other, Net                        257     2,798     13,546      6,763
    Exploration Costs                21,874    17,812     67,466     57,409
    Dry Hole Costs                   21,114     8,876     50,205     18,932
    Mark-to-market Commodity
     Derivative Contracts
      Total (Gains) Losses          (22,743)  (23,628)    36,275     37,346
      Realized Losses               (32,297)   (8,611)   (70,507)   (47,700)
      Collar Premium                    ---    (1,365)       ---     (1,365)
    Tax Benefits From Stock
     Options Exercised                6,938     2,223     20,730      7,025
    Other, Net                        1,065      (605)      (208)     2,894
    Changes in Components of
     Working Capital and Other
     Liabilities
      Accounts Receivable             5,106    28,515    (55,352)   (15,905)
      Inventories                      (486)   (1,816)    (8,817)    (1,860)
      Accounts Payable               20,942    25,675     58,113     50,028
      Accrued Taxes Payable           5,069    15,960        619     32,769
      Other Liabilities               3,309     2,934      3,566      1,783
      Other, Net                      2,935    10,175       (531)    18,074
    Changes in Components of
     Working Capital Associated
     with Investing and Financing
     Activities                     (34,676)  (15,133)   (17,940)   (22,064)
  Net Cash Provided by Operating
   Activities                       392,904   361,240  1,085,048  1,014,452

  Investing Cash Flows
    Additions to Oil and Gas
     Properties                    (356,925) (239,779)  (891,465)  (564,825)
    Exploration Costs               (21,874)  (17,812)   (67,466)   (57,409)
    Dry Hole Costs                  (21,114)   (8,876)   (50,205)   (18,932)
    Proceeds from Sales of Assets     3,009     2,611     12,771     12,361
    Changes in Components of
     Working Capital Associated
     with Investing Activities       33,354    15,344     17,366     22,223
    Other, Net                       (1,183)  (71,645)   (14,322)   (70,366)
  Net Cash Used in Investing
   Activities                      (364,733) (320,157)  (993,321)  (676,948)

  Financing Cash Flows
    Net Commercial Paper and Line
     of Credit Borrowings
     (Repayments)                    77,150       ---    (20,900)  (134,310)
    Long-Term Debt Borrowings           ---       ---    150,000        ---
    Long-Term Debt Repayments      (100,000)      ---   (175,000)       ---
    Dividends Paid                   (9,729)   (8,398)   (27,828)   (22,878)
    Treasury Stock Purchased            ---       ---        ---    (21,295)
    Proceeds from Stock Options
     Exercised                       17,289     2,987     60,479     17,717
    Other, Net                        1,188    (2,150)    (1,013)    (2,097)
  Net Cash Used in Financing
   Activities                       (14,102)   (7,561)   (14,262)  (162,863)

  Increase in Cash and Cash
   Equivalents                       14,069    33,522     77,465    174,641
  Cash and Cash Equivalents at
   Beginning of Period               67,839   150,967      4,443      9,848
  Cash and Cash Equivalents at End
   of Period                       $ 81,908  $184,489   $ 81,908   $184,489


                           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 third quarter and nine months ended September 30 net income available to common to reflect actual cash realized from previously disclosed oil and gas hedges, to eliminate the mark-to-market gain or 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             Nine Months
                                    Ended September 30    Ended September 30
                                     2004       2003       2004       2003

  Reported Net Income Available
   to Common                      $169,552   $114,661   $409,826   $347,361

  Mark-to-Market (MTM) Commodity
   Derivative Contracts Impact
    Total (Gains) Losses           (22,743)   (23,628)    36,275     37,346
    Realized Losses                (32,297)    (8,611)   (70,507)   (47,700)
    Collar Premium                     ---     (1,365)       ---     (1,365)
       Subtotal                    (55,040)   (33,604)   (34,232)   (11,719)

    After Tax MTM Impact           (35,418)   (21,624)   (22,028)    (7,541)

  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 Canadian Tax
     Rate Reduction                    ---        ---     (5,335)       ---

  Adjusted Non-GAAP Net Income
   Available to Common            $134,134    $93,037   $382,463   $346,951

  Adjusted Non-GAAP Net Income
   Per Share Available to Common
    Basic                         $   1.14    $  0.81   $   3.28   $   3.03
    Diluted                       $   1.12    $  0.80   $   3.22   $   2.98

  Average Number of Shares
   Outstanding
    Basic                          117,411    114,616    116,485    114,489
    Diluted                        119,677    116,370    118,710    116,284


                           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 third quarter and nine months ended September 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               Nine Months
                                 Ended September 30      Ended September 30
                                  2004        2003        2004        2003
  Net Cash Provided by
   Operating Activities        $392,904    $361,240  $1,085,048  $1,014,452

  Adjustments
    Changes in Components of
     Working Capital and
     Other Liabilities
      Accounts Receivable        (5,106)    (28,515)     55,352      15,905
      Inventories                   486       1,816       8,817       1,860
      Accounts Payable          (20,942)    (25,675)    (58,113)    (50,028)
      Accrued Taxes Payable      (5,069)    (15,960)       (619)    (32,769)
      Other Liabilities          (3,309)     (2,934)     (3,566)     (1,783)
      Other, Net                 (2,935)    (10,175)        531     (18,074)
    Changes in Components of
     Working Capital Associated
     with Investing and
     Financing Activities        34,676      15,133      17,940      22,064
    Preferred Dividends          (2,758)     (2,758)     (8,274)     (8,274)

  Discretionary Cash Flow
   Available to Common         $387,947    $292,172  $1,097,116    $943,353

 

For Further Information Contact:
Investors
Maire A. Baldwin
(713) 651-6EOG (651-6364)

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

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