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Press Releases
EOG Resources Reports Second Quarter 2006 Results
* 10.6 Percent Organic Increase in United States Natural Gas and Natural Gas Liquids Production Over First Six Months of 2005
* Continued Drilling Success in Johnson County
PRNewswire-FirstCall
HOUSTON

Click here for PDF version

FOR IMMEDIATE RELEASE: Monday, July 31, 2006

EOG Resources, Inc. (EOG) today reported second quarter 2006 net income available to common of $329.6 million, or $1.34 per share. This compares to second quarter 2005 net income available to common of $247.6 million, or $1.02 per share.

The results for the second quarter 2006 included a tax benefit of $18.6 million ($0.08 per share) related to a Canadian federal tax rate reduction, a tax benefit of $13.4 million ($0.05 per share) related to a provincial tax rate reduction in Alberta, Canada, a tax expense of $5.2 million ($0.02 per share) related to a revision of the Texas franchise tax law and a previously disclosed $91.0 million ($58.6 million after tax, or $0.24 per share) gain on the mark-to-market of financial commodity price transactions. During the quarter, the net cash realized related to financial commodity contracts was $63.9 million ($41.1 million after tax, or $0.17 per share). Reflecting these items, second quarter 2006 adjusted non-GAAP net income available to common was $285.3 million, or $1.16 per share. Last year's second quarter results included a positive adjustment to revenue of $19.3 million ($8.7 million after tax, or $0.04 per share) related to an amended gas sales agreement. Reflecting this item, second quarter 2005 adjusted non-GAAP net income available to common was $238.9 million, or $0.98 per share. (Please refer to the attached tables for the reconciliation of adjusted non-GAAP net income available to common to net income available to common.)

Operational Highlights

In the United States for the first six months of 2006, EOG's natural gas and natural gas liquids production increased 10.6 percent over the same period last year driven in part by success from the Barnett Shale Play in Central Texas. Favorable results from EOG's Rocky Mountain, East Texas and North Louisiana drilling programs also bolstered EOG's solid performance.

"Production from the Barnett Shale continues to surpass our internal forecast. We recently achieved net natural gas production of over 140 million cubic feet per day, which exceeds our original plan and is also approaching our original year-end target," said Mark G. Papa, Chairman and Chief Executive Officer. "The organic growth rate and operational success of the Barnett have been tremendous considering that this time last year, we were producing about 36 million a day from the play."

Another area recording strong performance during the second quarter was South Texas. EOG reported successful drilling results from the Frio Formation in San Patricio County. The Kirk Gas Unit #4, in which EOG has an 87 percent working interest, was drilled to a depth of over 12,000 feet. After fracture stimulation, the well tested at a gross rate of 13 million cubic feet per day (MMcfd) of natural gas and approximately 800 barrels of condensate per day. Several offset well locations are planned for later in the year. Also in South Texas, EOG reported success from the Lobo formation. EOG has an 88 percent working interest in both the Slator Ranch V#1 and the Slator Ranch W#1 that were each drilled to depths of approximately 11,000 feet. The V#1 is producing at a gross rate of 13 MMcfd and the W#1 at 18 MMcfd of natural gas.

Capital Structure

In keeping with EOG's long-term strategy, in the second quarter EOG further reduced long-term debt outstanding to $893 million at June 30, 2006. At quarter end, cash on the balance sheet was $759 million for non-GAAP net debt of $134 million. (Please refer to the attached tables for the reconciliation of non-GAAP net debt to current and long-term debt.) The company's debt-to-total capitalization ratio was 15 percent at June 30, 2006, down from 19 percent at December 31, 2005.

"With the second quarter results now in, EOG continues to be positioned to meet its 2006 goals of achieving strong organic production growth, maintaining low net debt and achieving high rates of return on equity and return on capital employed," said Papa.

Conference Call Scheduled for August 1, 2006

An updated investor presentation and reconciliation schedules will be posted to the EOG website prior to the conference call.

EOG's second quarter 2006 conference call will be available via live audio webcast at 9 a.m. Central Daylight Time (10 a.m. Eastern Daylight Time) Tuesday, August 1, 2006. To listen, log on to http://www.eogresources.com/ . The webcast will be archived on EOG's website through Tuesday, August 15, 2006.

EOG Resources, Inc. is one of the largest independent (non-integrated) oil and natural gas companies in the United States with proved reserves in the United States, Canada, offshore Trinidad and 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. All statements other than statements of historical facts, including, among others, statements regarding EOG's future financial position, business strategy, budgets, reserve information, projected levels of production, projected costs and plans and objectives of management for future operations, are forward-looking statements. EOG typically uses words such as "expect," "anticipate," "estimate," "strategy," "intend," "plan," "target" and "believe" or the negative of those terms or other variations of them or by comparable terminology to identify its forward-looking statements. In particular, statements, express or implied, concerning future operating results, the ability to replace or increase reserves or to increase production, or the ability to generate income or cash flows are forward- looking statements. 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, materials and equipment used in well completions, and tubular steel; the availability, terms and timing of governmental and other permits and rights of way; the availability of pipeline transportation capacity; the availability of compression uplift capacity; the extent to which EOG can economically develop its Barnett Shale acreage outside of Johnson County, Texas; 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; weather; and financial market conditions. In light of these risks, uncertainties and assumptions, the events anticipated by EOG's forward-looking statements might not occur. Forward-looking statements speak only as of the date made and EOG undertakes no obligation 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 Annual Report on Form 10-K for fiscal year ended December 31, 2005, 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 or from the SEC's website at http://www.sec.gov/ .

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

                                       Quarter              Six Months
                                    Ended June 30         Ended June 30
                                    2006      2005       2006        2005
  Net Operating Revenues           $919.1    $783.9    $2,003.6    $1,472.1
  Net Income Available to Common   $329.6    $247.6      $754.4      $448.4
  Net Income Per Share Available
   to Common
    Basic                           $1.36     $1.04       $3.13       $1.89
    Diluted                         $1.34     $1.02       $3.07       $1.85
  Average Number of Shares
   Outstanding
    Basic                           241.6     238.3       241.4       237.8
    Diluted                         245.9     243.4       245.8       242.8



                        SUMMARY INCOME STATEMENTS
                        (Unaudited; in thousands)

                                Quarter                 Six Months
                             Ended June 30             Ended June 30
                            2006        2005         2006          2005
  Net Operating
   Revenues
    Wellhead Natural
     Gas                  $642,969    $625,564    $1,432,030    $1,168,670
    Wellhead Crude Oil,
     Condensate and
     Natural Gas
     Liquids               185,036     157,307       369,754       301,843
    Gains (Losses) on
     Mark-to-Market
     Commodity
     Derivative
     Contracts              91,022         ---       198,046          (940)
    Other, Net                  61       1,053         3,794         2,507
      Total                919,088     783,924     2,003,624     1,472,080
  Operating Expenses
    Lease and Well          87,287      66,558       174,771       132,326
    Transportation
     Costs                  25,913      20,293        54,009        37,400
    Exploration Costs       35,313      27,994        74,705        62,810
    Dry Hole Costs          14,668      22,537        25,394        37,119
    Impairments             22,680      24,231        45,453        36,403
    Depreciation,
     Depletion and
     Amortization          192,928     159,896       370,580       312,912
    General and
     Administrative         38,607      30,113        74,898        58,800
    Taxes Other Than
     Income                 46,858      37,613       100,552        79,526
      Total                464,254     389,235       920,362       757,296
  Operating Income         454,834     394,689     1,083,262       714,784

  Other Income, Net         21,844       6,874        36,400        12,339

  Income Before
   Interest Expense and
   Income Taxes            476,678     401,563     1,119,662       727,123

  Interest Expense, Net     12,384      14,687        25,537        28,644

  Income Before Income
   Taxes                   464,294     386,876     1,094,125       698,479

  Income Tax Provision     132,877     137,420       336,001       246,320

  Net Income               331,417     249,456       758,124       452,159

  Preferred Stock
   Dividends                 1,858       1,858         3,716         3,716

  Net Income Available
   to Common              $329,559    $247,598      $754,408      $448,443



                           EOG RESOURCES, INC.
                           OPERATING HIGHLIGHTS
                               (Unaudited)

                                      Quarter              Six Months
                                   Ended June 30          Ended June 30
                                   2006      2005         2006     2005
  Wellhead Volumes and Prices
  Natural Gas Volumes (MMcfd)
    United States                    776       706          767      698
    Canada                           225       228          227      231
      United States & Canada       1,001       934          994      929
    Trinidad                         265       214          274      209
    United Kingdom                    25        34           30       34
      Total                        1,291     1,182        1,298    1,172

  Average Natural Gas Prices
   ($/Mcf)
    United States                  $6.33     $6.64        $7.04    $6.31
    Canada                          6.28      6.02         7.08     5.85
      United States & Canada
       Composite                    6.32      6.49         7.04     6.20
    Trinidad                        2.18      2.92 (A)     2.31     2.35 (B)
    United Kingdom                  6.34      5.54         9.32     6.10
      Composite                     5.47      5.82         6.10     5.51

  Crude Oil and Condensate
   Volumes (MBbld)
    United States                   19.5      21.7         20.2     22.1
    Canada                           2.4       2.5          2.5      2.5
      United States & Canada        21.9      24.2         22.7     24.6
    Trinidad                         4.8       4.2          5.2      4.1
    United Kingdom                   0.1       0.1          0.1      0.2
      Total                         26.8      28.5         28.0     28.9

  Average Crude Oil and
   Condensate Prices ($/Bbl)
    United States                 $67.69    $51.03       $63.70   $49.90
    Canada                         62.62     46.58        57.12    45.68
      United States & Canada
       Composite                   67.06     50.58        62.92    49.47
    Trinidad                       67.47     53.05        64.45    49.22
    United Kingdom                 65.80     49.10        61.04    43.93
      Composite                    67.13     50.93        63.21    49.41

  Natural Gas Liquids Volumes
   (MBbld)
    United States                    9.0       7.9          8.1      6.7
    Canada                           0.6       1.2          0.7      1.3
      Total                          9.6       9.1          8.8      8.0

  Average Natural Gas Liquids
   Prices ($/Bbl)
    United States                 $41.02    $30.51       $39.32   $30.01
    Canada                         46.55     30.52        44.56    28.80
      Composite                    41.38     30.51        39.72    29.81

  Natural Gas Equivalent
   Volumes (MMcfed)
    United States                    947       885          937      870
    Canada                           244       249          246      254
      United States & Canada       1,191     1,134        1,183    1,124
    Trinidad                         293       238          305      235
    United Kingdom                    26        35           30       35
      Total                        1,510     1,407        1,518    1,394

  Total Bcfe                       137.4     128.1        274.8    252.3

   (A)  Includes $0.99 per Mcf as a result of a revenue adjustment related
        to an amended Trinidad take-or-pay contract.
   (B)  Includes $0.51 per Mcf as a result of a revenue adjustment related
        to an amended Trinidad take-or-pay contract.



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

                                               June 30,        December 31,
                                                 2006              2005

                                  ASSETS
  Current Assets
    Cash and Cash Equivalents                   $759,108          $643,811
    Accounts Receivable, Net                     597,564           762,207
    Inventories                                   98,430            63,215
    Assets from Price Risk Management
     Activities                                  108,344            11,415
    Deferred Income Taxes                            ---            24,376
    Other                                         35,264            58,214
        Total                                  1,598,710         1,563,238

  Oil and Gas Properties (Successful
   Efforts Method)                            12,446,522        11,173,389
    Less:  Accumulated Depreciation,
     Depletion and Amortization               (5,512,505)       (5,086,210)
        Net Oil and Gas Properties             6,934,017         6,087,179
  Other Assets                                   109,430           102,903
  Total Assets                                $8,642,157        $7,753,320


                   LIABILITIES AND SHAREHOLDERS' EQUITY
  Current Liabilities
    Accounts Payable                            $680,575          $679,548
    Accrued Taxes Payable                        131,150           140,902
    Dividends Payable                             14,799             9,912
    Deferred Income Taxes                         83,672           164,659
    Current Portion of Long-Term Debt            124,075           126,075
    Other                                         48,246            50,945
        Total                                  1,082,517         1,172,041


  Long-Term Debt                                 768,442           858,992
  Other Liabilities                              296,407           283,407
  Deferred Income Taxes                        1,346,395         1,122,588

  Shareholders' Equity
    Preferred Stock, $0.01 Par,
     10,000,000 Shares Authorized:
     Series B, 100,000 Shares Issued,
     Cumulative, $100,000,000 Liquidation
     Preference                                   99,181            99,062
    Common Stock, $0.01 Par,
     640,000,000 Shares Authorized and
     249,460,000 Shares Issued                   202,495           202,495
    Additional Paid In Capital                    91,852            84,705
    Unearned Compensation                            ---           (36,246)
    Accumulated Other Comprehensive
     Income                                      242,827           177,137
    Retained Earnings                          4,645,763         3,920,483
    Common Stock Held in Treasury,
     6,861,919 Shares at June 30, 2006
     and 7,385,862 Shares at
     December 31, 2005                          (133,722)         (131,344)
          Total Shareholders' Equity           5,148,396         4,316,292
  Total Liabilities and Shareholders'
   Equity                                     $8,642,157        $7,753,320



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

                                                         Six Months
                                                        Ended June 30
                                                    2006             2005
  Cash Flows from Operating Activities
  Reconciliation of Net Income to Net
   Cash Provided by Operating Activities:
    Net Income                                    $758,124         $452,159
    Items Not Requiring Cash
      Depreciation, Depletion and
       Amortization                                370,580          312,912
      Impairments                                   45,453           36,403
      Stock-Based Compensation Expenses             19,618            5,699
      Deferred Income Taxes                        153,552          109,278
      Other, Net                                    (7,485)            (366)
    Dry Hole Costs                                  25,394           37,119
    Mark-to-Market Commodity Derivative
     Contracts
      Total (Gains) Losses                        (198,046)             940
      Realized Gains                                93,913            9,807
    Tax Benefits From Stock Options
     Exercised                                         ---           18,309
    Other, Net                                       4,710           (5,323)
    Changes in Components of Working
     Capital and Other Liabilities
      Accounts Receivable                          169,350           (5,081)
      Inventories                                  (35,066)         (12,185)
      Accounts Payable                              (5,225)          16,934
      Accrued Taxes Payable                        (11,470)           5,200
      Other Liabilities                               (936)          (5,325)
      Other, Net                                     3,674          (10,917)
    Changes in Components of Working
     Capital Associated with
     Investing and Financing Activities             (9,708)          19,842
  Net Cash Provided by Operating
   Activities                                    1,376,432          985,405

  Investing Cash Flows
    Additions to Oil and Gas Properties         (1,189,927)        (762,347)
    Proceeds from Sales of Assets                   14,553           31,578
    Changes in Components of Working
     Capital Associated with
     Investing Activities                            9,742          (19,950)
    Other, Net                                     (14,256)         (16,111)
  Net Cash Used in Investing Activities         (1,179,888)        (766,830)

  Financing Cash Flows
    Net Commercial Paper and Line of
     Credit Borrowings                                 ---           39,475
    Long-Term Debt Borrowing                        10,000              ---
    Long-Term Debt Repayments                     (102,550)             ---
    Dividends Paid                                 (27,712)         (20,220)
    Excess Tax Benefits from Stock-Based
     Compensation Expenses                          20,841              ---
    Proceeds from Stock Options
     Exercised and Employee Stock
     Purchase Plan                                  11,143           24,372
    Other, Net                                        (214)             108
  Net Cash (Used in) Provided by
   Financing Activities                            (88,492)          43,735

  Effect of Exchange Rate Changes on
   Cash                                              7,245             (589)

  Increase in Cash and Cash Equivalents            115,297          261,721
  Cash and Cash Equivalents at Beginning
   of Period                                       643,811           20,980
  Cash and Cash Equivalents at End of
   Period                                         $759,108         $282,701



                           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 data)

The following chart adjusts three-month and six-month periods ended June 30 reported Net Income Available to Common to reflect actual cash realized from oil and gas hedges by eliminating the unrealized mark-to-market gains or losses from these transactions, to add the one-time tax expense related to Texas (US) franchise tax law revision in the second quarter of 2006, to eliminate tax benefits related to the Alberta (Canada) provincial tax rate reduction and Canadian federal tax rate reduction in the second quarter of 2006 and to eliminate the upward revenue adjustment for an amended Trinidad gas sales agreement recorded in the second quarter of 2005. 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 make certain other adjustments to exclude one-time items. EOG management uses this information for comparative purposes within the industry.

                                       Quarter             Six Months
                                    Ended June 30         Ended June 30
                                   2006       2005       2006       2005

  Reported Net Income Available
   to Common (GAAP)              $329,559   $247,598   $754,408   $448,443

  Mark-to-Market (MTM)
   Commodity Derivative
   Contracts Impact
    Total (Gains) Losses          (91,022)       ---   (198,046)       940
    Realized Gains                 63,859        ---     93,913      9,807
      Subtotal                    (27,163)       ---   (104,133)    10,747

    After Tax MTM Impact          (17,479)       ---    (67,010)     6,916

  Add: Tax Expense Related to
   Texas (US) Franchise Tax Law
   Revision                         5,221        ---      5,221        ---
  Less: Tax Benefit Related to
   Alberta (Canada) Provincial
   Tax Rate Reduction             (13,449)       ---    (13,449)       ---
  Less: Tax Benefit Related to
   Canadian Federal Tax Rate
   Reduction                      (18,593)       ---    (18,593)       ---
  Less: Revenue Adjustment for
   an Amended Trinidad Gas
   Sales
    Agreement, Net of Tax             ---     (8,672)       ---     (8,672)


  Adjusted Net Income Available
   to Common (Non-GAAP)          $285,259   $238,926   $660,577   $446,687

  Adjusted Net Income Per Share
   Available to Common
   (Non-GAAP)
    Basic                           $1.18      $1.00      $2.74      $1.88
    Diluted                         $1.16      $0.98      $2.69      $1.84

  Average Number of Shares
   Outstanding
    Basic                         241,613    238,252    241,370    237,752
    Diluted                       245,887    243,414    245,827    242,771



                           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 three-month and six-month periods 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
                                 2006        2005        2006        2005
  Net Cash Provided by
   Operating Activities
   (GAAP)                      $589,665    $503,566  $1,376,432    $985,405

  Adjustments
    Exploration Costs            35,313      27,994      74,705      62,810
    Changes in Components of
     Working Capital and
     Other Liabilities
      Accounts Receivable       (34,200)     10,599    (169,350)      5,081
      Inventories                21,696       3,484      35,066      12,185
      Accounts Payable           (4,310)    (43,286)      5,225     (16,934)
      Accrued Taxes Payable      40,768      36,606      11,470      (5,200)
      Other Liabilities           6,364       8,992         936       5,325
      Other, Net                 (6,764)      4,458      (3,674)     10,917
    Changes in Components of
     Working Capital
     Associated
     with Investing and
     Financing Activities       (23,479)      5,878       9,708     (19,842)
    Preferred Dividends          (1,858)     (1,858)     (3,716)     (3,716)

  Discretionary Cash Flow
   Available to Common
   (Non-GAAP)                  $623,195    $556,433  $1,336,802  $1,036,031



                           EOG RESOURCES, INC.
            QUANTITATIVE RECONCILIATION OF NET DEBT (NON-GAAP)
                   TO CURRENT AND LONG-TERM DEBT (GAAP)
                         (Unaudited; in millions)

The following chart reconciles Current and Long-Term Debt (GAAP) to Net Debt (Non-GAAP). A portion of the cash is associated with international subsidiaries; tax considerations may impact debt paydown. EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who utilize Net Debt in their calculation. EOG management uses this information for comparative purposes within the industry.

                                                      June 30,
                                                        2006

     Current and Long-Term Debt (GAAP)                  $893
     Less: Cash                                         (759)
     Net Debt (Non-GAAP)                                $134

 

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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