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EOG Resources Reports Third Quarter 2007 Results
- Extends North Dakota Bakken Crude Oil Play
- Continues Positive Results from Barnett Shale With Increased 2007 Exit Rate
- Sets Target for 2008 Total Company Organic Production Growth of 13 to 17 Percent
- Projects 33 Percent Total Company Crude Oil and Condensate Production Growth for 2008
PRNewswire-FirstCall
HOUSTON

Click here for PDF version

FOR IMMEDIATE RELEASE: Monday, October 29, 2007

EOG Resources, Inc. (EOG) today reported third quarter 2007 net income available to common of $202.4 million, or $0.82 per share. This compares to third quarter 2006 net income available to common of $297.3 million, or $1.21 per share.

The results for the third quarter 2007 included a previously disclosed $43.6 million ($28.1 million after tax, or $0.11 per share) net gain on the mark-to-market of financial commodity transactions. During the quarter, the net cash realized related to financial commodity contracts was $33.3 million ($21.4 million after tax, or $0.08 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 $195.7 million, or $0.79 per share. Adjusted non-GAAP net income available to common for the third quarter 2006 was $276.9 million, or $1.12 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, EOG's total crude oil and condensate production increased 23 percent compared to the same quarter a year ago, driven by continued drilling success in North Dakota and the Mid Continent.

In Mountrail County, North Dakota, EOG has reported successful drilling from the Bakken Formation. The Wenco #1-30H, in which EOG has a 52 percent working interest, was completed to sales at the end of September at an initial production rate of 1,930 barrels of oil per day (Bopd), gross. Also in Mountrail County, the Austin #1-02H was completed to sales in October at an initial production rate of 2,000 Bopd. EOG has a 100 percent working interest in the well, which is located nine miles north of existing production. This is the northernmost location that EOG has drilled to date. To further confirm the northern extension of the field, following completion of the Austin #1-02H, EOG drilled an offset well, the Austin #2-03H that will be completed in November. Based on shows during drilling, EOG expects the well to produce at a rate similar to that of the Austin #1-02H. EOG has an 81 percent working interest in the Austin #2-03H. In the North Dakota Bakken Play, where it has accumulated over 175,000 net acres, EOG plans to increase drilling activity from six to eight rigs in early 2008.

"The results from the two Austin wells have given us the confidence to increase estimated reserves in the Bakken Play from the previously announced 60 million barrels of oil to approximately 80 million barrels, net to EOG. By extending the perimeter of the field, we have also increased our inventory of firm drilling locations. Therefore, we expect this area to have a significant impact on EOG's oil production in 2008 and beyond. The Bakken is currently the highest rate of return play in our drilling program," said Mark G. Papa, Chairman and Chief Executive Officer.

EOG's natural gas and natural gas liquids production in the United States increased 19 percent versus the same quarter in 2006, with the largest increase coming from the Fort Worth Basin Barnett Shale. In Johnson County, refinements in well completion processes are resulting in higher well production rates. Reflecting a more efficient drilling program and improved well results, overall natural gas production from the Barnett Shale has exceeded internal estimates. Therefore, EOG is increasing its net year-end exit rate from the Barnett Shale from 300 to approximately 350 million cubic feet per day.

Outside of the Barnett Shale, EOG's total production in the United States and Canada increased approximately 6 percent for the first nine months of 2007 as compared to the same period a year ago. Increases were driven by East Texas and Rocky Mountain natural gas activity and crude oil production in North Dakota.

2008 Operational Plans and Targets

EOG announced 2008 total company production growth targets, ranging from 13 to 17 percent, depending upon drilling economics and North American natural gas prices. Production growth next year will be driven by United States operations, particularly the Fort Worth Basin Barnett Shale natural gas and the North Dakota Bakken crude oil plays, both very high rate of return programs. Production from Canada, Trinidad and the United Kingdom North Sea in 2008 is expected to be relatively flat with 2007 production levels.

"While the economics of onshore drilling in North America remain strong, EOG is approaching its 2008 natural gas drilling and capital expenditure program with a measure of caution based on the uncertainty of natural gas pricing," said Papa. "We have set two alternate production growth targets, one more aggressive than the other. Our initial case assumes a more robust natural gas price environment with Henry Hub gas prices averaging $8 or higher. In this scenario, we are targeting 17 percent total company production growth. However, after the first quarter, if it appears that the industry is in a $7 natural gas price environment for the year, we will reset the total company production growth target to 13 percent. In either case, we expect total company crude oil and condensate production to increase 33 percent in 2008 over 2007.

"In anticipation of our 2008 activity level and our robust prospect inventory, we are enthusiastic about achieving EOG's double-digit organic growth targets even taking into consideration that we plan to divest our Appalachian shallow assets during the first quarter. In either gas price environment, our goal is the same -- to pursue a high rate of return drilling program while maintaining flat net debt year over year," said Papa.

Conference Call Scheduled for October 30, 2007

EOG's third quarter 2007 results conference call will be available via live audio webcast at 9 a.m. Central Daylight Time (10 a.m. Eastern Daylight Time) Tuesday, October 30, 2007. To listen, log on to http://www.eogresources.com/. The webcast will be archived on EOG's website through Tuesday, November 13, 2007.

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 or 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 the expectations reflected in its 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 EOG's 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,
     interest rates and financial market conditions;
  -- the extent and effect of any hedging activities engaged in by EOG;
  -- the timing and impact of liquefied natural gas imports;
  -- changes in demand or prices for ammonia or methanol;
  -- 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 ability to achieve production levels from existing and future oil
     and gas development projects due to operating hazards, drilling risks
     and the inherent uncertainties in predicting oil and gas reservoir
     performance;
  -- the availability and cost of drilling rigs, experienced drilling crews,
     tubular steel and other materials, equipment and services used in
     drilling and well completions;
  -- the availability, terms and timing of mineral licenses and leases and
     governmental and other permits and rights of way;
  -- access to surface locations for drilling and production facilities;
  -- the availability and capacity of gathering, processing and pipeline
     transportation facilities;
  -- 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 and the enactment of new
     government policies, legislation and regulations;
  -- acts of war and terrorism and responses to these acts; and
  -- weather, including weather-related delays in the installation of
     gathering and production facilities.


In light of these risks, uncertainties and assumptions, the events anticipated by EOG's forward-looking statements may not occur. EOG's 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 (SEC) 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, 2006, 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             Nine Months
                                  Ended September 30,   Ended September 30,
                                    2007      2006        2007       2006
  Net Operating Revenues           $990.5    $968.7    $2,940.0    $2,981.2
  Net Income Available to Common   $202.4    $297.3      $725.2    $1,051.7
  Net Income Per Share Available
   to Common
    Basic                           $0.83     $1.23       $2.98       $4.35
    Diluted                         $0.82     $1.21       $2.93       $4.28
  Average Number of Common
   Shares
    Basic                           243.5     241.9       243.1       241.5
    Diluted                         247.4     246.1       247.3       246.0



                        SUMMARY INCOME STATEMENTS
                        (Unaudited; in thousands)

                                 Quarter                 Nine Months
                            Ended September 30,       Ended September 30,
                             2007        2006         2007          2006
  Net Operating Revenues
    Wellhead Natural Gas   $684,292    $661,920    $2,210,390    $2,093,950
    Wellhead Crude Oil,
     Condensate and
     Natural Gas Liquids    258,273     200,724       651,833       570,478
    Gains on Mark-to-
     Market Commodity
     Derivative
     Contracts               43,591     104,696        47,893       302,742
    Other, Net                4,307       1,386        29,871        13,999
       Total                990,463     968,726     2,939,987     2,981,169
  Operating Expenses
    Lease and Well          120,091      93,693       347,604       268,464
    Transportation Costs     44,213      26,632       123,552        80,641
    Exploration Costs        38,840      35,174       106,440       109,879
    Dry Hole Costs           46,046      16,356        74,672        41,750
    Impairments              42,014      22,106        86,860        67,559
    Depreciation,
     Depletion and
     Amortization           279,189     216,071       783,311       586,651
    General and
     Administrative          48,101      42,362       139,163       117,260
    Taxes Other Than
     Income                  47,111      54,066       149,806       154,618
       Total                665,605     506,460     1,811,408     1,426,822
  Operating Income          324,858     462,266     1,128,579     1,554,347

  Other Income, Net           6,311      13,832        22,236        41,413

  Income Before Interest
   Expense and Income
   Taxes                    331,169     476,098     1,150,815     1,595,760

  Interest Expense, Net      12,571      10,102        31,027        35,639

  Income Before Income
   Taxes                    318,598     465,996     1,119,788     1,560,121

  Income Tax Provision      114,595     166,860       391,065       502,861

  Net Income                204,003     299,136       728,723     1,057,260

  Preferred Stock
   Dividends                  1,637       1,858         3,502         5,574

  Net Income Available
   to Common               $202,366    $297,278      $725,221    $1,051,686



                           EOG RESOURCES, INC.
                           OPERATING HIGHLIGHTS
                               (Unaudited)

                                          Quarter           Nine Months
                                     Ended September 30, Ended September 30,
                                         2007      2006      2007      2006
  Wellhead Volumes and Prices
  Natural Gas Volumes (MMcfd)
     United States                        997       837       958       791
     Canada                               216       224       223       226
       United States & Canada           1,213     1,061     1,181     1,017
     Trinidad                             262       255       255       267
     United Kingdom                        22        28        25        29
       Total                            1,497     1,344     1,461     1,313

  Average Natural Gas Prices ($/Mcf)
     United States                      $5.56     $6.21     $6.24     $6.74
     Canada                              5.49      5.65      6.22      6.60
       United States & Canada
        Composite                        5.55      6.09      6.24      6.71
     Trinidad                            2.20      2.21      2.35      2.28
     United Kingdom                      5.89      6.09      5.29      8.27
       Composite                         4.97      5.35      5.54      5.84

  Crude Oil and Condensate Volumes
   (MBbld)
     United States                       25.3      20.6      23.6      20.4
     Canada                               2.4       2.6       2.4       2.5
       United States & Canada            27.7      23.2      26.0      22.9
     Trinidad                             4.2       4.4       4.2       4.9
     United Kingdom                       0.1       0.1       0.1       0.1
       Total                             32.0      27.7      30.3      27.9

  Average Crude Oil and Condensate
   Prices ($/Bbl)
     United States                     $70.86    $67.35    $62.52    $65.00
     Canada                             69.99     63.87     60.54     59.42
       United States & Canada
        Composite                       70.78     66.96     62.33     64.35
     Trinidad                           67.03     74.26     67.22     66.50
     United Kingdom                     66.96     59.09     61.57     60.49
       Composite                        70.27     67.68     63.01     64.68

  Natural Gas Liquids Volumes
   (MBbld)
     United States                       10.8       8.8      10.3       8.4
     Canada                               0.9       0.7       1.0       0.7
       Total                             11.7       9.5      11.3       9.1

  Average Natural Gas Liquids Prices
   ($/Bbl)
     United States                     $47.94    $44.33    $43.73    $41.10
     Canada                             46.71     52.21     41.52     47.15
       Composite                        47.84     44.89     43.52     41.55

  Natural Gas Equivalent Volumes
   (MMcfed)
     United States                      1,213     1,015     1,161       964
     Canada                               236       243       244       245
       United States & Canada           1,449     1,258     1,405     1,209
     Trinidad                             288       281       280       296
     United Kingdom                        22        29        25        30
       Total                            1,759     1,568     1,710     1,535

  Total Bcfe                            161.9     144.2     466.8     419.1



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

                                             September 30,      December 31,
                                                  2007              2006
                                  ASSETS
  Current Assets
    Cash and Cash Equivalents                    $301,944          $218,255
    Accounts Receivable, Net                      678,762           754,134
    Inventories                                   109,838           113,591
    Assets from Price Risk Management
     Activities                                    68,354           130,612
    Income Taxes Receivable                        92,569            94,311
    Other                                          58,758            39,177
       Total                                    1,310,225         1,350,080

  Oil and Gas Properties (Successful
   Efforts Method)                             16,955,361        13,893,851
    Less:  Accumulated Depreciation,
     Depletion and Amortization                (6,921,155)       (5,949,804)
       Net Oil and Gas Properties              10,034,206         7,944,047
  Other Assets                                    123,276           108,033
  Total Assets                                $11,467,707        $9,402,160

                   LIABILITIES AND SHAREHOLDERS' EQUITY

  Current Liabilities
    Accounts Payable                             $964,515          $896,572
    Accrued Taxes Payable                         102,518           130,984
    Dividends Payable                              22,095            14,718
    Deferred Income Taxes                          84,499           144,615
    Current Portion of Long-Term Debt              98,442                 -
    Other                                          69,484            68,123
       Total                                    1,341,553         1,255,012

  Long-Term Debt                                1,185,000           733,442
  Other Liabilities                               353,331           300,907
  Deferred Income Taxes                         1,960,675         1,513,128

  Shareholders' Equity
    Preferred Stock, $0.01 Par,
     10,000,000 Shares Authorized:
     Series B, Cumulative, $1,000
     Liquidation Preference Per
     Share, 43,260 Shares Outstanding at
     September 30, 2007 and 53,260 Shares
     Outstanding at December 31, 2006              43,035            52,887
    Common Stock, $0.01 Par,
     640,000,000 Shares Authorized and
     249,460,000 Shares Issued                    202,495           202,495
    Additional Paid In Capital                    186,256           129,986
    Accumulated Other Comprehensive
     Income                                       450,500           176,704
    Retained Earnings                           5,820,884         5,151,034
    Common Stock Held in Treasury,
     3,647,754 Shares at September 30, 2007
     and 5,724,959 Shares at December 31, 2006    (76,022)         (113,435)
       Total Shareholders' Equity               6,627,148         5,599,671
  Total Liabilities and Shareholders'
   Equity                                     $11,467,707        $9,402,160



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

                                                        Nine Months
                                                    Ended September 30,
                                                   2007             2006
  Cash Flows from Operating Activities
  Reconciliation of Net Income to Net Cash
   Provided by Operating Activities:
    Net Income                                   $728,723        $1,057,260
    Items Not Requiring (Providing) Cash
      Depreciation, Depletion and
       Amortization                               783,311           586,651
      Impairments                                  86,860            67,559
      Stock-Based Compensation Expenses            46,732            38,407
      Deferred Income Taxes                       328,005           258,465
      Other, Net                                  (21,080)          (19,271)
    Dry Hole Costs                                 74,672            41,750
    Mark-to-Market Commodity Derivative
     Contracts
      Total Gains                                 (47,893)         (302,742)
      Realized Gains                               99,188           166,892
    Other, Net                                     20,778            17,849
    Changes in Components of Working
     Capital and Other Assets and
     Liabilities
      Accounts Receivable                          78,283           110,517
      Inventories                                   4,232           (54,021)
      Accounts Payable                             42,830           104,592
      Accrued Taxes Payable                       (22,834)          (49,083)
      Other Assets                                 (7,780)           27,623
      Other Liabilities                            (3,765)           (6,904)
    Changes in Components of Working
     Capital Associated with Investing
     and Financing Activities                     (44,314)          (65,996)
  Net Cash Provided by Operating
   Activities                                   2,145,948         1,979,548

  Investing Cash Flows
    Additions to Oil and Gas Properties        (2,641,871)       (1,953,209)
    Proceeds from Sales of Assets                  43,972            15,655
    Changes in Components of Working
     Capital Associated with
     Investing Activities                          44,325            66,054
    Other, Net                                    (38,997)          (20,474)
  Net Cash Used in Investing Activities        (2,592,571)       (1,891,974)

  Financing Cash Flows
    Net Commercial Paper and Revolving
     Credit Facility Borrowings                    10,000                 -
    Long-Term Debt Borrowings                     600,000            37,000
    Long-Term Debt Repayments                     (60,000)         (192,550)
    Dividends Paid                                (61,253)          (44,015)
    Excess Tax Benefits from Stock-
     Based Compensation                            17,422            27,139
    Preferred Stock Redemptions                   (10,641)                -
    Proceeds from Stock Options
     Exercised and Employee Stock
     Purchase Plans                                32,747            29,284
    Debt Issuance Costs                            (4,752)                -
    Other, Net                                        (11)             (448)
  Net Cash Provided by (Used in) Financing
   Activities                                     523,512          (143,590)

  Effect of Exchange Rate Changes on Cash           6,800             8,136

  Increase / (Decrease) in Cash and
   Cash Equivalents                                83,689           (47,880)
  Cash and Cash Equivalents at
   Beginning of Period                            218,255           643,811
  Cash and Cash Equivalents at End of
   Period                                        $301,944          $595,931



                           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 nine-month periods ended September 30 reported Net Income Available to Common (GAAP) to reflect actual cash realized from financial commodity price transactions by eliminating the unrealized mark-to-market gains from these transactions, to add the one-time tax expense related to Texas (US) franchise tax law revision in the second quarter of 2006 and 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. 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              Nine Months
                                Ended September 30,    Ended September 30,
                                  2007       2006       2007        2006

  Reported Net Income
   Available to Common (GAAP)   $202,366   $297,278   $725,221   $1,051,686

  Mark-to-Market (MTM)
   Commodity Derivative
   Contracts Impact
    Total Gains                  (43,591)  (104,696)   (47,893)    (302,742)
    Realized Gains                33,308     72,978     99,188      166,892
      Subtotal                   (10,283)   (31,718)    51,295     (135,850)

    After Tax MTM Impact          (6,617)   (20,411)    33,008      (87,419)

  Add: Tax Expense Related to
   Texas (US) Franchise Tax
   Law Revision                        -          -          -        5,221
  Less: Tax Benefit Related to
   Alberta (Canada) Provincial
   Tax Rate Reduction                  -          -          -      (13,449)
  Less: Tax Benefit Related to
   Canadian Federal Tax Rate
   Reduction                           -          -          -      (18,593)

  Adjusted Net Income
   Available to Common
   (Non-GAAP)                   $195,749   $276,867   $758,229     $937,446

  Adjusted Net Income Per
   Share Available to Common
   (Non-GAAP)
    Basic                          $0.80      $1.14      $3.12        $3.88
    Diluted                        $0.79      $1.12      $3.07        $3.81

  Average Number of Common
   Shares
    Basic                        243,486    241,911    243,140      241,550
    Diluted                      247,425    246,136    247,275      245,990



                           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 nine-month periods ended September 30 Net Cash Provided by Operating Activities (GAAP) to Discretionary Cash Flow Available to Common (Non-GAAP). 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 Exploration Costs (excluding Stock-Based Compensation Expenses), Changes in Components of Working Capital, Other Assets and 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,
                               2007        2006         2007        2006
  Net Cash Provided by
   Operating Activities
   (GAAP)                    $724,260    $603,116    $2,145,948  $1,979,548

  Adjustments
    Exploration Costs
     (excluding
     Stock-Based
     Compensation
     Expenses)                 35,268      30,853        96,842     101,513
    Changes in Components
     of Working Capital
     and Other Assets and
     Liabilities
      Accounts Receivable     (57,549)     58,833       (78,283)   (110,517)
      Inventories              (6,708)     18,955        (4,232)     54,021
      Accounts Payable        (28,179)   (109,817)      (42,830)   (104,592)
      Accrued Taxes Payable    49,025      37,613        22,834      49,083
      Other Assets              3,097         537         7,780     (27,623)
      Other Liabilities       (16,655)    (18,518)        3,765       6,904
    Changes in Components
     of Working Capital
     Associated with
     Investing and Financing
     Activities                23,843      56,288        44,314      65,996
    Preferred Stock
     Dividends                 (1,637)     (1,858)       (3,502)     (5,574)

  Discretionary Cash Flow
   Available to Common
   (Non-GAAP)                $724,765    $676,002    $2,192,636  $2,008,759

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

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

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