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INVESTORS
EOG Resources Announces Second Quarter 2008 Results and Increases Dividend
HOUSTON, July 29 /PRNewswire-FirstCall/ -- EOG Resources, Inc. (NYSE: EOG) (EOG) today reported second quarter 2008 net income available to common stockholders of $178.2 million, or $0.71 per share. This compares to second quarter 2007 net income available to common stockholders of $306.1 million, or $1.24 per share.
The results for the second quarter 2008 included a previously disclosed $842.8 million ($542.4 million after tax, or $2.16 per share) loss on the mark-to-market of financial commodity transactions. During the quarter, the cash outflow related to financial commodity contracts was $138.1 million ($88.9 million after tax, or $0.35 per share). Consistent with some analysts' practice of matching realizations to settlement months, adjusted non-GAAP net income available to common stockholders for the quarter was $631.7 million, or $2.52 per share. Adjusted non-GAAP net income available to common stockholders for the second quarter 2007 was $289.7 million, or $1.17 per share. (Please refer to the attached tables for the reconciliation of adjusted non-GAAP net income available to common stockholders to GAAP net income available to common stockholders.)
Operational Highlights
Driven by strong well results from the North Dakota Bakken and Mid Continent operating areas, EOG's United States crude oil and condensate production increased 51 percent versus the second quarter 2007. Total company crude oil and condensate production increased 38 percent over the same period. In the North Dakota Bakken, where EOG is operating an eight rig program, among its most prolific wells drilled during the quarter in the Parshall Field were the Austin #5-14H, #24-33H and #9-11H. The wells started production in June, posting peak rates of 3,744, 1,880 and 3,225 barrels of oil per day, gross respectively. EOG holds a 91 percent, 75 percent and 57 percent working interest, respectively, in the wells.
In the Fort Worth Barnett Shale Play, which continues to be one of the key drivers of EOG's United States natural gas production growth, the company recorded strong drilling results from northeastern Johnson County. Further reflecting EOG's application of completion technology and improved recovery rates, the Martin #1H, #2H, #3H, #4H and #5H started production in June at rates ranging from 6.1 to 9.2 million cubic feet per day of natural gas, gross. EOG has a 48 percent working interest in the wells.
Recently, EOG commenced sales from its first two natural gas shale wells in British Columbia's Horn River Basin. EOG plans to monitor the production profile of these and an additional five wells that are scheduled to be completed by year-end before assessing per well reserves.
"EOG's consistent strategy of organic production growth has again positioned our company as an industry leader in ROCE, low unit costs, debt adjusted production per share growth and low net debt," said Mark G. Papa, Chairman and Chief Executive Officer. "With the robust growth from our core areas, EOG remains on track to achieve 15 percent total company organic production growth in 2008."
Dividend Increased
Following a 33 percent increase in the common stock dividend in February, EOG's Board of Directors increased the cash dividend on the common stock for the second time in 2008. Effective with the dividend payable on October 31, 2008 to holders of record as of October 17, 2008, the quarterly dividend on the common stock will be $0.135 per share. The indicated annual rate of $0.54 reflects a 12.5 percent increase from the previously stated rate, the ninth increase in nine years.
Capital Structure
At June 30, 2008, EOG's total debt outstanding was $1,147 million for a debt-to-total capitalization ratio of 13 percent. Taking into account cash on the balance sheet of $108 million, at the end of the second quarter EOG's net debt was $1,039 million. At the end of the second quarter, the net debt-to-total capitalization ratio was 12 percent, down from 14 percent at year-end 2007. (Please refer to the attached tables for the reconciliation of net debt (non-GAAP) to long-term debt (GAAP) and the reconciliation of net debt-to-total capitalization ratio (non-GAAP) to debt-to-total capitalization ratio (GAAP).)
"EOG's strong results for the first six months of the year have provided us with the opportunity to further strengthen our balance sheet and increase the common stock dividend. Based on current NYMEX price projections, we expect to further reduce our net debt by year-end," said Papa.
Appointment of New Board Member
EOG announced the appointment of James C. Day to its Board of Directors. Mr. Day is the retired Chairman of the Board and Chief Executive Officer of Noble Corporation, one of the world's largest offshore drilling companies. Mr. Day also serves on the Board of Directors of Tidewater Inc. and ONEOK, Inc. and as a Trustee of The Samuel Roberts Noble Foundation. He has held numerous leadership positions with various industry and civic associations throughout his career.
"We are pleased to have an industry leader such as Jim join our board. His experience in the industry will certainly be an asset to EOG," said Papa.
Conference Call Scheduled for July 30, 2008
EOG's second quarter 2008 results conference call will be available via live audio webcast at 8 a.m. Central Daylight Time (9 a.m. Eastern Daylight Time) on Wednesday, July 30, 2008. To listen, log on to http://www.eogresources.com. The webcast will be archived on EOG's website through Wednesday, August 13, 2008.
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, Trinidad, the United Kingdom North Sea and China. 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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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, including
environmental 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, 2007, available from EOG at P.O. Box 4362, Houston, Texas 77210-4362 (Attn: Investor Relations). You can also obtain this report 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,
2008 2007 2008 2007
Net Operating Revenues $1,032.5 $1,068.5 $2,133.5 $1,939.7
Net Income Available to
Common Stockholders $178.2 $306.1 $418.7 $522.9
Net Income Per Share
Available to Common
Stockholders
Basic $0.72 $1.26 $1.70 $2.15
Diluted $0.71 $1.24 $1.67 $2.12
Average Number of Shares
Outstanding
Basic 246.5 243.2 246.0 243.0
Diluted 251.1 247.3 250.6 247.0
SUMMARY INCOME STATEMENTS
(Unaudited; in thousands)
Quarter Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Net Operating Revenues
Natural Gas $1,340,557 $785,837 $2,378,195 $1,516,298
Crude Oil,
Condensate and
Natural Gas Liquids 524,793 218,696 919,641 393,560
(Losses) Gains on
Mark-to-Market
Commodity Derivative
Contracts (842,822) 44,103 (1,312,666) 4,302
Other, Net 9,998 19,851 148,329 25,564
Total 1,032,526 1,068,487 2,133,499 1,939,724
Operating Expenses
Lease and Well 138,871 123,188 271,337 227,513
Transportation Costs 63,102 36,971 125,069 69,538
Exploration Costs 59,511 41,216 107,454 67,600
Dry Hole Costs 6,785 11,816 15,213 28,626
Impairments 48,875 20,804 81,449 44,846
Depreciation,
Depletion and
Amortization 315,294 259,780 612,493 504,122
General and
Administrative 61,640 47,183 114,566 91,062
Taxes Other Than
Income 95,345 62,047 182,095 102,695
Total 789,423 603,005 1,509,676 1,136,002
Operating Income 243,103 465,482 623,823 803,722
Other Income, Net 13,309 11,205 14,892 15,924
Income Before
Interest Expense
and Income Taxes 256,412 476,687 638,715 819,646
Interest Expense, Net 9,029 10,818 21,220 18,456
Income Before
Income Taxes 247,383 465,869 617,495 801,190
Income Tax
Provision 69,177 158,816 198,333 276,470
Net Income 178,206 307,053 419,162 524,720
Preferred Stock
Dividends - 990 443 1,865
Net Income
Available to
Common Stockholders $178,206 $306,063 $418,719 $522,855
EOG RESOURCES, INC.
OPERATING HIGHLIGHTS
(Unaudited)
Quarter Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Wellhead Volumes and Prices
Natural Gas Volumes (MMcfd) (A)
United States 1,139 960 1,112 938
Canada 215 232 215 227
Trinidad 217 250 224 251
United Kingdom 12 22 15 26
Total 1,583 1,464 1,566 1,442
Average Natural Gas Prices
($/Mcf) (B)
United States $10.36 $6.74 $9.23 $6.55
Canada 9.42 6.70 8.42 6.57
Trinidad 3.64 2.04 3.76 2.42
United Kingdom 9.95 4.35 9.89 5.04
Composite 9.31 5.90 8.34 5.81
Crude Oil and Condensate Volumes
(MBbld) (A)
United States 35.4 23.4 33.0 22.6
Canada 2.6 2.4 2.5 2.5
Trinidad 3.2 4.0 3.4 4.2
United Kingdom - 0.1 - 0.1
Total 41.2 29.9 38.9 29.4
Average Crude Oil and Condensate
Prices ($/Bbl) (B)
United States $117.60 $61.38 $105.78 $57.75
Canada 112.55 60.08 101.41 55.88
Trinidad 113.29 75.16 99.92 67.32
United Kingdom 114.40 68.82 96.84 59.61
Composite 116.94 63.15 104.97 58.96
Natural Gas Liquids Volumes
(MBbld) (A)
United States 14.2 10.4 15.5 10.0
Canada 0.9 1.1 0.9 1.1
Total 15.1 11.5 16.4 11.1
Average Natural Gas Liquids
Prices ($/Bbl) (B)
United States $63.62 $45.35 $60.19 $41.40
Canada 66.39 42.30 61.52 39.39
Composite 63.78 45.04 60.26 41.20
Natural Gas Equivalent Volumes
(MMcfed) (C)
United States 1,437 1,163 1,403 1,134
Canada 236 253 236 248
Trinidad 236 274 244 276
United Kingdom 12 23 15 27
Total 1,921 1,713 1,898 1,685
Total Bcfe (C) 174.8 155.8 345.4 305.0
(A) Million cubic feet per day or thousand barrels per day, as
applicable.
(B) Dollars per thousand cubic feet or per barrel, as applicable.
(C) Million cubic feet equivalent per day or billion cubic feet
equivalent, as applicable; includes natural gas, crude oil,
condensate and natural gas liquids. Natural gas equivalents are
determined using the ratio of 6.0 thousand cubic feet of natural gas
to 1.0 barrel of crude oil, condensate or natural gas liquids.
EOG RESOURCES, INC.
SUMMARY BALANCE SHEETS
(Unaudited; in thousands, except share data)
June 30, December 31,
2008 2007
ASSETS
Current Assets
Cash and Cash Equivalents $108,101 $54,231
Accounts Receivable, Net 1,228,560 835,670
Inventories 109,971 102,322
Assets from Price Risk Management
Activities - 100,912
Income Taxes Receivable 239,442 110,370
Deferred Income Taxes 347,928 33,533
Other 54,095 55,001
Total 2,088,097 1,292,039
Property, Plant and Equipment
Oil and Gas Properties (Successful
Efforts Method) 18,929,852 16,981,836
Other Property, Plant and Equipment 776,864 581,402
19,706,716 17,563,238
Less: Accumulated Depreciation,
Depletion and Amortization (7,717,996) (7,133,984)
Total Property, Plant and
Equipment, Net 11,988,720 10,429,254
Long-Term Assets Held for Sale - 254,376
Other Assets 147,950 113,238
Total Assets $14,224,767 $12,088,907
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $1,379,602 $1,152,140
Accrued Taxes Payable 137,589 104,647
Dividends Payable 29,607 22,045
Liabilities from Price Risk
Management Activities 762,560 3,404
Deferred Income Taxes 61,048 108,980
Other 74,634 82,954
Total 2,445,040 1,474,170
Long-Term Debt 1,147,000 1,185,000
Other Liabilities 661,417 368,336
Deferred Income Taxes 2,545,139 2,071,307
Stockholders' Equity
Preferred Stock, $0.01 Par,
10,000,000 Shares Authorized:
Series B, Cumulative, $1,000
Liquidation Preference per Share,
5,000 Shares Outstanding at
December 31, 2007 - 4,977
Common Stock, $0.01 Par, 640,000,000
Shares Authorized:
249,470,617 Shares Issued at
June 30, 2008 and 249,460,000
Shares Issued at December 31, 2007 202,495 202,495
Additional Paid In Capital 321,026 221,102
Accumulated Other Comprehensive Income 403,195 466,702
Retained Earnings 6,515,795 6,156,721
Common Stock Held in Treasury,
678,033 Shares at June 30, 2008
and 2,935,313 Shares at
December 31, 2007 (16,340) (61,903)
Total Stockholders' Equity 7,426,171 6,990,094
Total Liabilities and Stockholders'
Equity $14,224,767 $12,088,907
EOG RESOURCES, INC.
SUMMARY STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Six Months
Ended June 30,
2008 2007
Cash Flows from Operating Activities
Reconciliation of Net Income to Net
Cash Provided by Operating Activities:
Net Income $419,162 $524,720
Items Not Requiring (Providing) Cash
Depreciation, Depletion and Amortization 612,493 504,122
Impairments 81,449 44,846
Stock-Based Compensation Expenses 44,566 29,542
Deferred Income Taxes 123,330 223,591
Other, Net (127,693) (24,091)
Dry Hole Costs 15,213 28,626
Mark-to-Market Commodity Derivative
Contracts
Total Losses (Gains) 1,312,666 (4,302)
Realized (Losses) Gains (114,859) 65,880
Other, Net 9,077 15,228
Changes in Components of Working Capital
and Other Assets and Liabilities
Accounts Receivable (395,526) 20,734
Inventories (9,176) (2,476)
Accounts Payable 255,495 14,651
Accrued Taxes Payable (92,738) 26,191
Other Assets (61,623) (4,683)
Other Liabilities (8,440) (15,492)
Changes in Components of Working Capital
Associated with Investing and Financing
Activities (775) (20,471)
Net Cash Provided by Operating Activities 2,062,621 1,426,616
Investing Cash Flows
Additions to Oil and Gas Properties (2,144,769) (1,621,542)
Additions to Other Property, Plant
and Equipment (196,353) (157,515)
Proceeds from Sales of Assets 354,413 37,988
Changes in Components of Working Capital
Associated with Investing Activities 648 20,412
Other, Net (20,429) (1,540)
Net Cash Used in Investing Activities (2,006,490) (1,722,197)
Financing Cash Flows
Net Commercial Paper Borrowings - 170,400
Long-Term Debt Borrowings - 10,000
Long-Term Debt Repayments (38,000) (30,000)
Dividends Paid (51,647) (38,370)
Redemption of Preferred Stock (5,395) -
Excess Tax Benefits from Stock-Based
Compensation 55,552 11,122
Treasury Stock Purchased (6,865) (4,928)
Proceeds from Stock Options Exercised
and Employee Stock Purchase Plan 48,509 14,089
Other, Net 127 (194)
Net Cash Provided by Financing Activities 2,281 132,119
Effect of Exchange Rate Changes on Cash (4,542) 3,741
Increase (Decrease) in Cash and Cash
Equivalents 53,870 (159,721)
Cash and Cash Equivalents at
Beginning of Period 54,231 218,255
Cash and Cash Equivalents at
End of Period $108,101 $58,534
EOG RESOURCES, INC.
QUANTITATIVE RECONCILIATION OF ADJUSTED NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS (Non-GAAP)
TO NET INCOME AVAILABLE TO COMMON STOCKHOLDERS (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 Stockholders (GAAP) to reflect
actual cash realized from financial commodity price transactions by
eliminating the unrealized mark-to-market losses (gains) from these
transactions and for the gain on the sale of Appalachian assets. 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,
2008 2007 2008 2007
Reported Net Income
Available to Common
Stockholders (GAAP) $178,206 $306,063 $418,719 $522,855
Mark-to-Market (MTM)
Commodity Derivative
Contracts Impact
Total Losses (Gains) 842,822 (44,103) 1,312,666 (4,302)
Realized (Losses) Gains (138,069) 18,613 (114,859) 65,880
Subtotal 704,753 (25,490) 1,197,807 61,578
After Tax MTM Impact 453,509 (16,403) 770,789 39,625
Less: Gain on Sale of
Appalachian Assets, Net of
Tax - - (84,748) -
Adjusted Net Income
Available to Common
Stockholders (Non-GAAP) $631,715 $289,660 $1,104,760 $562,480
Net Income Per Share
Available to Common
Stockholders (GAAP)
Basic $0.72 $1.26 $1.70 $2.15
Diluted $0.71 $1.24 $1.67 $2.12
Adjusted Net Income Per
Share Available to Common
Stockholders (Non-GAAP)
Basic $2.56 $1.19 $4.49 $2.31
Diluted $2.52 $1.17 $4.41 $2.28
Average Number of Shares
Outstanding
Basic 246,536 243,227 245,950 242,976
Diluted 251,135 247,261 250,553 247,009
EOG RESOURCES, INC.
QUANTITATIVE RECONCILIATION OF DISCRETIONARY CASH FLOW AVAILABLE TO COMMON
STOCKHOLDERS (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 (GAAP) to Discretionary Cash Flow Available to Common Stockholders (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 and Other Assets and Liabilities, Changes in Components of Working Capital Associated with Investing and Financing Activities and Preferred Stock Dividends. EOG management uses this information for comparative purposes within the industry.
Quarter Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Net Cash Provided by
Operating
Activities (GAAP) $1,141,044 $728,136 $2,062,621 $1,426,616
Adjustments
Exploration Costs
(excluding Stock-
Based Compensation
Expenses) 55,168 38,230 99,091 61,574
Changes in
Components of
Working Capital
and Other Assets
and Liabilities
Accounts Receivable 217,842 2,201 395,526 (20,734)
Inventories 12,461 (6,368) 9,176 2,476
Accounts Payable (162,043) 8,780 (255,495) (14,651)
Accrued Taxes Payable 63,473 (24,224) 92,738 (26,191)
Other Assets 59,878 1,060 61,623 4,683
Other Liabilities (19,233) 1,136 8,440 15,492
Changes in
Components of
Working Capital
Associated with
Investing
and Financing
Activities 5,967 (12,223) 775 20,471
Preferred Stock
Dividends - (990) (443) (1,865)
Discretionary Cash
Flow Available to
Common Stockholders
(Non-GAAP) $1,374,557 $735,738 $2,474,052 $1,467,871
EOG RESOURCES, INC.
QUANTITATIVE RECONCILIATION OF NET DEBT (Non-GAAP) AND TOTAL
CAPITALIZATION (Non-GAAP) AS USED IN THE CALCULATION OF
THE NET DEBT-TO-TOTAL CAPITALIZATION RATIO
TO LONG-TERM DEBT (GAAP) AND TOTAL CAPITALIZATION (GAAP)
(Unaudited; in millions, except ratio information)
The following chart reconciles Long-Term Debt (GAAP) to Net Debt (Non-GAAP) and Total Capitalization (GAAP) to Total Capitalization (Non-GAAP), as used in the Net Debt-to-Total Capitalization ratio calculation. 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 Net Debt-to-Total Capitalization ratio calculation. EOG management uses this information for comparative purposes within the industry.
06/30/2008 12/31/2007
Total Stockholders' Equity (GAAP) - (a) $7,426 $6,990
Long-Term Debt (GAAP) - (b) 1,147 1,185
Less: Cash (GAAP) (108) (54)
Net Debt (Non-GAAP) - (c) 1,039 1,131
Total Capitalization (Non-GAAP) - (a) + (c) $8,465 $8,121
Total Capitalization (GAAP) - (a) + (b) $8,573 $8,175
Net Debt-to-Total Capitalization
(Non-GAAP) - (c) / [(a) + (c)] 12% 14%
Debt-to-Total Capitalization
(GAAP) - (b) / [(a) + (b)] 13% 14%
SOURCE EOG Resources, Inc.
Contact: investors, Maire A. Baldwin, +1-713-651-6EOG [651-6364], or media and investors, Elizabeth M. Ivers, +1-713-651-7132, both of EOG Resources, Inc.