EOG Resources Announces Outstanding Third Quarter 2018 Results

Company Release - 11/1/2018 4:29 PM ET

HOUSTON, Nov. 1, 2018 /PRNewswire/ -- 

  • Exceeds High End of Oil and NGL Production Targets
  • Generates Significant Free Cash Flow
  • Achieves Improved Well Performance and Lower Costs in Delaware Basin
  • Secures 2019 Services at Competitive Prices and Raises 2018 Capex Guidance Range to $5.8-$6.0 Billion
  • Targets Further Well Cost Reductions in 2019

EOG Resources, Inc. (EOG) today reported third quarter 2018 net income of $1.2 billion, or $2.05 per share. This compares to third quarter 2017 net income of $101 million, or $0.17 per share. Net cash from operating activities in the third quarter 2018 was $2.2 billion.

Adjusted non-GAAP net income for the third quarter 2018 was $1.0 billion, or $1.75 per share, compared to adjusted non-GAAP net income of $111 million, or $0.19 per share, for the same prior year period. Please refer to the attached tables for the reconciliation of non-GAAP measures to GAAP measures.

Third Quarter Review
EOG set a company record and exceeded the high end of its target range for crude oil volumes in the third quarter 2018 by producing 415,000 barrels of oil per day (Bopd), an increase of 27 percent compared to the same prior year period. Natural gas liquids (NGL) production increased 46 percent while natural gas volumes grew 13 percent, contributing to total company production growth of 25 percent.

Per-unit operating expenses declined during the third quarter 2018 compared to the same prior year period. General and administrative expenses fell 20 percent, transportation costs declined 15 percent and depreciation, depletion and amortization expenses fell 13 percent, all on a per-unit basis.

EOG generated $2.3 billion of discretionary cash flow in the third quarter 2018. After considering exploration and development expenditures of $1.7 billion and dividend payments of $107 million, EOG produced free cash flow during the third quarter of $503 million. Please refer to the attached tables for the reconciliation of non-GAAP measures to GAAP measures.

"EOG delivered a compelling combination of production growth, high returns and free cash flow in the third quarter 2018 due to disciplined capital allocation. These results demonstrate the value of EOG's sustainable business model," said William R. "Bill" Thomas, Chairman and Chief Executive Officer. "EOG is making significant progress lowering costs and improving well performance. Our culture of innovation, experimentation and entrepreneurship combined with our ability to capture and quickly analyze real-time data and make rapid changes in the field are resulting in significant performance improvements company-wide."

Updated 2018 Outlook
EOG has raised its target for full-year 2018 crude oil production growth to 19 percent. To maintain operational continuity into 2019, the company elected to retain high performing service providers for the remainder of 2018. Approximately 65 percent of its anticipated 2019 services have been secured at competitive pricing. As a result, EOG increased its 2018 exploration and development expenditure forecast to $5.8 to $6.0 billion, excluding acquisitions and non-cash transactions. The company is on track to reduce total well costs by five percent in 2018, and targets further well cost reductions in 2019. EOG now expects to complete approximately 720 net wells in 2018, an increase of 20 net wells from its prior forecast.

"We are positioning EOG to carry the operating efficiencies gained this year into 2019. We secured a significant proportion of our service costs, which along with disciplined execution will help further reduce well costs and improve returns," Thomas continued. "With a deep inventory of premium drilling locations across multiple plays, EOG will continue to allocate capital to the highest return areas while maintaining a disciplined operating pace. EOG is well positioned to continue delivering its unique combination of high returns, disciplined growth and strong free cash flow for years to come."

Operating Highlights
EOG's South Texas Eagle Ford remained the most active area of the company in the third quarter 2018. EOG now expects to complete 290 net wells in 2018, an addition of 20 net wells from the prior forecast. EOG also continued to delineate the South Texas Austin Chalk, completing 14 wells in the third quarter.

In the Delaware Basin, EOG made significant progress on well cost reductions and optimizing targeting and development patterns. The company increased the number of wells developed in a single package and drilled longer laterals. Packages of four wells or more accounted for 87 percent of the wells brought on line in the third quarter. EOG also made additional progress towards its cost reduction goals. Drilling speeds and the pace of completion operations increased markedly during the quarter. In addition, the company now supplies nearly all of its Delaware Basin sand from local sources and has further increased its use of low-cost recycled water.

EOG continued development of its premium play in the Eastern Anadarko Basin Woodford Oil Window. EOG is testing spacing patterns and various targets across the play. The company completed 11 wells in the third quarter. EOG completed a package of four wells spaced 660 feet apart late in the second quarter. The Ted 2326 #1H-#4H were completed with an average treated lateral length of 10,000 feet per well and average 30-day initial production rates per well of 800 barrels of oil equivalent per day, or 660 Bopd, 90 barrels per day of NGLs and 0.3 million cubic feet per day of natural gas. These low-decline wells support our initial spacing assessment of 660 feet. EOG is also making significant progress reducing well costs in this new play. Recent wells have been brought to production at costs at or below the company's $7.8 million target.

EOG continued development of its premium plays across the Rocky Mountain region. The company brought 20 wells on line in the Powder River Basin during the third quarter 2018, including 13 wells from the Turner formation. In the Wyoming DJ Basin, EOG began production from 25 wells in the third quarter 2018. EOG completed 19 wells in the Williston Basin during the third quarter as part of its seasonal development program.

Financial Review
At September 30, 2018, EOG's total debt outstanding was $6.4 billion for a debt-to-total capitalization ratio of 26 percent. Considering cash on the balance sheet at the end of the third quarter, EOG's net debt was $5.2 billion for a net debt-to-total capitalization ratio of 22 percent. For a reconciliation of non-GAAP measures to GAAP measures, please refer to the attached tables.

EOG reached an agreement to divest all of its U.K. operations. Closing is anticipated in the fourth quarter 2018.

During the third quarter ended September 30, 2018, EOG entered into additional crude oil derivative contracts. A comprehensive summary of EOG's crude oil and natural gas derivative contracts is provided in the attached tables.  

Third Quarter 2018 Results Webcast
Friday, November 2, 2018, 9:00 a.m. Central time (10:00 a.m. Eastern time)
Webcast will be available on EOG website for one year.
http://investors.eogresources.com/Investors

About EOG
EOG Resources, Inc. (NYSE: EOG) is one of the largest crude oil and natural gas exploration and production companies in the United States with proved reserves in the United States, Trinidad, the United Kingdom and China. To learn more visit www.eogresources.com.

Investor Contacts
David Streit  713-571-4902
Neel Panchal  713-571-4884
John Wagner  713-571-4404

Media and Investor Contact
Kimberly Ehmer  713-571-4676

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 and projections regarding EOG's future financial position, operations, performance, business strategy, returns, budgets, reserves, levels of production, costs and asset sales, statements regarding future commodity prices and statements regarding the plans and objectives of EOG's management for future operations, are forward-looking statements.  EOG typically uses words such as "expect," "anticipate," "estimate," "project," "strategy," "intend," "plan," "target," "aims," "goal," "may," "will," "should" 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 EOG's future operating results and returns or EOG's ability to replace or increase reserves, increase production, reduce or otherwise control operating and capital costs, generate income or cash flows, pay down indebtedness or pay and/or increase dividends are forward-looking statements.  Forward-looking statements are not guarantees of performance.  Although EOG believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct.  Moreover, EOG's forward-looking statements may be affected by known, unknown or currently unforeseen risks, events or circumstances that may be outside EOG's control.  Furthermore, EOG has presented or referenced herein or in its accompanying disclosures certain forward-looking, non-GAAP financial measures, such as free cash flow and discretionary cash flow, and certain related estimates regarding future performance, results and financial position.  These forward-looking measures and estimates are intended to be illustrative only and are not intended to reflect the results that EOG will necessarily achieve for the period(s) presented.  EOG's actual results may differ materially from the measure and estimates presented or referenced herein.  Important factors that could cause EOG's actual results to differ materially from the expectations reflected in EOG's forward-looking statements include, among others:

  • the timing, extent and duration of changes in prices for, supplies of, and demand for, crude oil and condensate, natural gas liquids, natural gas and related commodities;
  • the extent to which EOG is successful in its efforts to acquire or discover additional reserves;
  • ­the extent to which EOG is successful in its efforts to economically develop its acreage in, produce reserves and achieve anticipated production levels from, and maximize reserve recovery from, its existing and future crude oil and natural gas exploration and development projects;
  • the extent to which EOG is successful in its efforts to market its crude oil and condensate, natural gas liquids, natural gas and related commodity production;
  • the availability, proximity and capacity of, and costs associated with, appropriate gathering, processing, compression, transportation and refining facilities;
  • the availability, cost, terms and timing of issuance or execution of, and competition for, mineral licenses and leases and governmental and other permits and rights-of-way, and EOG's ability to retain mineral licenses and leases;
  • the impact of, and changes in, government policies, laws and regulations, including tax laws and regulations; environmental, health and safety laws and regulations relating to air emissions, disposal of produced water, drilling fluids and other wastes, hydraulic fracturing and access to and use of water; laws and regulations imposing conditions or restrictions on drilling and completion operations and on the transportation of crude oil and natural gas; laws and regulations with respect to derivatives and hedging activities; and laws and regulations with respect to the import and export of crude oil, natural gas and related commodities;
  • EOG's ability to effectively integrate acquired crude oil and natural gas properties into its operations, fully identify existing and potential problems with respect to such properties and accurately estimate reserves, production and costs with respect to such properties;
  • the extent to which EOG's third-party-operated crude oil and natural gas properties are operated successfully and economically;
  • competition in the oil and gas exploration and production industry for the acquisition of licenses, leases and properties, employees and other personnel, facilities, equipment, materials and services;
  • the availability and cost of employees and other personnel, facilities, equipment, materials (such as water) and services;
  • the accuracy of reserve estimates, which by their nature involve the exercise of professional judgment and may therefore be imprecise;
  • weather, including its impact on crude oil and natural gas demand, and weather-related delays in drilling and in the installation and operation (by EOG or third parties) of production, gathering, processing, refining, compression and transportation facilities;
  • the ability of EOG's customers and other contractual counterparties to satisfy their obligations to EOG and, related thereto, to access the credit and capital markets to obtain financing needed to satisfy their obligations to EOG;
  • EOG's ability to access the commercial paper market and other credit and capital markets to obtain financing on terms it deems acceptable, if at all, and to otherwise satisfy its capital expenditure requirements;
  • the extent to which EOG is successful in its completion of planned asset dispositions;
  • the extent and effect of any hedging activities engaged in by EOG;
  • the timing and extent of changes in foreign currency exchange rates, interest rates, inflation rates, global and domestic financial market conditions and global and domestic general economic conditions;
  • political conditions and developments around the world (such as political instability and armed conflict), including in the areas in which EOG operates;
  • the use of competing energy sources and the development of alternative energy sources;
  • the extent to which EOG incurs uninsured losses and liabilities or losses and liabilities in excess of its insurance coverage;
  • acts of war and terrorism and responses to these acts;
  • physical, electronic and cyber security breaches; and
  • the other factors described under ITEM 1A, Risk Factors, on pages 14 through 23 of EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and any updates to those factors set forth in EOG's subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

In light of these risks, uncertainties and assumptions, the events anticipated by EOG's forward-looking statements may not occur, and, if any of such events do, we may not have anticipated the timing of their occurrence or the duration and extent of their impact on our actual results.  Accordingly, you should not place any undue reliance on any of EOG's forward-looking statements. EOG's forward-looking statements speak only as of the date made, and EOG undertakes no obligation, other than as required by applicable law, to update or revise its forward-looking statements, whether as a result of new information, subsequent events, anticipated or unanticipated circumstances or otherwise.

The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose not only "proved" reserves (i.e., quantities of oil and gas that are estimated to be recoverable with a high degree of confidence), but also "probable" reserves (i.e., quantities of oil and gas that are as likely as not to be recovered) as well as "possible" reserves (i.e., additional quantities of oil and gas that might be recovered, but with a lower probability than probable reserves).  Statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any reserve estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include "potential" reserves and/or other estimated reserves not necessarily calculated in accordance with, or contemplated by, the SEC's latest reserve reporting guidelines.  Investors are urged to consider closely the disclosure in EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2017, 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 www.sec.gov.  In addition, reconciliation and calculation schedules for non-GAAP financial measures can be found on the EOG website at www.eogresources.com.

 

EOG RESOURCES, INC.

Financial Report

(Unaudited; in millions, except per share data)














Three Months Ended


Nine Months Ended


September 30,


September 30,


2018


2017


2018


2017













Operating Revenues and Other

$

4,781.6


$

2,644.8


$

12,700.9


$

7,867.9

Net Income 

$

1,191.0


$

100.5


$

2,526.3


$

152.1

Net Income Per Share 












        Basic

$

2.06


$

0.17


$

4.38


$

0.26

        Diluted

$

2.05


$

0.17


$

4.35


$

0.26

Average Number of Common Shares












        Basic


577.3



574.8



576.4



574.4

        Diluted


581.6



578.7



580.4



578.5

























Summary Income Statements

(Unaudited; in thousands, except per share data)














Three Months Ended


Nine Months Ended


September 30,


September 30,


2018


2017


2018


2017

Operating Revenues and Other








        Crude Oil and Condensate

$

2,655,278


$

1,451,410


$

7,134,114


$

4,326,925

        Natural Gas Liquids


353,704



180,038



861,473



480,389

        Natural Gas


311,713



220,402



912,324



675,012

        Gains (Losses) on Mark-to-Market Commodity
           Derivative Contracts


(52,081)



(6,606)



(297,735)



64,860

        Gathering, Processing and Marketing


1,360,992



784,368



3,899,250



2,289,702

        Gains (Losses) on Asset Dispositions, Net


115,944



(8,202)



94,658



(33,876)

        Other, Net


36,074



23,434



96,779



64,869

               Total


4,781,624



2,644,844



12,700,863



7,867,881

Operating Expenses












        Lease and Well


321,568



251,943



936,236



762,906

        Transportation Costs


196,027



183,565



550,781



548,635

        Gathering and Processing Costs


114,063



32,590



324,577



105,480

        Exploration Costs


32,823



30,796



115,137



122,401

        Dry Hole Costs


358



50



5,260



77

        Impairments 


44,617



53,677



160,934



325,798

        Marketing Costs


1,326,974



793,536



3,853,827



2,320,671

        Depreciation, Depletion and Amortization


918,180



846,222



2,515,445



2,527,642

        General and Administrative


111,284



111,717



310,065



317,462

        Taxes Other Than Income


209,043



125,912



582,395



386,319

               Total


3,274,937



2,430,008



9,354,657



7,417,391













Operating Income 


1,506,687



214,836



3,346,206



450,490













Other Income (Expense), Net


3,308



226



(4,516)



8,349













Income Before Interest Expense and Income Taxes


1,509,995



215,062



3,341,690



458,839













Interest Expense, Net


63,632



69,082



189,032



211,010













Income Before Income Taxes


1,446,363



145,980



3,152,658



247,829













Income Tax Provision


255,411



45,439



626,386



95,718













Net Income 

$

1,190,952


$

100,541


$

2,526,272


$

152,111













Dividends Declared per Common Share

$

0.2200


$

0.1675


$

0.5900


$

0.5025













EOG RESOURCES, INC.

Operating Highlights

(Unaudited)














Three Months Ended


Nine Months Ended


September 30,


September 30,


2018


2017


2018


2017

Wellhead Volumes and Prices




Crude Oil and Condensate Volumes (MBbld) (A)




      United States


409.2



327.1



382.9



324.3

      Trinidad


0.8



0.8



0.8



0.8

      Other International (B)


5.0



-



4.1



1.0

            Total


415.0



327.9



387.8



326.1













Average Crude Oil and Condensate Prices ($/Bbl) (C)












      United States

$

69.53


$

48.06


$

67.35


$

48.61

      Trinidad


61.71



39.42



58.91



40.24

      Other International (B)


72.81



-



71.83



51.55

            Composite


69.55



48.11



67.38



48.60













Natural Gas Liquids Volumes (MBbld) (A)












      United States


127.8



87.4



113.9



84.3

      Other International (B)


-



-



-



-

            Total


127.8



87.4



113.9



84.3













Average Natural Gas Liquids Prices ($/Bbl) (C)












      United States

$

30.09


$

22.38


$

27.71


$

20.87

      Other International (B)


-



-



-



-

            Composite


30.09



22.38



27.71



20.87













Natural Gas Volumes (MMcfd) (A)












      United States


948



748



905



744

      Trinidad


260



323



278



317

      Other International (B)


28



25



31



22

            Total


1,236



1,096



1,214



1,083













Average Natural Gas Prices ($/Mcf) (C)












      United States

$

2.67


$

2.20


$

2.66


$

2.22

      Trinidad


2.88



2.04



2.91



2.33

      Other International (B)


3.83



3.74



4.10



3.72

            Composite


2.74

(D)


2.19



2.75

(D)


2.28













Crude Oil Equivalent Volumes (MBoed) (E)












      United States 


695.0



539.2



647.6



532.6

      Trinidad


44.1



54.6



47.2



53.6

      Other International (B)


9.7



4.3



9.2



4.8

            Total


748.8



598.1



704.0



591.0













Total MMBoe (E)


68.9



55.0



192.2



161.3


(A) Thousand barrels per day or million cubic feet per day, as applicable.

(B) Other International includes EOG's United Kingdom, China and Canada operations.

(C) Dollars per barrel or per thousand cubic feet, as applicable.  Excludes the impact of financial commodity derivative instruments (see Note 12 to the Condensed Consolidated Financial Statements in EOG's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018).

(D) Includes positive revenue adjustments of $0.49 per Mcf and $0.43 per Mcf for the three and nine months ended September 30, 2018, respectively, related to the adoption of ASU 2014-09, "Revenue From Contracts with Customers" (ASU 2014-09). (see Note 1 to the Condensed Consolidated Financial Statements in EOG's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018).  In connection with the adoption of ASU 2014-09, EOG presents natural gas processing fees for certain processing and marketing agreements as Gathering and Processing Costs, instead of as a deduction to Revenues.

(E) Thousand barrels of oil equivalent per day or million barrels of oil equivalent, as applicable; includes crude oil and condensate, NGLs and natural gas.  Crude oil equivalent volumes are determined using a ratio of 1.0 barrel of crude oil and condensate or NGLs to 6.0 thousand cubic feet of natural gas.  MMBoe is calculated by multiplying the MBoed amount by the number of days in the period and then dividing that amount by one thousand.

 

EOG RESOURCES, INC.

Summary Balance Sheets

(Unaudited; in thousands, except share data)








September 30,


December 31,


2018


2017

ASSETS

Current Assets






     Cash and Cash Equivalents

$

1,274,132


$

834,228

     Accounts Receivable, Net


2,151,247



1,597,494

     Inventories


766,964



483,865

     Assets from Price Risk Management Activities


1,569



7,699

     Income Taxes Receivable


320,938



113,357

     Other


302,242



242,465

            Total


4,817,092



3,279,108







Property, Plant and Equipment






     Oil and Gas Properties (Successful Efforts Method)


56,799,237



52,555,741

     Other Property, Plant and Equipment


4,191,958



3,960,759

            Total Property, Plant and Equipment


60,991,195



56,516,500

     Less:  Accumulated Depreciation, Depletion and Amortization


(33,043,454)



(30,851,463)

            Total Property, Plant and Equipment, Net


27,947,741



25,665,037

Deferred Income Taxes


16,880



17,506

Other Assets


856,023



871,427

Total Assets

$

33,637,736


$

29,833,078







LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities






     Accounts Payable

$

2,435,773


$

1,847,131

     Accrued Taxes Payable


249,234



148,874

     Dividends Payable


126,829



96,410

     Liabilities from Price Risk Management Activities


132,618



50,429

     Current Portion of Long-Term Debt


1,262,874



356,235

     Other


217,819



226,463

            Total


4,425,147



2,725,542













Long-Term Debt


5,171,949



6,030,836

Other Liabilities


1,302,249



1,275,213

Deferred Income Taxes


4,199,921



3,518,214

Commitments and Contingencies












Stockholders' Equity






     Common Stock, $0.01 Par, 1,280,000,000 Shares Authorized and
        580,308,937 Shares Issued at September 30, 2018 and 578,827,768
        Shares Issued at December 31, 2017  


205,803



205,788

     Additional Paid in Capital


5,626,259



5,536,547

     Accumulated Other Comprehensive Loss


(19,458)



(19,297)

     Retained Earnings


12,778,104



10,593,533

     Common Stock Held in Treasury, 478,042 Shares at September 30, 2018
        and 350,961 Shares at December 31, 2017


(52,238)



(33,298)

            Total Stockholders' Equity


18,538,470



16,283,273

Total Liabilities and Stockholders' Equity

$

33,637,736


$

29,833,078

 

EOG RESOURCES, INC.

Summary Statements of Cash Flows

(Unaudited; in thousands)








Nine Months Ended


September 30,


2018


2017

Cash Flows from Operating Activities






Reconciliation of Net Income to Net Cash Provided by Operating Activities:






     Net Income

$

2,526,272


$

152,111

     Items Not Requiring (Providing) Cash






            Depreciation, Depletion and Amortization


2,515,445



2,527,642

            Impairments 


160,934



325,798

            Stock-Based Compensation Expenses


116,290



101,537

            Deferred Income Taxes


681,702



114,850

            (Gains) Losses on Asset Dispositions, Net


(94,658)



33,876

            Other, Net


15,314



(4,514)

     Dry Hole Costs


5,260



77

     Mark-to-Market Commodity Derivative Contracts






            Total (Gains) Losses


297,735



(64,860)

            Net Cash Received from (Payments for) Settlements of Commodity Derivative Contracts 


(180,228)



4,730

     Other, Net


1,652



270

     Changes in Components of Working Capital and Other Assets and Liabilities






            Accounts Receivable


(553,529)



(25,445)

            Inventories


(286,817)



(17,674)

            Accounts Payable


537,525



112,894

            Accrued Taxes Payable


(36,891)



(49,967)

            Other Assets


(103,334)



(83,940)

            Other Liabilities


(14,776)



(69,224)

     Changes in Components of Working Capital Associated with Investing and Financing
        Activities


95,484



(120,373)

Net Cash Provided by Operating Activities


5,683,380



2,937,788







Investing Cash Flows






     Additions to Oil and Gas Properties


(4,571,932)



(2,927,988)

     Additions to Other Property, Plant and Equipment


(202,384)



(139,558)

     Proceeds from Sales of Assets


11,582



191,593

     Other Investing Activities


(19,993)



-

     Changes in Components of Working Capital Associated with Investing Activities


(95,541)



120,469

Net Cash Used in Investing Activities


(4,878,268)



(2,755,484)







Financing Cash Flows






     Long-Term Debt Repayments


-



(600,000)

     Dividends Paid


(311,075)



(289,261)

     Treasury Stock Purchased


(58,558)



(50,374)

     Proceeds from Stock Options Exercised and Employee Stock Purchase Plan 


12,098



11,174

     Repayment of Capital Lease Obligation


(5,052)



(4,897)

     Changes in Components of Working Capital Associated with Financing Activities


57



(96)

Net Cash Used in Financing Activities


(362,530)



(933,454)







Effect of Exchange Rate Changes on Cash


(2,678)



(2,607)







Increase (Decrease) in Cash and Cash Equivalents


439,904



(753,757)

Cash and Cash Equivalents at Beginning of Period


834,228



1,599,895

Cash and Cash Equivalents at End of Period

$

1,274,132


$

846,138

 

EOG RESOURCES, INC.

Third Quarter 2018 Well Results by Play

(Unaudited)


















Wells Online




Initial Gross 30-Day Average Production Rate



Gross


Net


Lateral
Length
(ft)


Crude Oil and
Condensate
(Bbld) (A)


Natural Gas
Liquids
(Bbld) (A)


 Natural Gas
(MMcfd) (A)


Crude Oil
Equivalent
(Boed) (B)

Delaware Basin















Wolfcamp


61


58


7,100


1,655


505


2.9


2,640

Bone Spring


4


4


5,200


1,135


270


1.6


1,675

Leonard


6


5


4,500


995


325


1.9


1,645
















South Texas Eagle Ford


90


83


7,300


1,235


155


0.9


1,540
















South Texas Austin Chalk


14


10


5,000


1,815


340


2.0


2,485
















Powder River Basin Turner


13


11


7,500


795


320


3.7


1,730
















DJ Basin Codell


25


19


10,100


915


105


0.4


1,090
















Williston Basin Bakken/Three Forks


19


12


9,400


1,135


130


0.6


1,370
















Anadarko Basin Woodford Oil Window


11


9


8,500


720


120


0.4


915


(A)  Barrels per day or million cubic feet per day, as applicable.

(B)  Barrels of oil equivalent per day; includes crude oil and condensate, natural gas liquids and natural gas.  Crude oil equivalent volumes are determined using a ratio of 1.0 barrel of crude oil and condensate or natural gas liquids to 6.0 thousand cubic feet of natural gas.

 

EOG RESOURCES, INC.

Quantitative Reconciliation of Adjusted Net Income (Non-GAAP)

To Net Income (GAAP)

(Unaudited; in thousands, except per share data)

































The following chart adjusts the three-month and nine-month periods ended September 30, 2018 and 2017 reported Net Income (GAAP) to reflect actual net cash received from (payments for) settlements of commodity derivative contracts by eliminating the unrealized mark-to-market (gains) losses from these transactions, to eliminate the net (gains) losses on asset dispositions in 2018 and 2017, to add back impairment charges related to certain of EOG's assets in 2018 and 2017, to add back an early lease termination payment as the result of a legal settlement in 2017, to add back the transaction costs for the formation of a joint venture in 2017 and to eliminate certain adjustments in 2018 related to the 2017 U.S. tax reform.  EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who adjust reported company earnings to match hedge realizations to production settlement months and make certain other adjustments to exclude non-recurring and certain other items.  EOG management uses this information for purposes of comparing its financial performance with the financial performance of other companies in the industry.


















Three Months Ended 


Three Months Ended 


September 30, 2018


September 30, 2017




















Income




Diluted




Income




Diluted


Before


Tax


After


Earnings


Before


Tax


After


Earnings


Tax


Impact


Tax


per Share


Tax


Impact


Tax


per Share

Reported Net Income (GAAP)

$1,446,363


$(255,411)


$1,190,952


$      2.05


$145,980


$  (45,439)


$100,541


$      0.17

Adjustments:
















Losses on Mark-to-Market Commodity
   Derivative Contracts

52,081


(11,472)


40,609


0.07


6,606


(2,368)


4,238


0.01

Net Cash Received from (Payments for)
   Settlements of Commodity
   Derivative Contracts

(91,894)


20,241


(71,653)


(0.12)


2,139


(767)


1,372


-

Add:  Net (Gains) Losses on Asset Dispositions

(115,944)


28,934


(87,010)


(0.15)


8,202


(3,068)


5,134


0.01

Less:  Tax Reform Impact

-


(57,127)


(57,127)


(0.10)


-


-


-


-

Adjustments to Net Income 

(155,757)


(19,424)


(175,181)


(0.30)


16,947


(6,203)


10,744


0.02

















Adjusted Net Income (Non-GAAP)

$1,290,606


$(274,835)


$1,015,771


$      1.75


$162,927


$  (51,642)


$111,285


$      0.19

















Average Number of Common Shares (GAAP)
















       Basic







577,254








574,783

       Diluted







581,559








578,736


















































Nine Months Ended 


Nine Months Ended 


September 30, 2018


September 30, 2017




















Income




Diluted




Income




Diluted


Before


Tax


After


Earnings


Before


Tax


After


Earnings


Tax


Impact


Tax


per Share


Tax


Impact


Tax


per Share

Reported Net Income (GAAP)

$3,152,658


$(626,386)


$2,526,272


$      4.35


$247,829


$  (95,718)


$152,111


$      0.26

Adjustments:
















(Gains) Losses on Mark-to-Market Commodity
   Derivative Contracts

297,735


(65,582)


232,153


0.40


(64,860)


23,249


(41,611)


(0.07)

Net Cash Received from (Payments for) 
   Settlements of Commodity Derivative
   Contracts

(180,228)


39,699


(140,529)


(0.24)


4,730


(1,695)


3,035


0.01

Add:  Net (Gains) Losses on Asset Dispositions

(94,658)


24,235


(70,423)


(0.12)


33,876


(11,955)


21,921


0.04

Add:  Impairments

20,876


(4,598)


16,278


0.03


161,148


(57,764)


103,384


0.18

Add:  Legal Settlement - Early Lease Termination

-


-


-


-


10,202


(3,657)


6,545


0.01

Add:  Joint Venture Transaction Costs

-


-


-


-


3,056


(1,095)


1,961


-

Less:  Tax Reform Impact

-


(63,651)


(63,651)


(0.11)


-


-


-


-

Adjustments to Net Income

43,725


(69,897)


(26,172)


(0.04)


148,152


(52,917)


95,235


0.17

















Adjusted Net Income (Non-GAAP)

$3,196,383


$(696,283)


$2,500,100


$      4.31


$395,981


$(148,635)


$247,346


$      0.43

















Average Number of Common Shares (GAAP)
















       Basic







576,431








574,370

       Diluted







580,442








578,453

















 

EOG RESOURCES, INC.

Quantitative Reconciliation of Discretionary Cash Flow (Non-GAAP)

To Net Cash Provided By Operating Activities (GAAP)

(Unaudited; in thousands)














Calculation of Free Cash Flow (Non-GAAP)

(Unaudited; in thousands)








The following chart reconciles the three-month and nine-month periods ended September 30, 2018 and 2017 Net Cash Provided by Operating Activities (GAAP) to Discretionary Cash Flow (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), Other Non-Current Income Taxes - Net Receivable (Payable), Changes in Components of Working Capital and Other Assets and Liabilities, and Changes in Components of Working Capital Associated with Investing and Financing Activities.  EOG defines Free Cash Flow (Non-GAAP) for a given period as Discretionary Cash Flow (Non-GAAP) (see below reconciliation) for such period less the total cash capital expenditures excluding acquisitions incurred (Non-GAAP) during such period and dividends paid (GAAP) during such period, as is illustrated below for the three months and nine months ended September 30, 2018.  EOG management uses this information for comparative purposes within the industry.
















Three Months Ended


Nine Months Ended



September 30,


September 30,



2018


2017


2018


2017














Net Cash Provided by Operating Activities (GAAP)

$

2,189,597


$

961,363


$

5,683,380


$

2,937,788














Adjustments:













Exploration Costs (excluding Stock-Based Compensation Expenses) 



27,032



26,132



96,716



106,268

Other Non-Current Income Taxes - Net Receivable (Payable)



(129,941)



-



62,421



-

Changes in Components of Working Capital and Other Assets













and Liabilities













Accounts Receivable



243,778



129,231



553,529



25,445

Inventories



94,598



11,545



286,817



17,674

Accounts Payable



(81,548)



(36,190)



(537,525)



(112,894)

Accrued Taxes Payable



59,426



10,843



36,891



49,967

Other Assets



40,491



22,851



103,334



83,940

Other Liabilities



(38,392)



2,355



14,776



69,224

Changes in Components of Working Capital Associated with 













Investing and Financing Activities



(122,763)



41,235



(95,484)



120,373








Discretionary Cash Flow (Non-GAAP)


$

2,282,278


$

1,169,365


$

6,204,855


$

3,297,785














Discretionary Cash Flow (Non-GAAP) - Percentage Increase



95%






88%






























Discretionary Cash Flow (Non-GAAP)


$

2,282,278





$

6,204,855




Less:  













Total Cash Expenditures Excluding Acquisitions (Non-GAAP)(a)



(1,671,922)






(4,869,951)




Dividends Paid (GAAP) 



(107,465)






(311,075)




Free Cash Flow (Non-GAAP)


$

502,891





$

1,023,829






























(a) See below reconciliation of Total Expenditures (GAAP) to Total Cash Expenditures Excluding Acquisitions (Non-GAAP) for the three months and nine months ended September 30, 2018:














Total Expenditures (GAAP)


$

1,828,348





$

5,201,921




Less:  













          Asset Retirement Costs



(10,834)






(41,789)




          Non-Cash Expenditures of Other Property, Plant and Equipment



(1,257)






(48,937)




          Non-Cash Acquisition Costs of Unproved Properties



(101,821)






(161,823)




          Acquisition Costs of Proved Properties



(42,514)






(79,421)




Total Cash Expenditures Excluding Acquisitions (Non-GAAP) 


$

1,671,922





$

4,869,951





 

EOG RESOURCES, INC.

Quantitative Reconciliation of Adjusted Earnings Before Interest Expense, Net,

Income Taxes, Depreciation, Depletion and Amortization, Exploration Costs, 

Dry Hole Costs, Impairments and Additional Items (Adjusted EBITDAX)

 (Non-GAAP) to Net Income (GAAP)

(Unaudited; in thousands)













The following chart adjusts the three-month and nine-month periods ended September 30, 2018 and 2017 reported Net Income (GAAP) to Earnings Before Interest Expense (Net), Income Taxes (Income Tax Provision), Depreciation, Depletion and Amortization, Exploration Costs, Dry Hole Costs and Impairments (EBITDAX) (Non-GAAP) and further adjusts such amount to reflect actual net cash received from (payments for) settlements of commodity derivative contracts by eliminating the unrealized mark-to-market (MTM) (gains) losses from these transactions and to eliminate the (gains) losses on asset dispositions (Net).  EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who adjust reported Net Income (GAAP) to add back Interest Expense (Net), Income Taxes (Income Tax Provision), Depreciation, Depletion and Amortization, Exploration Costs, Dry Hole Costs and Impairments and further adjust such amount to match realizations to production settlement months and make certain other adjustments to exclude non-recurring and certain other items.  EOG management uses this information for purposes of comparing its financial performance with the financial performance of other companies in the industry.














Three Months Ended


Nine Months Ended


September 30,


September 30,


2018


2017


2018


2017













Net Income (GAAP)

$

1,190,952


$

100,541


$

2,526,272


$

152,111













Adjustments:












     Interest Expense, Net


63,632



69,082



189,032



211,010

     Income Tax Provision 


255,411



45,439



626,386



95,718

     Depreciation, Depletion and Amortization


918,180



846,222



2,515,445



2,527,642

     Exploration Costs


32,823



30,796



115,137



122,401

     Dry Hole Costs


358



50



5,260



77

     Impairments 


44,617



53,677



160,934



325,798

           EBITDAX (Non-GAAP)


2,505,973



1,145,807



6,138,466



3,434,757

     Total (Gains) Losses on MTM Commodity Derivative Contracts  


52,081



6,606



297,735



(64,860)

     Net Cash Received from (Payments for) Settlements of Commodity
        Derivative Contracts


(91,894)



2,139



(180,228)



4,730

     (Gains) Losses on Asset Dispositions, Net


(115,944)



8,202



(94,658)



33,876













Adjusted EBITDAX (Non-GAAP)

$

2,350,216


$

1,162,754


$

6,161,315


$

3,408,503













Adjusted EBITDAX (Non-GAAP) - Percentage Increase


102%






81%





 

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 (Non-GAAP) to

Current and Long-Term Debt (GAAP) and Total Capitalization (GAAP)

(Unaudited; in millions, except ratio data)







The following chart reconciles Current and 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 and Total Capitalization (Non-GAAP) in their Net Debt-to-Total Capitalization ratio calculation.  EOG management uses this information for comparative purposes within the industry.








At


At


September 30,


December 31,


2018


2017







Total Stockholders' Equity - (a)

$

18,538


$

16,283







Current and Long-Term Debt (GAAP) - (b)


6,435



6,387

Less: Cash 


(1,274)



(834)

Net Debt (Non-GAAP) - (c)


5,161



5,553







Total Capitalization (GAAP) - (a) + (b)

$

24,973


$

22,670







Total Capitalization (Non-GAAP) - (a) + (c)

$

23,699


$

21,836







Debt-to-Total Capitalization (GAAP) - (b) / [(a) + (b)]


26%



28%







Net Debt-to-Total Capitalization (Non-GAAP) - (c) / [(a) + (c)]


22%



25%


 

EOG RESOURCES, INC.

Crude Oil and Natural Gas Financial Commodity

Derivative Contracts













EOG accounts for financial commodity derivative contracts using the mark-to-market accounting method.  Prices received by EOG for its crude oil production generally vary from NYMEX West Texas Intermediate prices due to adjustments for delivery location (basis) and other factors.  EOG has entered into crude oil basis swap contracts in order to fix the differential between pricing in Midland, Texas, and Cushing, Oklahoma (Midland Differential).  Presented below is a comprehensive summary of EOG's Midland Differential basis swap contracts through October 26, 2018.  The weighted average price differential expressed in $/Bbl represents the amount of reduction to Cushing, Oklahoma, prices for the notional volumes expressed in Bbld covered by the basis swap contracts.

























Midland Differential Basis Swap Contracts










Weighted












Average Price










Volume


Differential










(Bbld) 


($/Bbl) 

2018











January 1, 2018 through November 30, 2018 (closed)




15,000


$           1.063

December 2018 







15,000


1.063













2019











January 1, 2019 through December 31, 2019 




20,000


$           1.075

























EOG has also entered into crude oil basis swap contracts in order to fix the differential between pricing in the U.S. Gulf Coast and Cushing, Oklahoma (Gulf Coast Differential).  Presented below is a comprehensive summary of EOG's Gulf Coast Differential basis swap contracts through October 26, 2018.  The weighted average price differential expressed in $/Bbl represents the amount of addition to Cushing, Oklahoma, prices for the notional volumes expressed in Bbld covered by the basis swap contracts.

























Gulf Coast Differential Basis Swap Contracts










Weighted












Average Price










Volume


Differential










(Bbld) 


($/Bbl) 

2018











January 1, 2018 through September 30, 2018 (closed)




37,000


$           3.818

October 1, 2018 through November 30, 2018 (closed)




52,000


3.911

December 2018 







52,000


3.911













2019











January 1, 2019 through December 31, 2019 




13,000


$           5.572

























Presented below is a comprehensive summary of EOG's crude oil price swap contracts through October 26, 2018, with notional volumes expressed in Bbld and prices expressed in $/Bbl.  

























Crude Oil Price Swap Contracts










Weighted










Volume


Average Price










(Bbld) 


($/Bbl) 

2018











January 1, 2018 through September 30, 2018 (closed)




134,000


$           60.04

October 1, 2018 through December 31, 2018




134,000


60.04

























Presented below is a comprehensive summary of EOG's natural gas price swap contracts through October 26, 2018, with notional volumes expressed in MMBtud and prices expressed in $/MMBtu.

























Natural Gas Price Swap Contracts












Weighted










Volume


Average Price










(MMBtud)


($/MMBtu)

2018











March 1, 2018 through October 31, 2018 (closed)




35,000


$             3.00

November 2018







35,000


3.00

























EOG has sold call options which establish a ceiling price for the sale of notional volumes of natural gas as specified in the call option contracts.  The call options require that EOG pay the difference between the call option strike price and either the average or last business day NYMEX Henry Hub natural gas price for the contract month (Henry Hub Index Price) in the event the Henry Hub Index Price is above the call option strike price. 













In addition, EOG has purchased put options which establish a floor price for the sale of notional volumes of natural gas as specified in the put option contracts.  The put options grant EOG the right to receive the difference between the put option strike price and the Henry Hub Index Price in the event the Henry Hub Index Price is below the put option strike price.  Presented below is a comprehensive summary of EOG's natural gas call and put option contracts through October 26, 2018, with notional volumes expressed in MMBtud and prices expressed in $/MMBtu.

























Natural Gas Option Contracts






Call Options Sold


Put Options Purchased








Weighted




Weighted






Volume


Average Price


Volume


Average Price






(MMBtud) 


($/MMBtu) 


(MMBtud)


($/MMBtu)

2018











March 1, 2018 through October 31, 2018 (closed)



120,000


$             3.38


96,000


$             2.94

November 2018 



120,000


3.38


96,000


2.94

























Definitions











Bbld

Barrels per day










$/Bbl

Dollars per barrel










MMBtud      

Million British thermal units per day










$/MMBtu

Dollars per million British thermal units










NYMEX

U.S. New York Mercantile Exchange











 

EOG RESOURCES, INC.

Direct After-Tax Rate of Return (ATROR)


The calculation of our direct after-tax rate of return (ATROR) with respect to our capital expenditure program for a particular play or well is based on the estimated recoverable reserves ("net" to EOG's interest) for all wells in such play or such well (as the case may be), the estimated net present value (NPV) of the future net cash flows from such reserves (for which we utilize certain assumptions regarding future commodity prices and operating costs) and our direct net costs incurred in drilling or acquiring (as the case may be) such wells or well (as the case may be).  As such, our direct ATROR with respect to our capital expenditures for a particular play or well cannot be calculated from our consolidated financial statements. 



Direct ATROR

Based on Cash Flow and Time Value of Money

  - Estimated future commodity prices and operating costs

  - Costs incurred to drill, complete and equip a well, including facilities

Excludes Indirect Capital

  - Gathering and Processing and other Midstream

  - Land, Seismic, Geological and Geophysical


Payback ~12 Months on 100% Direct ATROR Wells

First Five Years ~1/2 Estimated Ultimate Recovery Produced but ~3/4 of NPV Captured



Return on Equity / Return on Capital Employed 

Based on GAAP Accrual Accounting

Includes All Indirect Capital and Growth Capital for Infrastructure

  - Eagle Ford, Bakken, Permian Facilities

  - Gathering and Processing

Includes Legacy Gas Capital and Capital from Mature Wells

 

EOG RESOURCES, INC.

Quantitative Reconciliation of After-Tax Net Interest Expense (Non-GAAP), Adjusted Net Income (Loss)

(Non-GAAP), Net Debt (Non-GAAP) and Total Capitalization (Non-GAAP) as used in the Calculations of

Return on Capital Employed (Non-GAAP) and Return on Equity (Non-GAAP) to Net Interest Expense (GAAP),

Net Income (Loss) (GAAP), Current and Long-Term Debt (GAAP) and Total Capitalization (GAAP), Respectively

(Unaudited; in millions, except ratio data)
















The following chart reconciles Net Interest Expense (GAAP), Net Income (Loss) (GAAP), Current and Long-Term Debt (GAAP) and Total Capitalization (GAAP) to After-Tax Net Interest Expense (Non-GAAP), Adjusted Net Income (Loss) (Non-GAAP), Net Debt (Non-GAAP) and Total Capitalization (Non-GAAP), respectively, as used in the Return on Capital Employed (ROCE) and Return on Equity (ROE) calculations.  EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who utilize After-Tax Net Interest Expense, Adjusted Net Income (Loss), Net Debt and Total Capitalization (Non-GAAP) in their ROCE and ROE calculations.  EOG management uses this information for purposes of comparing its financial performance with the financial performance of other companies in the industry.


















2017



2016



2015



2014



2013

Return on Capital Employed (ROCE) (Non-GAAP)






























Net Interest Expense (GAAP)

$

274


$

282


$

237


$

201




Tax Benefit Imputed (based on 35%) 


(96)



(99)



(83)



(70)




After-Tax Net Interest Expense (Non-GAAP) - (a) 

$

178


$

183


$

154


$

131



















Net Income (Loss) (GAAP) - (b)                                                   

$

2,583


$

(1,097)


$

(4,525)


$

2,915




Adjustments to Net Income (Loss), Net of Tax (See Accompanying Schedules)


(1,934)

 (a) 


204

 (b) 


4,559

 (c) 


(199)

 (d) 



Adjusted Net Income (Loss) (Non-GAAP) - (c)   

$

649


$

(893)


$

34


$

2,716



















Total Stockholders' Equity Before Retained Earnings Adjustment (GAAP) - (d)   

$

16,283


$

13,982


$

12,943


$

17,713


$

15,418

Less: Tax Reform Impact


(2,169)



-



-



-



-

Total Stockholders' Equity (Non-GAAP) - (e)   

$

14,114


$

13,982


$

12,943


$

17,713


$

15,418
















Average Total Stockholders' Equity (GAAP) * - (f)   

$

15,133


$

13,463


$

15,328


$

16,566



















Average Total Stockholders' Equity (Non-GAAP) * - (g)   

$

14,048


$

13,463


$

15,328


$

16,566



















Current and Long-Term Debt (GAAP) - (h) 

$

6,387


$

6,986


$

6,655


$

5,906


$

5,909

Less: Cash                                                       


(834)



(1,600)



(719)



(2,087)



(1,318)

Net Debt (Non-GAAP) - (i) 

$

5,553


$

5,386


$

5,936


$

3,819


$

4,591
















Total Capitalization (GAAP) - (d) + (h)  

$

22,670


$

20,968


$

19,598


$

23,619


$

21,327
















Total Capitalization (Non-GAAP) - (e) + (i) 

$

19,667


$

19,368


$

18,879


$

21,532


$

20,009
















Average Total Capitalization (Non-GAAP) * - (j)   

$

19,518


$

19,124


$

20,206


$

20,771



















ROCE (GAAP Net Income) - [(a) + (b)] / (j)       


14.1%



-4.8%



-21.6%



14.7%



















ROCE (Non-GAAP Adjusted Net Income) - [(a) + (c)] / (j)       


4.2%



-3.7%



0.9%



13.7%



















Return on Equity (ROE)






























ROE (GAAP) (GAAP Net Income) - (b) / (f)


17.1%



-8.1%



-29.5%



17.6%



















ROE (Non-GAAP) (Non-GAAP Adjusted Net Income) - (c) / (g)


4.6%



-6.6%



0.2%



16.4%





* Average for the current and immediately preceding year












































































Adjustments to Net Income (Loss) (GAAP)































(a) See below schedule for detail of adjustments to Net Income (Loss) (GAAP) in 2017:



Year Ended December 31, 2017









 Before 



 Income Tax  



 After 









 Tax 



 Impact 



 Tax 







Adjustments:















    Add:   Mark-to-Market Commodity Derivative Contracts Impact

$

(12)


$

4


$

(8)







    Add:   Impairments of Certain Assets


261



(93)



168







    Add:   Net Losses on Asset Dispositions


99



(35)



64







    Add:   Legal Settlement - Early Lease Termination


10



(4)



6







    Add:   Joint Venture Transaction Costs


3



(1)



2







    Add:   Joint Interest Billings Deemed Uncollectible


5



(2)



3







    Less:  Tax Reform Impact


-



(2,169)



(2,169)







Total

$

366


$

(2,300)


$

(1,934)






















(b) See below schedule for detail of adjustments to Net Income (Loss) (GAAP) in 2016:



Year Ended December 31, 2016









 Before 



 Income Tax  



 After 









 Tax 



 Impact 



 Tax 







Adjustments:















    Add:   Mark-to-Market Commodity Derivative Contracts Impact

$

77


$

(28)


$

49







    Add:   Impairments of Certain Assets


321



(113)



208







    Less:  Net Gains on Asset Dispositions


(206)



62



(144)







    Add:   Trinidad Tax Settlement


-



43



43







    Add:   Voluntary Retirement Expense


42



(15)



27







    Add:   Acquisition - State Apportionment Change


-



16