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INVESTORS
EOG Resources Reports Second Quarter 2006 Results
HOUSTON, July 31 /PRNewswire-FirstCall/ -- EOG Resources, Inc. (NYSE: EOG) (EOG) today reported second quarter 2006 net income available to common of $329.6 million, or $1.34 per share. This compares to second quarter 2005 net income available to common of $247.6 million, or $1.02 per share.
The results for the second quarter 2006 included a tax benefit of $18.6 million ($0.08 per share) related to a Canadian federal tax rate reduction, a tax benefit of $13.4 million ($0.05 per share) related to a provincial tax rate reduction in Alberta, Canada, a tax expense of $5.2 million ($0.02 per share) related to a revision of the Texas franchise tax law and a previously disclosed $91.0 million ($58.6 million after tax, or $0.24 per share) gain on the mark-to-market of financial commodity price transactions. During the quarter, the net cash realized related to financial commodity contracts was $63.9 million ($41.1 million after tax, or $0.17 per share). Reflecting these items, second quarter 2006 adjusted non-GAAP net income available to common was $285.3 million, or $1.16 per share. Last year's second quarter results included a positive adjustment to revenue of $19.3 million ($8.7 million after tax, or $0.04 per share) related to an amended gas sales agreement. Reflecting this item, second quarter 2005 adjusted non-GAAP net income available to common was $238.9 million, or $0.98 per share. (Please refer to the attached tables for the reconciliation of adjusted non-GAAP net income available to common to net income available to common.)
Operational Highlights
In the United States for the first six months of 2006, EOG's natural gas and natural gas liquids production increased 10.6 percent over the same period last year driven in part by success from the Barnett Shale Play in Central Texas. Favorable results from EOG's Rocky Mountain, East Texas and North Louisiana drilling programs also bolstered EOG's solid performance.
"Production from the Barnett Shale continues to surpass our internal forecast. We recently achieved net natural gas production of over 140 million cubic feet per day, which exceeds our original plan and is also approaching our original year-end target," said Mark G. Papa, Chairman and Chief Executive Officer. "The organic growth rate and operational success of the Barnett have been tremendous considering that this time last year, we were producing about 36 million a day from the play."
Another area recording strong performance during the second quarter was South Texas. EOG reported successful drilling results from the Frio Formation in San Patricio County. The Kirk Gas Unit #4, in which EOG has an 87 percent working interest, was drilled to a depth of over 12,000 feet. After fracture stimulation, the well tested at a gross rate of 13 million cubic feet per day (MMcfd) of natural gas and approximately 800 barrels of condensate per day. Several offset well locations are planned for later in the year. Also in South Texas, EOG reported success from the Lobo formation. EOG has an 88 percent working interest in both the Slator Ranch V#1 and the Slator Ranch W#1 that were each drilled to depths of approximately 11,000 feet. The V#1 is producing at a gross rate of 13 MMcfd and the W#1 at 18 MMcfd of natural gas.
Capital Structure
In keeping with EOG's long-term strategy, in the second quarter EOG further reduced long-term debt outstanding to $893 million at June 30, 2006. At quarter end, cash on the balance sheet was $759 million for non-GAAP net debt of $134 million. (Please refer to the attached tables for the reconciliation of non-GAAP net debt to current and long-term debt.) The company's debt-to-total capitalization ratio was 15 percent at June 30, 2006, down from 19 percent at December 31, 2005.
"With the second quarter results now in, EOG continues to be positioned to meet its 2006 goals of achieving strong organic production growth, maintaining low net debt and achieving high rates of return on equity and return on capital employed," said Papa.
Conference Call Scheduled for August 1, 2006
An updated investor presentation and reconciliation schedules will be posted to the EOG website prior to the conference call.
EOG's second quarter 2006 conference call will be available via live audio webcast at 9 a.m. Central Daylight Time (10 a.m. Eastern Daylight Time) Tuesday, August 1, 2006. To listen, log on to http://www.eogresources.com . The webcast will be archived on EOG's website through Tuesday, August 15, 2006.
EOG Resources, Inc. is one of the largest independent (non-integrated) oil and natural gas companies in the United States with proved reserves in the United States, Canada, offshore Trinidad and the United Kingdom North Sea. EOG Resources, Inc. is listed on the New York Stock Exchange and is traded under the ticker symbol "EOG."
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts, including, among others, statements regarding EOG's future financial position, business strategy, budgets, reserve information, projected levels of production, projected costs and plans and objectives of management for future operations, are forward-looking statements. EOG typically uses words such as "expect," "anticipate," "estimate," "strategy," "intend," "plan," "target" and "believe" or the negative of those terms or other variations of them or by comparable terminology to identify its forward-looking statements. In particular, statements, express or implied, concerning future operating results, the ability to replace or increase reserves or to increase production, or the ability to generate income or cash flows are forward- looking statements. Forward-looking statements are not guarantees of performance. Although EOG believes its expectations reflected in forward- looking statements are based on reasonable assumptions, no assurance can be given that these expectations will be achieved. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include, among others: the timing and extent of changes in commodity prices for crude oil, natural gas and related products, foreign currency exchange rates and interest rates; the timing and impact of liquefied natural gas imports and changes in demand or prices for ammonia or methanol; the extent and effect of any hedging activities engaged in by EOG; the extent of EOG's success in discovering, developing, marketing and producing reserves and in acquiring oil and gas properties; the accuracy of reserve estimates, which by their nature involve the exercise of professional judgment and may therefore be imprecise; the availability and cost of drilling rigs, experienced drilling crews, materials and equipment used in well completions, and tubular steel; the availability, terms and timing of governmental and other permits and rights of way; the availability of pipeline transportation capacity; the availability of compression uplift capacity; the extent to which EOG can economically develop its Barnett Shale acreage outside of Johnson County, Texas; whether EOG is successful in its efforts to more densely develop its acreage in the Barnett Shale and other production areas; political developments around the world; acts of war and terrorism and responses to these acts; weather; and financial market conditions. In light of these risks, uncertainties and assumptions, the events anticipated by EOG's forward-looking statements might not occur. Forward-looking statements speak only as of the date made and EOG undertakes no obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. As noted above, statements of proved reserves are only estimates and may be imprecise. Any reserve estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include not only proved reserves, but also other categories of reserves that the SEC's guidelines strictly prohibit EOG from including in filings with the SEC. Investors are urged to consider closely the disclosure in EOG's Annual Report on Form 10-K for fiscal year ended December 31, 2005, available from EOG at P.O. Box 4362, Houston, Texas 77210-4362 (Attn: Investor Relations). You can also obtain this form from the SEC by calling 1-800-SEC-0330 or from the SEC's website at http://www.sec.gov .
EOG RESOURCES, INC.
FINANCIAL REPORT
(Unaudited; in millions, except per share data)
Quarter Six Months
Ended June 30 Ended June 30
2006 2005 2006 2005
Net Operating Revenues $919.1 $783.9 $2,003.6 $1,472.1
Net Income Available to Common $329.6 $247.6 $754.4 $448.4
Net Income Per Share Available
to Common
Basic $1.36 $1.04 $3.13 $1.89
Diluted $1.34 $1.02 $3.07 $1.85
Average Number of Shares
Outstanding
Basic 241.6 238.3 241.4 237.8
Diluted 245.9 243.4 245.8 242.8
SUMMARY INCOME STATEMENTS
(Unaudited; in thousands)
Quarter Six Months
Ended June 30 Ended June 30
2006 2005 2006 2005
Net Operating
Revenues
Wellhead Natural
Gas $642,969 $625,564 $1,432,030 $1,168,670
Wellhead Crude Oil,
Condensate and
Natural Gas
Liquids 185,036 157,307 369,754 301,843
Gains (Losses) on
Mark-to-Market
Commodity
Derivative
Contracts 91,022 --- 198,046 (940)
Other, Net 61 1,053 3,794 2,507
Total 919,088 783,924 2,003,624 1,472,080
Operating Expenses
Lease and Well 87,287 66,558 174,771 132,326
Transportation
Costs 25,913 20,293 54,009 37,400
Exploration Costs 35,313 27,994 74,705 62,810
Dry Hole Costs 14,668 22,537 25,394 37,119
Impairments 22,680 24,231 45,453 36,403
Depreciation,
Depletion and
Amortization 192,928 159,896 370,580 312,912
General and
Administrative 38,607 30,113 74,898 58,800
Taxes Other Than
Income 46,858 37,613 100,552 79,526
Total 464,254 389,235 920,362 757,296
Operating Income 454,834 394,689 1,083,262 714,784
Other Income, Net 21,844 6,874 36,400 12,339
Income Before
Interest Expense and
Income Taxes 476,678 401,563 1,119,662 727,123
Interest Expense, Net 12,384 14,687 25,537 28,644
Income Before Income
Taxes 464,294 386,876 1,094,125 698,479
Income Tax Provision 132,877 137,420 336,001 246,320
Net Income 331,417 249,456 758,124 452,159
Preferred Stock
Dividends 1,858 1,858 3,716 3,716
Net Income Available
to Common $329,559 $247,598 $754,408 $448,443
EOG RESOURCES, INC.
OPERATING HIGHLIGHTS
(Unaudited)
Quarter Six Months
Ended June 30 Ended June 30
2006 2005 2006 2005
Wellhead Volumes and Prices
Natural Gas Volumes (MMcfd)
United States 776 706 767 698
Canada 225 228 227 231
United States & Canada 1,001 934 994 929
Trinidad 265 214 274 209
United Kingdom 25 34 30 34
Total 1,291 1,182 1,298 1,172
Average Natural Gas Prices
($/Mcf)
United States $6.33 $6.64 $7.04 $6.31
Canada 6.28 6.02 7.08 5.85
United States & Canada
Composite 6.32 6.49 7.04 6.20
Trinidad 2.18 2.92 (A) 2.31 2.35 (B)
United Kingdom 6.34 5.54 9.32 6.10
Composite 5.47 5.82 6.10 5.51
Crude Oil and Condensate
Volumes (MBbld)
United States 19.5 21.7 20.2 22.1
Canada 2.4 2.5 2.5 2.5
United States & Canada 21.9 24.2 22.7 24.6
Trinidad 4.8 4.2 5.2 4.1
United Kingdom 0.1 0.1 0.1 0.2
Total 26.8 28.5 28.0 28.9
Average Crude Oil and
Condensate Prices ($/Bbl)
United States $67.69 $51.03 $63.70 $49.90
Canada 62.62 46.58 57.12 45.68
United States & Canada
Composite 67.06 50.58 62.92 49.47
Trinidad 67.47 53.05 64.45 49.22
United Kingdom 65.80 49.10 61.04 43.93
Composite 67.13 50.93 63.21 49.41
Natural Gas Liquids Volumes
(MBbld)
United States 9.0 7.9 8.1 6.7
Canada 0.6 1.2 0.7 1.3
Total 9.6 9.1 8.8 8.0
Average Natural Gas Liquids
Prices ($/Bbl)
United States $41.02 $30.51 $39.32 $30.01
Canada 46.55 30.52 44.56 28.80
Composite 41.38 30.51 39.72 29.81
Natural Gas Equivalent
Volumes (MMcfed)
United States 947 885 937 870
Canada 244 249 246 254
United States & Canada 1,191 1,134 1,183 1,124
Trinidad 293 238 305 235
United Kingdom 26 35 30 35
Total 1,510 1,407 1,518 1,394
Total Bcfe 137.4 128.1 274.8 252.3
(A) Includes $0.99 per Mcf as a result of a revenue adjustment related
to an amended Trinidad take-or-pay contract.
(B) Includes $0.51 per Mcf as a result of a revenue adjustment related
to an amended Trinidad take-or-pay contract.
EOG RESOURCES, INC.
SUMMARY BALANCE SHEETS
(Unaudited; in thousands, except share data)
June 30, December 31,
2006 2005
ASSETS
Current Assets
Cash and Cash Equivalents $759,108 $643,811
Accounts Receivable, Net 597,564 762,207
Inventories 98,430 63,215
Assets from Price Risk Management
Activities 108,344 11,415
Deferred Income Taxes --- 24,376
Other 35,264 58,214
Total 1,598,710 1,563,238
Oil and Gas Properties (Successful
Efforts Method) 12,446,522 11,173,389
Less: Accumulated Depreciation,
Depletion and Amortization (5,512,505) (5,086,210)
Net Oil and Gas Properties 6,934,017 6,087,179
Other Assets 109,430 102,903
Total Assets $8,642,157 $7,753,320
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $680,575 $679,548
Accrued Taxes Payable 131,150 140,902
Dividends Payable 14,799 9,912
Deferred Income Taxes 83,672 164,659
Current Portion of Long-Term Debt 124,075 126,075
Other 48,246 50,945
Total 1,082,517 1,172,041
Long-Term Debt 768,442 858,992
Other Liabilities 296,407 283,407
Deferred Income Taxes 1,346,395 1,122,588
Shareholders' Equity
Preferred Stock, $0.01 Par,
10,000,000 Shares Authorized:
Series B, 100,000 Shares Issued,
Cumulative, $100,000,000 Liquidation
Preference 99,181 99,062
Common Stock, $0.01 Par,
640,000,000 Shares Authorized and
249,460,000 Shares Issued 202,495 202,495
Additional Paid In Capital 91,852 84,705
Unearned Compensation --- (36,246)
Accumulated Other Comprehensive
Income 242,827 177,137
Retained Earnings 4,645,763 3,920,483
Common Stock Held in Treasury,
6,861,919 Shares at June 30, 2006
and 7,385,862 Shares at
December 31, 2005 (133,722) (131,344)
Total Shareholders' Equity 5,148,396 4,316,292
Total Liabilities and Shareholders'
Equity $8,642,157 $7,753,320
EOG RESOURCES, INC.
SUMMARY STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Six Months
Ended June 30
2006 2005
Cash Flows from Operating Activities
Reconciliation of Net Income to Net
Cash Provided by Operating Activities:
Net Income $758,124 $452,159
Items Not Requiring Cash
Depreciation, Depletion and
Amortization 370,580 312,912
Impairments 45,453 36,403
Stock-Based Compensation Expenses 19,618 5,699
Deferred Income Taxes 153,552 109,278
Other, Net (7,485) (366)
Dry Hole Costs 25,394 37,119
Mark-to-Market Commodity Derivative
Contracts
Total (Gains) Losses (198,046) 940
Realized Gains 93,913 9,807
Tax Benefits From Stock Options
Exercised --- 18,309
Other, Net 4,710 (5,323)
Changes in Components of Working
Capital and Other Liabilities
Accounts Receivable 169,350 (5,081)
Inventories (35,066) (12,185)
Accounts Payable (5,225) 16,934
Accrued Taxes Payable (11,470) 5,200
Other Liabilities (936) (5,325)
Other, Net 3,674 (10,917)
Changes in Components of Working
Capital Associated with
Investing and Financing Activities (9,708) 19,842
Net Cash Provided by Operating
Activities 1,376,432 985,405
Investing Cash Flows
Additions to Oil and Gas Properties (1,189,927) (762,347)
Proceeds from Sales of Assets 14,553 31,578
Changes in Components of Working
Capital Associated with
Investing Activities 9,742 (19,950)
Other, Net (14,256) (16,111)
Net Cash Used in Investing Activities (1,179,888) (766,830)
Financing Cash Flows
Net Commercial Paper and Line of
Credit Borrowings --- 39,475
Long-Term Debt Borrowing 10,000 ---
Long-Term Debt Repayments (102,550) ---
Dividends Paid (27,712) (20,220)
Excess Tax Benefits from Stock-Based
Compensation Expenses 20,841 ---
Proceeds from Stock Options
Exercised and Employee Stock
Purchase Plan 11,143 24,372
Other, Net (214) 108
Net Cash (Used in) Provided by
Financing Activities (88,492) 43,735
Effect of Exchange Rate Changes on
Cash 7,245 (589)
Increase in Cash and Cash Equivalents 115,297 261,721
Cash and Cash Equivalents at Beginning
of Period 643,811 20,980
Cash and Cash Equivalents at End of
Period $759,108 $282,701
EOG RESOURCES, INC.
QUANTITATIVE RECONCILIATION OF ADJUSTED NET INCOME AVAILABLE TO COMMON
(Non-GAAP)
TO NET INCOME AVAILABLE TO COMMON (GAAP)
(Unaudited; in thousands, except per share data)
The following chart adjusts three-month and six-month periods ended June 30 reported Net Income Available to Common to reflect actual cash realized from oil and gas hedges by eliminating the unrealized mark-to-market gains or losses from these transactions, to add the one-time tax expense related to Texas (US) franchise tax law revision in the second quarter of 2006, to eliminate tax benefits related to the Alberta (Canada) provincial tax rate reduction and Canadian federal tax rate reduction in the second quarter of 2006 and to eliminate the upward revenue adjustment for an amended Trinidad gas sales agreement recorded in the second quarter of 2005. EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who adjust reported company earnings to match realizations to production settlement months and make certain other adjustments to exclude one-time items. EOG management uses this information for comparative purposes within the industry.
Quarter Six Months
Ended June 30 Ended June 30
2006 2005 2006 2005
Reported Net Income Available
to Common (GAAP) $329,559 $247,598 $754,408 $448,443
Mark-to-Market (MTM)
Commodity Derivative
Contracts Impact
Total (Gains) Losses (91,022) --- (198,046) 940
Realized Gains 63,859 --- 93,913 9,807
Subtotal (27,163) --- (104,133) 10,747
After Tax MTM Impact (17,479) --- (67,010) 6,916
Add: Tax Expense Related to
Texas (US) Franchise Tax Law
Revision 5,221 --- 5,221 ---
Less: Tax Benefit Related to
Alberta (Canada) Provincial
Tax Rate Reduction (13,449) --- (13,449) ---
Less: Tax Benefit Related to
Canadian Federal Tax Rate
Reduction (18,593) --- (18,593) ---
Less: Revenue Adjustment for
an Amended Trinidad Gas
Sales
Agreement, Net of Tax --- (8,672) --- (8,672)
Adjusted Net Income Available
to Common (Non-GAAP) $285,259 $238,926 $660,577 $446,687
Adjusted Net Income Per Share
Available to Common
(Non-GAAP)
Basic $1.18 $1.00 $2.74 $1.88
Diluted $1.16 $0.98 $2.69 $1.84
Average Number of Shares
Outstanding
Basic 241,613 238,252 241,370 237,752
Diluted 245,887 243,414 245,827 242,771
EOG RESOURCES, INC.
QUANTITATIVE RECONCILIATION OF DISCRETIONARY CASH FLOW AVAILABLE TO COMMON
(Non-GAAP)
TO NET CASH PROVIDED BY OPERATING ACTIVITIES (GAAP)
(Unaudited; in thousands)
The following chart reconciles three-month and six-month periods ended June 30 Net Cash Provided by Operating Activities to Discretionary Cash Flow Available to Common. EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who adjust net cash provided by operating activities for changes in components of Working Capital, Other Liabilities and Preferred Stock Dividends. EOG management uses this information for comparative purposes within the industry.
Quarter Six Months
Ended June 30 Ended June 30
2006 2005 2006 2005
Net Cash Provided by
Operating Activities
(GAAP) $589,665 $503,566 $1,376,432 $985,405
Adjustments
Exploration Costs 35,313 27,994 74,705 62,810
Changes in Components of
Working Capital and
Other Liabilities
Accounts Receivable (34,200) 10,599 (169,350) 5,081
Inventories 21,696 3,484 35,066 12,185
Accounts Payable (4,310) (43,286) 5,225 (16,934)
Accrued Taxes Payable 40,768 36,606 11,470 (5,200)
Other Liabilities 6,364 8,992 936 5,325
Other, Net (6,764) 4,458 (3,674) 10,917
Changes in Components of
Working Capital
Associated
with Investing and
Financing Activities (23,479) 5,878 9,708 (19,842)
Preferred Dividends (1,858) (1,858) (3,716) (3,716)
Discretionary Cash Flow
Available to Common
(Non-GAAP) $623,195 $556,433 $1,336,802 $1,036,031
EOG RESOURCES, INC.
QUANTITATIVE RECONCILIATION OF NET DEBT (NON-GAAP)
TO CURRENT AND LONG-TERM DEBT (GAAP)
(Unaudited; in millions)
The following chart reconciles Current and Long-Term Debt (GAAP) to Net Debt (Non-GAAP). A portion of the cash is associated with international subsidiaries; tax considerations may impact debt paydown. EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who utilize Net Debt in their calculation. EOG management uses this information for comparative purposes within the industry.
June 30,
2006
Current and Long-Term Debt (GAAP) $893
Less: Cash (759)
Net Debt (Non-GAAP) $134
SOURCE EOG Resources, Inc.
Contact: investors, Maire A. Baldwin, +1-713-651-6EOG, or +1-713-651-6364, or media and investors, Elizabeth M. Ivers, +1-713-651-7132, both of EOG Resources, Inc.