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INVESTORS
EOG Resources Reports Third Quarter 2006 Results
HOUSTON, Oct. 30 /PRNewswire-FirstCall/ -- EOG Resources, Inc. (NYSE: EOG) (EOG) today reported third quarter 2006 net income available to common of $297.3 million, or $1.21 per share. This compares to third quarter 2005 net income available to common of $341.9 million, or $1.40 per share.
The results for the third quarter 2006 included a previously disclosed $104.7 million ($67.4 million after tax, or $0.28 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 $73.0 million ($47.0 million after tax, or $0.19 per share). Reflecting these items, third quarter 2006 adjusted non-GAAP net income available to common was $276.9 million, or $1.12 per share. (Please refer to the attached tables for the reconciliation of adjusted non-GAAP net income available to common to net income available to common.)
Operational Highlights
Continuing its focus on organic growth, EOG reported a 10.9 percent increase in total production during the third quarter 2006 over the third quarter 2005.
"Third quarter operational results reinforce EOG's established track record of delivering consistent, high rates of organic production growth, while maintaining a very low level of net debt and generating high rates of return on equity and capital employed," said Mark G. Papa, Chairman and Chief Executive Officer.
In the United States, natural gas and natural gas liquids production rose 17 percent as compared to the same quarter a year ago. Domestic production increases were driven by continued exploitation success in the Fort Worth Basin Barnett Shale Play and outstanding results from the Rocky Mountain and South Texas operating areas.
In Johnson County, EOG is implementing development drilling in the Barnett Shale Play with reduced well spacing from the original plan of 1,000 feet. Strong results have been reported from both eastern and western Johnson County on wells drilled in these downspaced patterns. In eastern Johnson County, the Casstevens #1H began flowing to sales at an initial rate of over seven million cubic feet per day (MMcfd) of natural gas in September and is producing at a current rate of 4.5 MMcfd. In western Johnson County, the Hardcastle #3H came on-line in August at a rate of eight MMcfd and is now producing over four MMcfd of natural gas. EOG has an 84 percent and 100 percent working interest, respectively, in these wells. In the Fort Worth Basin outside of Johnson County, EOG continues to make operational progress and remains focused on improving well results and reducing well costs.
"EOG's natural gas production from the Fort Worth Basin Barnett Shale averaged 174 MMcfd in September, far in excess of our original year-end 2006 target of 155 MMcfd," said Papa. "During the third quarter, we completed several new 'monster wells' in both eastern and western Johnson County."
In the Rocky Mountain operating area, EOG's successful development drilling program in its Uinta Basin Chapita Wells Unit in northeastern Utah contributed to a 19 percent increase in natural gas production as compared to the same period last year.
In South Texas, EOG holds an 87.5 percent working interest in the Slator Ranch W2, which was drilled to 9,300 feet in the Lobo Formation, tested at a gross rate of 17 MMcfd of natural gas and is currently producing over nine MMcfd.
Mid-Continent operations reported a 9.5 percent sequential increase in natural gas production from the second quarter 2006. In Kansas, EOG has a 100 percent working interest in the GPCU 25#1, a natural gas well that has been flowing to sales at 15 MMcfd since August.
EOG's Trinidad natural gas sales considerably surpassed contract quantities during the first half of the year and slightly exceeded contract amounts during the third quarter. Fourth quarter gas sales in Trinidad are anticipated to be limited to contract levels. Therefore, EOG has revised its total company 2006 production growth forecast to 9 percent.
"EOG's two-year production per share growth for 2005 and 2006 on a debt- adjusted basis is one of the highest in our peer group and we expect very strong production growth in 2007. We have the assets to continue this momentum going forward," noted Papa.
Capital Structure
In the third quarter, EOG reduced long-term debt outstanding to $830 million at September 30, 2006 from $893 million at June 30, 2006. At quarter end, cash on the balance sheet was $596 million for non-GAAP net debt of $234 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 13 percent at September 30, 2006, down from 19 percent at December 31, 2005.
Conference Call Scheduled for October 31, 2006
An updated investor presentation and reconciliation schedules will be posted to the EOG website prior to the conference call.
EOG's third quarter 2006 conference call will be available via live audio webcast at 9 a.m. Central Standard Time (10 a.m. Eastern Standard Time) Tuesday, October 31, 2006. To listen, log on to http://www.eogresources.com . The webcast will be archived on EOG's website through Tuesday, November 14, 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 Nine Months
Ended September 30 Ended September 30
2006 2005 2006 2005
Net Operating Revenues $968.2 $934.4 $2,971.9 $2,406.5
Net Income Available to Common $297.3 $341.9 $1,051.7 $790.3
Net Income Per Share Available
to Common
Basic $1.23 $1.43 $4.35 $3.32
Diluted $1.21 $1.40 $4.28 $3.25
Average Number of Shares
Outstanding
Basic 241.9 239.3 241.5 238.3
Diluted 246.1 244.9 246.0 243.5
SUMMARY INCOME STATEMENTS
(Unaudited; in thousands)
Quarter Nine Months
Ended September 30 Ended September 30
2006 2005 2006 2005
Net Operating Revenues
Wellhead Natural Gas $661,920 $751,239 $2,093,950 $1,919,909
Wellhead Crude Oil,
Condensate and
Natural Gas Liquids 200,724 181,741 570,478 483,584
Gains (Losses) on
Mark-to-Market
Commodity
Derivative
Contracts 104,696 --- 302,742 (940)
Other, Net 908 1,465 4,702 3,972
Total 968,248 934,445 2,971,872 2,406,525
Operating Expenses
Lease and Well 93,693 71,035 268,464 203,361
Transportation Costs 26,632 20,975 80,641 58,375
Exploration Costs 35,174 32,023 109,879 94,833
Dry Hole Costs 16,356 19,130 41,750 56,249
Impairments 22,106 18,292 67,559 54,695
Depreciation,
Depletion and
Amortization 216,071 164,372 586,651 477,284
General and
Administrative 42,362 30,079 117,260 88,879
Taxes Other Than
Income 54,066 56,383 154,618 135,909
Total 506,460 412,289 1,426,822 1,169,585
Operating Income 461,788 522,156 1,545,050 1,236,940
Other Income, Net 14,310 10,159 50,710 22,498
Income Before Interest
Expense and Income
Taxes 476,098 532,315 1,595,760 1,259,438
Interest Expense, Net 10,102 13,877 35,639 42,521
Income Before Income
Taxes 465,996 518,438 1,560,121 1,216,917
Income Tax Provision 166,860 174,677 502,861 420,997
Net Income 299,136 343,761 1,057,260 795,920
Preferred Stock
Dividends 1,858 1,857 5,574 5,573
Net Income Available
to Common $297,278 $341,904 $1,051,686 $790,347
EOG RESOURCES, INC.
OPERATING HIGHLIGHTS
(Unaudited)
Quarter Nine Months
Ended September 30 Ended September 30
2006 2005 2006 2005
Wellhead Volumes and Prices
Natural Gas Volumes (MMcfd)
United States 837 724 791 707
Canada 224 226 226 229
United States & Canada 1,061 950 1,017 936
Trinidad 255 213 267 210
United Kingdom 28 44 29 38
Total 1,344 1,207 1,313 1,184
Average Natural Gas Prices
($/Mcf)
United States $6.21 $8.19 $6.74 $6.96
Canada 5.65 7.12 6.60 6.28
United States & Canada
Composite 6.09 7.94 6.71 6.79
Trinidad 2.21 1.86 2.28 2.18 (B)
United Kingdom 6.09 5.14 8.27 5.72
Composite 5.35 6.77 5.84 5.94
Crude Oil and Condensate
Volumes (MBbld)
United States 20.6 21.2 20.4 21.8
Canada 2.6 2.3 2.5 2.4
United States & Canada 23.2 23.5 22.9 24.2
Trinidad 4.4 4.2 4.9 4.2
United Kingdom 0.1 0.3 0.1 0.2
Total 27.7 28.0 27.9 28.6
Average Crude Oil and
Condensate Prices ($/Bbl)
United States $67.35 $61.63 $65.00 $53.75
Canada 63.87 57.08 59.42 49.26
United States & Canada
Composite 66.96 61.19 64.35 53.30
Trinidad 74.26 61.93 66.50 53.56
United Kingdom 59.09 53.80 60.49 48.75
Composite 67.68 61.22 64.68 53.30
Natural Gas Liquids Volumes
(MBbld)
United States 8.8 6.0 8.4 6.5
Canada 0.7 0.3 (A) 0.7 1.0
Total 9.5 6.3 9.1 7.5
Average Natural Gas Liquids
Prices ($/Bbl)
United States $44.33 $39.80 $41.10 $33.07
Canada 52.21 69.43 (A) 47.15 33.10
Composite 44.89 41.25 41.55 33.08
Natural Gas Equivalent
Volumes (MMcfed)
United States 1,015 887 964 876
Canada 243 242 245 250
United States & Canada 1,258 1,129 1,209 1,126
Trinidad 281 238 296 236
United Kingdom 29 46 30 39
Total 1,568 1,413 1,535 1,401
Total Bcfe 144.2 130.0 419.1 382.3
(A) Includes 0.08 MBbld adjustment in the third quarter of 2005.
Excluding the adjustment, the average natural gas liquid price was
$44.50.
(B) Includes $0.34 per Mcf as a result of a revenue adjustment in the
second quarter of 2005 related to an amended Trinidad take-or-pay
contract.
EOG RESOURCES, INC.
SUMMARY BALANCE SHEETS
(Unaudited; in thousands, except share data)
September 30, December 31,
2006 2005
ASSETS
Current Assets
Cash and Cash Equivalents $595,931 $643,811
Accounts Receivable, Net 656,523 762,207
Inventories 117,385 63,215
Assets from Price Risk Management
Activities 125,893 11,415
Deferred Income Taxes --- 24,376
Other 87,269 58,214
Total 1,583,001 1,563,238
Oil and Gas Properties (Successful
Efforts Method) 13,188,912 11,173,389
Less: Accumulated Depreciation,
Depletion and Amortization (5,734,736) (5,086,210)
Net Oil and Gas Properties 7,454,176 6,087,179
Other Assets 127,839 102,903
Total Assets $9,165,016 $7,753,320
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $794,588 $679,548
Accrued Taxes Payable 143,896 140,902
Dividends Payable 14,844 9,912
Deferred Income Taxes 122,147 164,659
Current Portion of Long-Term Debt 124,075 126,075
Other 59,418 50,945
Total 1,258,968 1,172,041
Long-Term Debt 705,442 858,992
Other Liabilities 310,063 283,407
Deferred Income Taxes 1,416,310 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 99,240 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 121,298 84,705
Unearned Compensation --- (36,246)
Accumulated Other Comprehensive
Income 241,640 177,137
Retained Earnings 4,928,453 3,920,483
Common Stock Held in Treasury,
6,008,852 Shares at September 30, 2006
and 7,385,862 Shares at December 31, 2005 (118,893) (131,344)
Total Shareholders' Equity 5,474,233 4,316,292
Total Liabilities and Shareholders' Equity $9,165,016 $7,753,320
EOG RESOURCES, INC.
SUMMARY STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Nine Months
Ended September 30
2006 2005
Cash Flows from Operating Activities
Reconciliation of Net Income to Net
Cash Provided by Operating Activities:
Net Income $1,057,260 $795,920
Items Not Requiring Cash
Depreciation, Depletion and
Amortization 586,651 477,284
Impairments 67,559 54,695
Stock-Based Compensation Expenses 38,407 8,825
Deferred Income Taxes 258,465 172,015
Other, Net (9,738) (103)
Dry Hole Costs 41,750 56,249
Mark-to-Market Commodity Derivative
Contracts
Total (Gains) Losses (302,742) 940
Realized Gains 166,892 9,807
Tax Benefits From Stock Options Exercised --- 40,347
Other, Net 8,316 (10,558)
Changes in Components of Working
Capital and Other Liabilities
Accounts Receivable 110,517 (171,428)
Inventories (54,021) (14,736)
Accounts Payable 104,592 79,239
Accrued Taxes Payable (49,083) 8,018
Other Liabilities 2,626 (1,164)
Other, Net 18,093 804
Changes in Components of Working
Capital Associated with Investing
and Financing Activities (65,996) (1,942)
Net Cash Provided by Operating Activities 1,979,548 1,504,212
Investing Cash Flows
Additions to Oil and Gas Properties (1,953,209) (1,223,715)
Proceeds from Sales of Assets 15,655 56,990
Changes in Components of Working
Capital Associated with
Investing Activities 66,054 2,572
Other, Net (20,474) (13,986)
Net Cash Used in Investing Activities (1,891,974) (1,178,139)
Financing Cash Flows
Net Commercial Paper and Line of
Credit Borrowings --- 40,150
Long-Term Debt Borrowings 37,000 ---
Long-Term Debt Repayments (192,550) (75,000)
Dividends Paid (44,015) (31,575)
Excess Tax Benefits from Stock-
Based Compensation Expenses 27,139 ---
Proceeds from Stock Options
Exercised and Employee Stock
Purchase Plan 29,284 56,437
Other, Net (448) (1,462)
Net Cash Used in Financing Activities (143,590) (11,450)
Effect of Exchange Rate Changes on Cash 8,136 5,458
(Decrease) Increase in Cash and Cash
Equivalents (47,880) 320,081
Cash and Cash Equivalents at
Beginning of Period 643,811 20,980
Cash and Cash Equivalents at End of
Period $595,931 $341,061
EOG RESOURCES, INC.
QUANTITATIVE RECONCILIATION OF ADJUSTED NET INCOME AVAILABLE TO COMMON
(Non-GAAP)
TO NET INCOME AVAILABLE TO COMMON (GAAP)
(Unaudited; in thousands, except per share data)
The following chart adjusts three-month and nine-month periods ended September 30 reported Net Income Available to Common (GAAP) to reflect actual cash realized from 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 Nine Months
Ended September 30 Ended September 30
2006 2005 2006 2005
Reported Net Income
Available to Common (GAAP) $297,278 $341,904 $1,051,686 $790,347
Mark-to-Market (MTM)
Commodity Derivative
Contracts Impact
Total (Gains) Losses (104,696) --- (302,742) 940
Realized Gains 72,978 --- 166,892 9,807
Subtotal (31,718) --- (135,850) 10,747
After Tax MTM Impact (20,411) --- (87,419) 6,916
Add: Tax Expense Related to
Texas (US) Franchise Tax
Law Revision --- --- 5,221 ---
Less: Tax Benefit Related to
Alberta (Canada) Provincial
Tax Rate Reduction --- --- (13,449) ---
Less: Tax Benefit Related to
Canadian Federal Tax Rate
Reduction --- --- (18,593) ---
Less: Revenue Adjustment for
an Amended Trinidad Gas
Sales Agreement, Net of Tax --- --- --- (8,672)
Adjusted Net Income
Available to Common (Non-
GAAP) $276,867 $341,904 $937,446 $788,591
Adjusted Net Income Per
Share Available to Common
(Non-GAAP)
Basic $1.14 $1.43 $3.88 $3.31
Diluted $1.12 $1.40 $3.81 $3.24
Average Number of Shares
Outstanding
Basic 241,911 239,344 241,550 238,291
Diluted 246,136 244,900 245,990 243,530
EOG RESOURCES, INC.
QUANTITATIVE RECONCILIATION OF DISCRETIONARY CASH FLOW AVAILABLE TO COMMON
(NON-GAAP)
TO NET CASH PROVIDED BY OPERATING ACTIVITIES (GAAP)
(Unaudited; in thousands)
The following chart reconciles three-month and nine-month periods ended September 30 Net Cash Provided by Operating Activities (GAAP) to Discretionary Cash Flow Available to Common (Non-GAAP). EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who adjust net cash provided by operating activities for changes in components of Working Capital, Other Liabilities and Preferred Stock Dividends. EOG management uses this information for comparative purposes within the industry.
Quarter Nine Months
Ended September 30 Ended September 30
2006 2005 2006 2005
Net Cash Provided by
Operating Activities
(GAAP) $603,116 $518,807 $1,979,548 $1,504,212
Adjustments
Exploration Costs 35,174 32,023 109,879 94,833
Changes in Components of
Working Capital and
Other Liabilities
Accounts Receivable 58,833 166,347 (110,517) 171,428
Inventories 18,955 2,551 54,021 14,736
Accounts Payable (109,817) (62,305) (104,592) (79,239)
Accrued Taxes Payable 37,613 (2,818) 49,083 (8,018)
Other Liabilities (3,563) (4,161) (2,626) 1,164
Other, Net (14,419) (11,721) (18,093) (804)
Changes in Components of
Working Capital Associated
with Investing and
Financing Activities 56,288 21,784 65,996 1,942
Preferred Dividends (1,858) (1,857) (5,574) (5,573)
Discretionary Cash Flow
Available to Common
(Non-GAAP) $680,322 $658,650 $2,017,125 $1,694,681
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.
September 30,
2006
Current and Long-Term Debt (GAAP) $830
Less: Cash (596)
Net Debt (Non-GAAP) $234
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.