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INVESTORS
EOG Resources Reports First Quarter 2007 Results
HOUSTON, April 30 /PRNewswire-FirstCall/ -- EOG Resources, Inc. (NYSE: EOG)(EOG) today reported first quarter 2007 net income available to common of $216.8 million, or $0.88 per share. This compares to first quarter 2006 net income available to common of $424.8 million, or $1.73 per share.
The results for the first quarter 2007 included a previously disclosed $39.8 million ($25.6 million after tax, or $0.11 per share) loss on the mark- to-market of financial commodity price transactions. During the quarter, the net cash realized related to financial commodity contracts was $47.3 million ($30.4 million after tax, or $0.12 per share). Consistent with some analysts' practice of matching realizations to settlement months, adjusted non-GAAP net income available to common for the quarter was $272.8 million, or $1.11 per share. Last year's first quarter results included a $107.0 million ($68.8 million after tax, or $0.28 per share) gain on the mark-to-market of financial commodity price transactions. The net cash inflow from the settlement of financial commodity price transactions was $30.1 million ($19.3 million after tax, or $0.08 per share). Reflecting these items, first quarter 2006 adjusted non-GAAP net income available to common was $375.3 million, or $1.53 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
United States natural gas production increased 21 percent over the first quarter 2006 led by continued strong results and production increases from the Fort Worth Basin Barnett Shale. Other growth drivers during the first quarter were EOG's operations in East Texas, South Texas, the Rockies and Mid Continent.
"Based on our growing success in the Barnett Shale and our other activities in North America, we are on track to achieve our target of 10 percent total company production growth in 2007," said Mark G. Papa, Chairman and Chief Executive Officer. "We think it is a significant operational achievement for a company the size of EOG to grow U.S. production organically at double digit rates as we are doing."
In Johnson County, where EOG is furthest along in the development of its Barnett Shale assets, the Fowler Unit #1H, the best well that EOG has completed in the play to date, began production at a rate of 16 million cubic feet per day (MMcfd) of natural gas in March. EOG has a 100 percent working interest in the well, which is located in the eastern part of the county. Also in Johnson County, three Hardcastle Unit wells, the #8H, #9H and #10H, were drilled with 35 acre spacing between them. The wells, in which EOG has a 100 percent working interest, each began producing natural gas at rates varying from 5.8 to 6.7 MMcfd.
Outside of Johnson County in Erath, Hood, Jack and Parker Counties where EOG has increased its drilling activity, a number of wells were recently turned to sales. In Erath County, the Houston Ranch #16H, in which EOG has a 97 percent working interest, began producing natural gas in March at a rate of 1.7 MMcfd. Four Hood County wells, the Black Ranch #14H, the Branch Farms #1H and the Mabery A Unit #1H and B Unit #1H, were drilled during the first quarter and completed to sales in April at initial production rates that varied from 1.4 to 2.6 MMcfd. EOG has an approximate 80 percent working interest in these wells. In Parker County, EOG has a 100 percent working interest in the KTV Betzel Unit #3H, which began initial production in April at 2.0 MMcfd.
"Operating results from the Fort Worth Barnett Shale continue to meet or exceed every target we have set," said Papa. "As we maintain our focus on gaining operational expertise, our results continue to improve as well."
In South Texas, EOG completed two strong Lobo wells in Zapata County. The Barrocito #6, in which EOG has a 100 percent working interest, was drilled to 11,000 feet. The well, which began initial natural gas production at a rate of 14 MMcfd, sets up the potential for a significant number of offset drilling locations. Also in Zapata County, the Slator Ranch W-4, which was drilled in the Stirling Field, flowed at an initial production rate of 13.8 MMcfd of natural gas and 120 barrels of oil per day, gross. EOG has an 88 percent working interest in the well.
"In the past month, we have seen a strengthening in natural gas prices for the second half of the year that falls in-line with our internal expectations. Based on the current commodity environment, we plan to execute our $3.4 billion capital expenditure program in 2007," said Papa.
Capital Structure
Recognizing the company's strong financial position, Standard and Poor's Credit Rating Services upgraded EOG to A- after the end of the first quarter.
"2007 is shaping up to be an active drilling year with good organic production growth. Combined with our continued focus on returns and cost control, we expect to end the year as we began, with a very strong balance sheet," noted Papa.
Conference Call Scheduled for May 1, 2007
EOG's first quarter 2007 conference call will be available via live audio webcast at 8 a.m. Central Daylight Time (9 a.m. Eastern Daylight Time) Tuesday, May 1, 2007. To listen, log on to http://www.eogresources.com . The webcast will be archived on EOG's website through Tuesday, May 15, 2007.
EOG Resources, Inc. is one of the largest independent (non-integrated) oil and natural gas companies in the United States with proved reserves in the United States, Canada, offshore Trinidad and the United Kingdom North Sea. EOG Resources, Inc. is listed on the New York Stock Exchange and is traded under the ticker symbol "EOG."
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts, including, among others, statements regarding EOG's future financial position, business strategy, budgets, reserve information, projected levels of production, projected costs and plans and objectives of management for future operations, are forward-looking statements. EOG typically uses words such as "expect," "anticipate," "estimate," "strategy," "intend," "plan," "target" and "believe" or the negative of those terms or other variations 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, 2006, available from EOG at P.O. Box 4362, Houston, Texas 77210-4362 (Attn: Investor Relations). You can also obtain this form from the SEC by calling 1-800-SEC-0330 or from the SEC's website at http://www.sec.gov .
EOG RESOURCES, INC.
FINANCIAL REPORT
(Unaudited; in millions, except per share data)
Quarter
Ended March 31
2007 2006
Net Operating Revenues $875.2 $1,084.5
Net Income Available to Common $216.8 $424.8
Net Income Per Share Available to Common
Basic $0.89 $1.76
Diluted $0.88 $1.73
Average Number of Shares Outstanding
Basic 242.8 241.1
Diluted 246.7 245.9
SUMMARY INCOME STATEMENTS
(Unaudited; in thousands)
Quarter
Ended March 31
2007 2006
Net Operating Revenues
Wellhead Natural Gas $735,642 $789,061
Wellhead Crude Oil, Condensate
and Natural Gas Liquids 174,864 184,718
(Losses) Gains on Mark-to-Market
Commodity Derivative Contracts (39,801) 107,024
Other, Net 4,508 3,733
Total 875,213 1,084,536
Operating Expenses
Lease and Well 104,325 87,484
Transportation Costs 37,748 28,096
Exploration Costs 26,384 39,392
Dry Hole Costs 16,810 10,726
Impairments 24,042 22,773
Depreciation, Depletion and
Amortization 244,342 177,652
General and Administrative 43,879 36,291
Taxes Other Than Income 40,648 53,694
Total 538,178 456,108
Operating Income 337,035 628,428
Other Income, Net 5,924 14,556
Income Before Interest Expense and
Income Taxes 342,959 642,984
Interest Expense, Net 7,638 13,153
Income Before Income Taxes 335,321 629,831
Income Tax Provision 117,654 203,124
Net Income 217,667 426,707
Preferred Stock Dividends 875 1,858
Net Income Available to Common $216,792 $424,849
EOG RESOURCES, INC.
OPERATING HIGHLIGHTS
(Unaudited)
Quarter
Ended March 31
2007 2006
Wellhead Volumes and Prices
Natural Gas Volumes (MMcfd)
United States 915 758
Canada 222 229
United States & Canada 1,137 987
Trinidad 253 283
United Kingdom 30 34
Total 1,420 1,304
Average Natural Gas Prices ($/Mcf)
United States $6.42 $7.77
Canada 6.43 7.87
United States & Canada Composite 6.42 7.79
Trinidad 2.81 2.44
United Kingdom 5.55 11.56
Composite 5.76 6.72
Crude Oil and Condensate Volumes (MBbld)
United States 21.9 21.0
Canada 2.5 2.6
United States & Canada 24.4 23.6
Trinidad 4.3 5.4
United Kingdom 0.1 0.2
Total 28.8 29.2
Average Crude Oil and Condensate
Prices ($/Bbl)
United States $53.76 $60.42
Canada 51.76 51.95
United States & Canada Composite 53.55 59.48
Trinidad 59.91 61.79
United Kingdom 52.87 57.86
Composite 54.51 59.90
Natural Gas Liquids Volumes (MBbld)
United States 9.5 7.3
Canada 1.1 0.7
Total 10.6 8.0
Average Natural Gas Liquids Prices ($/Bbl)
United States $37.07 $37.19
Canada 36.37 42.77
Composite 37.00 37.69
Natural Gas Equivalent Volumes (MMcfed)
United States 1,104 927
Canada 243 249
United States & Canada 1,347 1,176
Trinidad 279 316
United Kingdom 31 35
Total 1,657 1,527
Total Bcfe 149.1 137.5
EOG RESOURCES, INC.
SUMMARY BALANCE SHEETS
(Unaudited; in thousands, except share data)
March 31, December 31,
2007 2006
ASSETS
Current Assets
Cash and Cash Equivalents $141,700 $218,255
Accounts Receivable, Net 734,231 754,134
Inventories 122,461 113,591
Assets from Price Risk Management
Activities 41,330 130,612
Income Taxes Receivable 42,202 94,311
Deferred Income Taxes 9,767 ---
Other 36,415 39,177
Total 1,128,106 1,350,080
Oil and Gas Properties (Successful
Efforts Method) 14,793,485 13,893,851
Less: Accumulated Depreciation,
Depletion and Amortization (6,212,647) (5,949,804)
Net Oil and Gas Properties 8,580,838 7,944,047
Other Assets 117,910 108,033
Total Assets $9,826,854 $9,402,160
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $924,644 $896,572
Accrued Taxes Payable 80,194 130,984
Dividends Payable 22,030 14,718
Deferred Income Taxes 21,071 144,615
Other 50,607 68,123
Total 1,098,546 1,255,012
Long-Term Debt 820,042 733,442
Other Liabilities 315,102 300,907
Deferred Income Taxes 1,747,500 1,513,128
Shareholders' Equity
Preferred Stock, $0.01 Par,
10,000,000 Shares Authorized:
Series B, Cumulative, $1,000
Liquidation Preference Per Share,
53,260 Shares Outstanding at
March 31, 2007 and December 31, 2006 52,919 52,887
Common Stock, $0.01 Par, 640,000,000
Shares Authorized and 249,460,000
Shares Issued 202,495 202,495
Additional Paid In Capital 140,642 129,986
Accumulated Other Comprehensive
Income 194,628 176,704
Retained Earnings 5,356,647 5,151,034
Common Stock Held in Treasury,
4,979,921 Shares at March 31, 2007
and 5,724,959 Shares at
December 31, 2006 (101,667) (113,435)
Total Shareholders' Equity 5,845,664 5,599,671
Total Liabilities and Shareholders'
Equity $9,826,854 $9,402,160
EOG RESOURCES, INC.
SUMMARY STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Quarter
Ended March 31
2007 2006
Cash Flows from Operating Activities
Reconciliation of Net Income to Net
Cash Provided by Operating Activities:
Net Income $217,667 $426,707
Items Not Requiring Cash
Depreciation, Depletion and
Amortization 244,342 177,652
Impairments 24,042 22,773
Stock-Based Compensation Expenses 14,211 9,003
Deferred Income Taxes 96,999 106,326
Other, Net (1,695) (4,444)
Dry Hole Costs 16,810 10,726
Mark-to-Market Commodity Derivative
Contracts
Total Losses (Gains) 39,801 (107,024)
Realized Gains 47,268 30,054
Other, Net 10,219 4,299
Changes in Components of Working
Capital and Other Assets and
Liabilities
Accounts Receivable 22,935 135,150
Inventories (8,844) (13,370)
Accounts Payable 23,431 (9,535)
Accrued Taxes Payable 1,967 29,298
Other Assets (3,623) 7,385
Other Liabilities (14,356) (5,046)
Changes in Components of Working
Capital Associated with Investing
and Financing Activities (32,694) (33,187)
Net Cash Provided by Operating
Activities 698,480 786,767
Investing Cash Flows
Additions to Oil and Gas Properties (867,936) (589,048)
Proceeds from Sales of Assets 2,939 2,741
Changes in Components of Working
Capital Associated with Investing
Activities 32,959 33,288
Other, Net (26,173) (5,253)
Net Cash Used in Investing Activities (858,211) (558,272)
Financing Cash Flows
Net Commercial Paper and Revolving
Credit Facility Borrowings 116,600 ---
Long-Term Debt Repayments (30,000) (52,325)
Dividends Paid (15,522) (11,432)
Excess Tax Benefits from Stock-Based
Compensation Expenses 7,409 7,177
Proceeds from Stock Options
Exercised and Employee Stock
Purchase Plan 5,276 6,129
Other, Net (265) (101)
Net Cash Provided by (Used in)
Financing Activities 83,498 (50,552)
Effect of Exchange Rate Changes on Cash (322) (427)
(Decrease) Increase in Cash and Cash
Equivalents (76,555) 177,516
Cash and Cash Equivalents at Beginning
of Period 218,255 643,811
Cash and Cash Equivalents at End of
Period $141,700 $821,327
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 periods ended March 31 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. 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. EOG management uses this information for comparative
purposes within the industry.
Quarter
Ended March 31
2007 2006
Reported Net Income Available to
Common (GAAP) $216,792 $424,849
Mark-to-Market (MTM) Commodity
Derivative Contracts Impact
Total Losses (Gains) 39,801 (107,024)
Realized Gains 47,268 30,054
Subtotal 87,069 (76,970)
After Tax MTM Impact 56,029 (49,530)
Adjusted Net Income Available to
Common (Non-GAAP) $272,821 $375,319
Adjusted Net Income Per Share
Available to Common (Non-GAAP)
Basic $1.12 $1.56
Diluted $1.11 $1.53
Average Number of Shares Outstanding
Basic 242,763 241,118
Diluted 246,677 245,923
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 periods ended March 31 Net
Cash Provided by Operating Activities (GAAP) to Discretionary Cash Flow
Available to Common (Non-GAAP). EOG believes this presentation may be
useful to investors who follow the practice of some industry analysts who
adjust Net Cash Provided by Operating Activities for Exploration Costs
(excluding Stock-Based Compensation Expenses), Changes in Components of
Working Capital, Other Assets and Liabilities and Preferred Stock
Dividends. EOG management uses this information for comparative purposes
within the industry.
Quarter
Ended March 31
2007 2006
Net Cash Provided by Operating
Activities (GAAP) $698,480 $786,767
Adjustments
Exploration Costs (excluding
Stock-Based Compensation
Expenses) 23,345 37,665
Changes in Components of Working
Capital and Other Assets and
Liabilities
Accounts Receivable (22,935) (135,150)
Inventories 8,844 13,370
Accounts Payable (23,431) 9,535
Accrued Taxes Payable (1,967) (29,298)
Other Assets 3,623 (7,385)
Other Liabilities 14,356 5,046
Changes in Components of Working
Capital Associated with Investing
and Financing Activities 32,694 33,187
Preferred Stock Dividends (875) (1,858)
Discretionary Cash Flow Available to
Common (Non-GAAP) $732,134 $711,879
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.