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INVESTORS
EOG Resources Reports Third Quarter 2007 Results
HOUSTON, Oct. 29 /PRNewswire-FirstCall/ -- EOG Resources, Inc. (NYSE: EOG) (EOG) today reported third quarter 2007 net income available to common of $202.4 million, or $0.82 per share. This compares to third quarter 2006 net income available to common of $297.3 million, or $1.21 per share.
The results for the third quarter 2007 included a previously disclosed $43.6 million ($28.1 million after tax, or $0.11 per share) net gain on the mark-to-market of financial commodity transactions. During the quarter, the net cash realized related to financial commodity contracts was $33.3 million ($21.4 million after tax, or $0.08 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 $195.7 million, or $0.79 per share. Adjusted non-GAAP net income available to common for the third quarter 2006 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
In the United States, EOG's total crude oil and condensate production increased 23 percent compared to the same quarter a year ago, driven by continued drilling success in North Dakota and the Mid Continent.
In Mountrail County, North Dakota, EOG has reported successful drilling from the Bakken Formation. The Wenco #1-30H, in which EOG has a 52 percent working interest, was completed to sales at the end of September at an initial production rate of 1,930 barrels of oil per day (Bopd), gross. Also in Mountrail County, the Austin #1-02H was completed to sales in October at an initial production rate of 2,000 Bopd. EOG has a 100 percent working interest in the well, which is located nine miles north of existing production. This is the northernmost location that EOG has drilled to date. To further confirm the northern extension of the field, following completion of the Austin #1-02H, EOG drilled an offset well, the Austin #2-03H that will be completed in November. Based on shows during drilling, EOG expects the well to produce at a rate similar to that of the Austin #1-02H. EOG has an 81 percent working interest in the Austin #2-03H. In the North Dakota Bakken Play, where it has accumulated over 175,000 net acres, EOG plans to increase drilling activity from six to eight rigs in early 2008.
"The results from the two Austin wells have given us the confidence to increase estimated reserves in the Bakken Play from the previously announced 60 million barrels of oil to approximately 80 million barrels, net to EOG. By extending the perimeter of the field, we have also increased our inventory of firm drilling locations. Therefore, we expect this area to have a significant impact on EOG's oil production in 2008 and beyond. The Bakken is currently the highest rate of return play in our drilling program," said Mark G. Papa, Chairman and Chief Executive Officer.
EOG's natural gas and natural gas liquids production in the United States increased 19 percent versus the same quarter in 2006, with the largest increase coming from the Fort Worth Basin Barnett Shale. In Johnson County, refinements in well completion processes are resulting in higher well production rates. Reflecting a more efficient drilling program and improved well results, overall natural gas production from the Barnett Shale has exceeded internal estimates. Therefore, EOG is increasing its net year-end exit rate from the Barnett Shale from 300 to approximately 350 million cubic feet per day.
Outside of the Barnett Shale, EOG's total production in the United States and Canada increased approximately 6 percent for the first nine months of 2007 as compared to the same period a year ago. Increases were driven by East Texas and Rocky Mountain natural gas activity and crude oil production in North Dakota.
2008 Operational Plans and Targets
EOG announced 2008 total company production growth targets, ranging from 13 to 17 percent, depending upon drilling economics and North American natural gas prices. Production growth next year will be driven by United States operations, particularly the Fort Worth Basin Barnett Shale natural gas and the North Dakota Bakken crude oil plays, both very high rate of return programs. Production from Canada, Trinidad and the United Kingdom North Sea in 2008 is expected to be relatively flat with 2007 production levels.
"While the economics of onshore drilling in North America remain strong, EOG is approaching its 2008 natural gas drilling and capital expenditure program with a measure of caution based on the uncertainty of natural gas pricing," said Papa. "We have set two alternate production growth targets, one more aggressive than the other. Our initial case assumes a more robust natural gas price environment with Henry Hub gas prices averaging $8 or higher. In this scenario, we are targeting 17 percent total company production growth. However, after the first quarter, if it appears that the industry is in a $7 natural gas price environment for the year, we will reset the total company production growth target to 13 percent. In either case, we expect total company crude oil and condensate production to increase 33 percent in 2008 over 2007.
"In anticipation of our 2008 activity level and our robust prospect inventory, we are enthusiastic about achieving EOG's double-digit organic growth targets even taking into consideration that we plan to divest our Appalachian shallow assets during the first quarter. In either gas price environment, our goal is the same -- to pursue a high rate of return drilling program while maintaining flat net debt year over year," said Papa.
Conference Call Scheduled for October 30, 2007
EOG's third quarter 2007 results conference call will be available via live audio webcast at 9 a.m. Central Daylight Time (10 a.m. Eastern Daylight Time) Tuesday, October 30, 2007. To listen, log on to http://www.eogresources.com. The webcast will be archived on EOG's website through Tuesday, November 13, 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 or comparable terminology to identify its forward-looking statements. In particular, statements, express or implied, concerning future operating results, the ability to replace or increase reserves or to increase production, or the ability to generate income or cash flows are forward-looking statements. Forward-looking statements are not guarantees of performance. Although EOG believes the expectations reflected in its forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations will be achieved. Important factors that could cause actual results to differ materially from the expectations reflected in EOG's forward-looking statements include, among others:
-- the timing and extent of changes in commodity prices for crude oil,
natural gas and related products, foreign currency exchange rates,
interest rates and financial market conditions;
-- the extent and effect of any hedging activities engaged in by EOG;
-- the timing and impact of liquefied natural gas imports;
-- changes in demand or prices for ammonia or methanol;
-- the extent of EOG's success in discovering, developing, marketing and
producing reserves and in acquiring oil and gas properties;
-- the accuracy of reserve estimates, which by their nature involve the
exercise of professional judgment and may therefore be imprecise;
-- the ability to achieve production levels from existing and future oil
and gas development projects due to operating hazards, drilling risks
and the inherent uncertainties in predicting oil and gas reservoir
performance;
-- the availability and cost of drilling rigs, experienced drilling crews,
tubular steel and other materials, equipment and services used in
drilling and well completions;
-- the availability, terms and timing of mineral licenses and leases and
governmental and other permits and rights of way;
-- access to surface locations for drilling and production facilities;
-- the availability and capacity of gathering, processing and pipeline
transportation facilities;
-- the availability of compression uplift capacity;
-- the extent to which EOG can economically develop its Barnett Shale
acreage outside of Johnson County, Texas;
-- whether EOG is successful in its efforts to more densely develop its
acreage in the Barnett Shale and other production areas;
-- political developments around the world and the enactment of new
government policies, legislation and regulations;
-- acts of war and terrorism and responses to these acts; and
-- weather, including weather-related delays in the installation of
gathering and production facilities.
In light of these risks, uncertainties and assumptions, the events anticipated by EOG's forward-looking statements may not occur. EOG's forward-looking statements speak only as of the date made and EOG undertakes no obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. As noted above, statements of proved reserves are only estimates and may be imprecise. Any reserve estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include not only proved reserves, but also other categories of reserves that the SEC's guidelines strictly prohibit EOG from including in filings with the SEC. Investors are urged to consider closely the disclosure in EOG's Annual Report on Form 10-K for fiscal year ended December 31, 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 Nine Months
Ended September 30, Ended September 30,
2007 2006 2007 2006
Net Operating Revenues $990.5 $968.7 $2,940.0 $2,981.2
Net Income Available to Common $202.4 $297.3 $725.2 $1,051.7
Net Income Per Share Available
to Common
Basic $0.83 $1.23 $2.98 $4.35
Diluted $0.82 $1.21 $2.93 $4.28
Average Number of Common
Shares
Basic 243.5 241.9 243.1 241.5
Diluted 247.4 246.1 247.3 246.0
SUMMARY INCOME STATEMENTS
(Unaudited; in thousands)
Quarter Nine Months
Ended September 30, Ended September 30,
2007 2006 2007 2006
Net Operating Revenues
Wellhead Natural Gas $684,292 $661,920 $2,210,390 $2,093,950
Wellhead Crude Oil,
Condensate and
Natural Gas Liquids 258,273 200,724 651,833 570,478
Gains on Mark-to-
Market Commodity
Derivative
Contracts 43,591 104,696 47,893 302,742
Other, Net 4,307 1,386 29,871 13,999
Total 990,463 968,726 2,939,987 2,981,169
Operating Expenses
Lease and Well 120,091 93,693 347,604 268,464
Transportation Costs 44,213 26,632 123,552 80,641
Exploration Costs 38,840 35,174 106,440 109,879
Dry Hole Costs 46,046 16,356 74,672 41,750
Impairments 42,014 22,106 86,860 67,559
Depreciation,
Depletion and
Amortization 279,189 216,071 783,311 586,651
General and
Administrative 48,101 42,362 139,163 117,260
Taxes Other Than
Income 47,111 54,066 149,806 154,618
Total 665,605 506,460 1,811,408 1,426,822
Operating Income 324,858 462,266 1,128,579 1,554,347
Other Income, Net 6,311 13,832 22,236 41,413
Income Before Interest
Expense and Income
Taxes 331,169 476,098 1,150,815 1,595,760
Interest Expense, Net 12,571 10,102 31,027 35,639
Income Before Income
Taxes 318,598 465,996 1,119,788 1,560,121
Income Tax Provision 114,595 166,860 391,065 502,861
Net Income 204,003 299,136 728,723 1,057,260
Preferred Stock
Dividends 1,637 1,858 3,502 5,574
Net Income Available
to Common $202,366 $297,278 $725,221 $1,051,686
EOG RESOURCES, INC.
OPERATING HIGHLIGHTS
(Unaudited)
Quarter Nine Months
Ended September 30, Ended September 30,
2007 2006 2007 2006
Wellhead Volumes and Prices
Natural Gas Volumes (MMcfd)
United States 997 837 958 791
Canada 216 224 223 226
United States & Canada 1,213 1,061 1,181 1,017
Trinidad 262 255 255 267
United Kingdom 22 28 25 29
Total 1,497 1,344 1,461 1,313
Average Natural Gas Prices ($/Mcf)
United States $5.56 $6.21 $6.24 $6.74
Canada 5.49 5.65 6.22 6.60
United States & Canada
Composite 5.55 6.09 6.24 6.71
Trinidad 2.20 2.21 2.35 2.28
United Kingdom 5.89 6.09 5.29 8.27
Composite 4.97 5.35 5.54 5.84
Crude Oil and Condensate Volumes
(MBbld)
United States 25.3 20.6 23.6 20.4
Canada 2.4 2.6 2.4 2.5
United States & Canada 27.7 23.2 26.0 22.9
Trinidad 4.2 4.4 4.2 4.9
United Kingdom 0.1 0.1 0.1 0.1
Total 32.0 27.7 30.3 27.9
Average Crude Oil and Condensate
Prices ($/Bbl)
United States $70.86 $67.35 $62.52 $65.00
Canada 69.99 63.87 60.54 59.42
United States & Canada
Composite 70.78 66.96 62.33 64.35
Trinidad 67.03 74.26 67.22 66.50
United Kingdom 66.96 59.09 61.57 60.49
Composite 70.27 67.68 63.01 64.68
Natural Gas Liquids Volumes
(MBbld)
United States 10.8 8.8 10.3 8.4
Canada 0.9 0.7 1.0 0.7
Total 11.7 9.5 11.3 9.1
Average Natural Gas Liquids Prices
($/Bbl)
United States $47.94 $44.33 $43.73 $41.10
Canada 46.71 52.21 41.52 47.15
Composite 47.84 44.89 43.52 41.55
Natural Gas Equivalent Volumes
(MMcfed)
United States 1,213 1,015 1,161 964
Canada 236 243 244 245
United States & Canada 1,449 1,258 1,405 1,209
Trinidad 288 281 280 296
United Kingdom 22 29 25 30
Total 1,759 1,568 1,710 1,535
Total Bcfe 161.9 144.2 466.8 419.1
EOG RESOURCES, INC.
SUMMARY BALANCE SHEETS
(Unaudited; in thousands, except share data)
September 30, December 31,
2007 2006
ASSETS
Current Assets
Cash and Cash Equivalents $301,944 $218,255
Accounts Receivable, Net 678,762 754,134
Inventories 109,838 113,591
Assets from Price Risk Management
Activities 68,354 130,612
Income Taxes Receivable 92,569 94,311
Other 58,758 39,177
Total 1,310,225 1,350,080
Oil and Gas Properties (Successful
Efforts Method) 16,955,361 13,893,851
Less: Accumulated Depreciation,
Depletion and Amortization (6,921,155) (5,949,804)
Net Oil and Gas Properties 10,034,206 7,944,047
Other Assets 123,276 108,033
Total Assets $11,467,707 $9,402,160
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $964,515 $896,572
Accrued Taxes Payable 102,518 130,984
Dividends Payable 22,095 14,718
Deferred Income Taxes 84,499 144,615
Current Portion of Long-Term Debt 98,442 -
Other 69,484 68,123
Total 1,341,553 1,255,012
Long-Term Debt 1,185,000 733,442
Other Liabilities 353,331 300,907
Deferred Income Taxes 1,960,675 1,513,128
Shareholders' Equity
Preferred Stock, $0.01 Par,
10,000,000 Shares Authorized:
Series B, Cumulative, $1,000
Liquidation Preference Per
Share, 43,260 Shares Outstanding at
September 30, 2007 and 53,260 Shares
Outstanding at December 31, 2006 43,035 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 186,256 129,986
Accumulated Other Comprehensive
Income 450,500 176,704
Retained Earnings 5,820,884 5,151,034
Common Stock Held in Treasury,
3,647,754 Shares at September 30, 2007
and 5,724,959 Shares at December 31, 2006 (76,022) (113,435)
Total Shareholders' Equity 6,627,148 5,599,671
Total Liabilities and Shareholders'
Equity $11,467,707 $9,402,160
EOG RESOURCES, INC.
SUMMARY STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
Nine Months
Ended September 30,
2007 2006
Cash Flows from Operating Activities
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net Income $728,723 $1,057,260
Items Not Requiring (Providing) Cash
Depreciation, Depletion and
Amortization 783,311 586,651
Impairments 86,860 67,559
Stock-Based Compensation Expenses 46,732 38,407
Deferred Income Taxes 328,005 258,465
Other, Net (21,080) (19,271)
Dry Hole Costs 74,672 41,750
Mark-to-Market Commodity Derivative
Contracts
Total Gains (47,893) (302,742)
Realized Gains 99,188 166,892
Other, Net 20,778 17,849
Changes in Components of Working
Capital and Other Assets and
Liabilities
Accounts Receivable 78,283 110,517
Inventories 4,232 (54,021)
Accounts Payable 42,830 104,592
Accrued Taxes Payable (22,834) (49,083)
Other Assets (7,780) 27,623
Other Liabilities (3,765) (6,904)
Changes in Components of Working
Capital Associated with Investing
and Financing Activities (44,314) (65,996)
Net Cash Provided by Operating
Activities 2,145,948 1,979,548
Investing Cash Flows
Additions to Oil and Gas Properties (2,641,871) (1,953,209)
Proceeds from Sales of Assets 43,972 15,655
Changes in Components of Working
Capital Associated with
Investing Activities 44,325 66,054
Other, Net (38,997) (20,474)
Net Cash Used in Investing Activities (2,592,571) (1,891,974)
Financing Cash Flows
Net Commercial Paper and Revolving
Credit Facility Borrowings 10,000 -
Long-Term Debt Borrowings 600,000 37,000
Long-Term Debt Repayments (60,000) (192,550)
Dividends Paid (61,253) (44,015)
Excess Tax Benefits from Stock-
Based Compensation 17,422 27,139
Preferred Stock Redemptions (10,641) -
Proceeds from Stock Options
Exercised and Employee Stock
Purchase Plans 32,747 29,284
Debt Issuance Costs (4,752) -
Other, Net (11) (448)
Net Cash Provided by (Used in) Financing
Activities 523,512 (143,590)
Effect of Exchange Rate Changes on Cash 6,800 8,136
Increase / (Decrease) in Cash and
Cash Equivalents 83,689 (47,880)
Cash and Cash Equivalents at
Beginning of Period 218,255 643,811
Cash and Cash Equivalents at End of
Period $301,944 $595,931
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 financial commodity price transactions by eliminating the unrealized mark-to-market gains from these transactions, to add the one-time tax expense related to Texas (US) franchise tax law revision in the second quarter of 2006 and 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. 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,
2007 2006 2007 2006
Reported Net Income
Available to Common (GAAP) $202,366 $297,278 $725,221 $1,051,686
Mark-to-Market (MTM)
Commodity Derivative
Contracts Impact
Total Gains (43,591) (104,696) (47,893) (302,742)
Realized Gains 33,308 72,978 99,188 166,892
Subtotal (10,283) (31,718) 51,295 (135,850)
After Tax MTM Impact (6,617) (20,411) 33,008 (87,419)
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)
Adjusted Net Income
Available to Common
(Non-GAAP) $195,749 $276,867 $758,229 $937,446
Adjusted Net Income Per
Share Available to Common
(Non-GAAP)
Basic $0.80 $1.14 $3.12 $3.88
Diluted $0.79 $1.12 $3.07 $3.81
Average Number of Common
Shares
Basic 243,486 241,911 243,140 241,550
Diluted 247,425 246,136 247,275 245,990
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 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 Nine Months
Ended September 30, Ended September 30,
2007 2006 2007 2006
Net Cash Provided by
Operating Activities
(GAAP) $724,260 $603,116 $2,145,948 $1,979,548
Adjustments
Exploration Costs
(excluding
Stock-Based
Compensation
Expenses) 35,268 30,853 96,842 101,513
Changes in Components
of Working Capital
and Other Assets and
Liabilities
Accounts Receivable (57,549) 58,833 (78,283) (110,517)
Inventories (6,708) 18,955 (4,232) 54,021
Accounts Payable (28,179) (109,817) (42,830) (104,592)
Accrued Taxes Payable 49,025 37,613 22,834 49,083
Other Assets 3,097 537 7,780 (27,623)
Other Liabilities (16,655) (18,518) 3,765 6,904
Changes in Components
of Working Capital
Associated with
Investing and Financing
Activities 23,843 56,288 44,314 65,996
Preferred Stock
Dividends (1,637) (1,858) (3,502) (5,574)
Discretionary Cash Flow
Available to Common
(Non-GAAP) $724,765 $676,002 $2,192,636 $2,008,759
SOURCE EOG Resources, Inc.
Contact: Investors, Maire A. Baldwin, +1-713-651-6EOG (651-6364), or Media and Investors, Elizabeth M. Ivers, +1-713-651-7132, all of EOG Resources, Inc.