HOUSTON, Feb. 16, 2012 /PRNewswire/ --

• Achieves 9.4 Percent Year-Over-Year Total Company Production Growth
• Reports 52 Percent North American Annual Crude Oil, Condensate and Natural Gas Liquids Growth with 48 Percent Increase in Total Company Liquids Volumes Year-Over-Year
• Delivers Strong Year-Over-Year Growth in EPS, EBITDAX and Discretionary Cash Flow
• Increases Eagle Ford Potential Recoverable Reserve Estimate by 78 Percent – from 900 MMboe to 1,600 MMboe, Net After Royalty
• Realizes Continued Drilling Success in Permian Basin Wolfcamp and Leonard Shale
• Raises Total Company Proved Reserves 5.3 Percent at Attractive Finding Costs
• Increases 2012 Total Company Organic Liquids Growth Target from 27 Percent to 30 Percent
• Raises Dividend on Common Stock for 13th Time in 13 Years

EOG Resources, Inc. (NYSE: EOG) (EOG) today reported fourth quarter 2011 net income of $120.7 million, or $0.45 per share. This compares to fourth quarter 2010 net income of $53.7 million, or $0.21 per share. For the full year 2011, EOG reported net income of $1,091.1 million, or $4.10 per share, as compared to $160.7 million, or $0.63 per share, for the full year 2010.

Consistent with some analysts’ practice of matching realizations to settlement months, and making certain other adjustments in order to exclude one-time items, adjusted non-GAAP net income for the quarter was $309.0 million, or $1.15 per share. Adjusted non-GAAP net income for the fourth quarter 2010 was $92.0 million, or $0.36 per share. The results for the fourth quarter 2011 included a $249.1 million, net of tax ($0.93 per share) impairment of certain North American non-core natural gas assets, gains on asset dispositions of $33.3 million, net of tax ($0.12 per share), the write-off of fees associated with revolving credit facilities of $3.7 million, net of tax ($0.01 per share) and a previously disclosed non-cash net gain of $145.5 million ($93.2 million after tax, or $0.35 per share) on the mark-to-market of financial commodity contracts. During the quarter, the net cash inflow related to financial commodity contracts was $96.9 million ($62.0 million after tax, or $0.23 per share).

On a similar basis, eliminating the items detailed in the attached table, adjusted non-GAAP net income for the full year 2011 was $1,008.5 million, or $3.79 per share, and for the full year 2010 was $296.4 million, or $1.16 per share. (Please refer to the attached tables for the reconciliation of adjusted non-GAAP net income to GAAP net income.)

“EOG had an exceptional year in 2011 with a 551 percent increase in earnings per share versus 2010. This solidifies the completion of our goal of becoming an oil company. These strong returns are one of the traditional hallmarks of EOG,” said Mark G. Papa, Chairman and Chief Executive Officer.

Through its focus on higher margins and returns, EOG posted strong financial metrics year-over-year in adjusted non-GAAP earnings per share, adjusted EBITDAX and discretionary cash flow. Compared to 2010, adjusted non-GAAP earnings per share increased 227 percent, adjusted EBITDAX increased 55 percent and discretionary cash flow rose 52 percent. (Please refer to the attached tables for the reconciliation of adjusted non-GAAP net income per share to GAAP net income per share, adjusted EBITDAX (non-GAAP) to income before interest expense and income taxes (GAAP) and non-GAAP discretionary cash flow to net cash provided by operating activities (GAAP).)

2011 Operational Highlights

For the full year 2011, total company production increased 9.4 percent compared to 2010, driven by 52 percent organic growth in North American crude oil, condensate and natural gas liquids, and a 48 percent increase in total company liquids production. During the fourth quarter, United States crude oil and condensate production rose 68 percent compared to 2010, contributing to a 61 percent increase for the full year 2011.

Crude Oil and Liquids Activity

2011 marked a significant year in the development of EOG’s single largest asset, the South Texas Eagle Ford. Production at year-end was 66 thousand barrels of oil equivalent per day, net, 78 percent of which was crude oil.

Starting 2011 with a 12-rig drilling program that ramped up to 26 rigs in December, EOG drilled and completed 244 net wells during the year with a focus on optimizing completion techniques, in addition to reducing drilling days and overall well costs. Moving into development mode early in 2011, EOG began shifting its attention to increasing recovery of the oil-in-place in the field. To test the impact of well spacing on reserve recoveries, EOG drilled eight pilot programs that included 33 total wells. Based on production analysis from these pilots and reservoir modeling, EOG is now pursuing development drilling on 65 to 90-acre spacing, significantly tighter than the original density of 130 acres between wells.

After taking into account both the excellent results from the 375 wells it has drilled to date across its 120-mile acreage position and the results from the down-spaced drilling tests, EOG has increased its estimated potential reserves in the Eagle Ford from 900 million barrels of oil equivalent (MMboe) to 1,600 MMboe, net after royalty (NAR). The 700 MMBoe, NAR, or 78 percent increase represents an estimated 6 percent recovery factor. On its 572,000 net acres in the prolific oil window, EOG has identified approximately 3,200 remaining drilling locations and increased its average per well estimate to 450 thousand barrels of oil equivalent (MBoe), NAR.

EOG’s well results in the Eagle Ford continue to lead the industry. In Gonzales County, the Henkhaus Unit #1H, #2H, #3H, #4H, #6H and #7H wells were drilled on a pattern of 65-acre spacing. The six wells were completed to sales at individual initial production rates ranging from 2,424 to 3,733 barrels of oil per day (Bopd) with 442 to 679 barrels per day (Bpd) of natural gas liquids (NGLs) and 2.2 to 3.4 million cubic feet per day (MMcfd) of natural gas per well. The Mitchell Unit #3H, #4H, #5H, #6H, #7H and #8H wells, which were also drilled as down-spaced pilots, began initial production at 2,833 to 3,527 Bopd with 275 to 485 Bpd of NGLs and 1.4 to 2.4 MMcfd of natural gas per well. The Meyer #3H, #4H, #5H, #8H and #9H wells had individual peak oil rates ranging from 1,647 to 2,813 Bopd with 199 to 413 Bpd of NGLs and 1.0 to 2.1 MMcfd of natural gas. EOG has 100 percent working interest in these 17 Gonzales County wells.

“With tremendous resource potential still remaining on our acreage, we continue to test and apply techniques that will increase the oil recovery and potential of the Eagle Ford, our crown jewel. This strategy takes us into the next inning of development. By concentrating our efforts on getting more oil out of the ground early in the development phase, we are taking a good asset and making it great,” Papa said. “Looking across the industry, we believe EOG’s Eagle Ford position represents the largest domestic net oil discovery in 40 years and the highest rate of return play in North America today.”

In the Fort Worth Barnett Shale Combo, EOG’s second largest driver of liquids growth during 2011, total liquids production increased 107 percent compared to 2010, driven by a 124 percent increase in crude oil and condensate production. In Montague County, a pattern of five horizontal wells, the Badger A Unit #1H, B Unit #2H, C Unit #3H, D Unit #4H and E Unit #5H showed initial peak oil production rates ranging from 525 to 659 Bopd with 106 to 205 Bpd of NGLs and 704 to 1,361 Mcfd (thousand cubic feet per day) of natural gas per well. EOG has 100 percent working interest in the wells, which had an average peak crude oil production rate of 604 Bopd per well. A series of 10 McKown wells drilled in Cooke County, began producing to sales at an average oil rate of 689 Bopd, with 210 Bpd of NGLs and 1.4 MMcfd of natural gas per well. EOG has 93 percent working interest in these wells.  

During 2011, EOG expanded its core holdings in the Barnett Combo by approximately 25,000 acres to 200,000 net acres. Following the success of its drilling program last year, EOG expects the Barnett Combo to be its second largest liquids production growth contributor again in 2012.

In the West Texas Permian Basin, EOG increased drilling activity in the Wolfcamp formation during the second half of 2011 in preparation for a more active year in 2012. EOG reported success from the upper Wolfcamp zone. The University 9 #2803H in Reagan County, 25 miles west of its current middle Wolfcamp activity began production at 883 Bopd with 68 Bpd of NGLs and 388 Mcfd of natural gas. EOG has a 100 percent working interest in the well. In Irion County, the University 43 #0902H and 40A #0402H were completed in the middle Wolfcamp zone at initial oil rates of 1,088 and 1,076 Bopd, respectively. In addition to the strong oil production, the wells were turned to sales with 86 and 129 Bpd of NGLs and 489 and 736 Mcfd of natural gas, respectively. EOG has 90 and 85 percent working interest in the wells, respectively. On the border between Irion and Crockett counties, the University 40 #1309H and 38 #0601H began production at 1,738 and 1,077 Bopd with 137 and 119 Bpd of NGLs and 779 and 678 Mcfd of natural gas, respectively. EOG has 88 percent working interest in these wells. EOG plans to operate a four-rig drilling program in the Wolfcamp during 2012.

In the New Mexico Leonard Shale, EOG reported drilling success from Lea County with the Caballo 23 Fed #4H and #6H. The wells, in which EOG has 86 percent working interest, initially produced at 932 and 750 Bopd with 116 and 99 Bpd of NGLs and 636 and 545 Mcfd of natural gas, respectively. During 2012, EOG is positioned to increase its drilling activity in the Leonard Shale with a year-long two-rig program.

Consistent with its game plan to increase recovery rates in existing fields, during 2011 EOG continued infill drilling on its core acreage in the North Dakota Bakken Parshall Field, which it discovered in 2006. Although originally developed on 640-acre spacing, EOG has successfully tested 320-acre down-spacing in various areas and around the perimeters of the field. A recent well in Mountrail County, the Fertile 48-0905H, in which EOG has a 96 percent working interest, was completed at an initial rate of 1,324 Bopd. Also in Mountrail County, the Liberty 24-2531H and Liberty LR 20-26H were drilled on 320-acre spacing. The wells, in which EOG has 82 and 95 percent working interest, respectively, were turned to sales at initial crude oil rates of 1,507 and 1,165 Bopd, respectively. Over the course of 2012, EOG will continue its efforts to increase recovery of the oil-in-place on its Bakken acreage through further down-spacing tests and the initiation of a secondary recovery pilot project.

Reserves

EOG’s total company net proved reserves for 2011 increased 5.3 percent over the prior year from 1,950 to 2,054 MMBoe, all organic. Total liquids proved reserves increased 39 percent year-over-year. Excluding the impact of property dispositions, total company and total North American net proved developed reserves increased 8.8 percent and 8.2 percent, respectively. Total liquids proved reserves, as a percentage of total company proved reserves, increased from 28 percent to 36 percent.

In 2011:

• Total reserve replacement from all sources – the ratio of net reserve additions from drilling, acquisitions, total revisions and dispositions to total production – was 167 percent at a total reserve replacement cost of $19.68 per barrel of oil equivalent (Boe), based on exploration and development expenditures of $6,466 million. (For the calculation of total reserve replacement and total reserve replacement costs, please refer to the attached tables.)  
• Total liquids reserve replacement from all sources – the ratio of net reserve additions from drilling, acquisitions, total revisions and dispositions to total production – was 465 percent. (For the calculation of total liquids reserve replacement, please refer to the attached tables.)  
• Reserve replacement from drilling – the ratio of extensions, discoveries and other additions to total production – was 248 percent. (Pease refer to the attached tables.)  
• In the United States, total reserve replacement from all sources was 216 percent at a reserve replacement cost of $18.00 per Boe based on exploration and development expenditures of $5,969 million. (For the calculation of U.S. total reserve replacement and total reserve replacement costs, please refer to the attached tables.) In the United States, 72 percent of the reserve additions were liquids.

For the 24th consecutive year, internal reserve estimates were within 5 percent of those prepared by the independent reserve engineering firm of DeGolyer and MacNaughton (D&M).  For 2011, D&M prepared a complete independent engineering analysis of properties containing 85 percent of EOG’s proved reserves on a Boe basis.

Natural Gas Activity

EOG is continuing to de-emphasize dry natural gas drilling activity on its Haynesville, Marcellus and Horn River acreage to pursue higher rate of return opportunities in its crude oil and liquids-rich unconventional resource plays. Since 2008, EOG’s North American natural gas production has declined annually, with a 7 percent reduction from 2010 to 2011. Because EOG’s outlook for natural gas prices is weak for the next several years, EOG plans to invest the minimum amount of capital expenditures necessary to hold its core acreage positions. During 2012, approximately 10 percent of EOG’s exploration and development capital expenditures is expected to be allocated to dry natural gas drilling activity, a significant decrease from 2011.

Capital Structure

During 2011, total cash proceeds from asset sales were $1.43 billion. At December 31, 2011, EOG’s total debt outstanding was $5,009 million for a debt-to-total capitalization ratio of 28 percent. Taking into account cash on the balance sheet of $616 million at year-end, EOG’s net debt was $4,393 million for a net debt-to-total capitalization ratio of 26 percent. (Please refer to the attached tables for the reconciliation of net debt (non-GAAP) to current and long-term debt (GAAP) and the reconciliation of net debt-to-total capitalization ratio (non-GAAP) to debt-to-total capitalization ratio (GAAP).)

“EOG hit a series of home runs during 2011. We exceeded our crude oil production growth targets and increased the estimated reserves in the Eagle Ford by increasing individual per well reserves and improving the overall recovery factor in the field,” Papa said. “The business model we set in motion several years ago is working, evidenced by the outstanding operational and financial metrics EOG achieved in 2011.”

2012 Operational Plans and Targets

EOG is targeting total company production growth of 5.5 percent in 2012 and has increased its total organic liquids production growth forecast from the previously stated 27 percent to 30 percent. Total liquids growth is expected to be comprised of a 30 percent increase in crude oil and condensate production and a 30 percent increase in natural gas liquids production. In North America, natural gas production is expected to decrease 11 percent from 2011, reflecting additional producing property sales and a further de-emphasis on natural gas drilling in a weak price environment.

Estimated exploration and production expenditures for 2012 are expected to range from $7.4 to $7.6 billion, including exploration and development, production facilities and midstream expenditures. To offset any funding gap between estimated cash flows and capital expenditures, EOG expects to sell approximately $1.2 billion of assets during 2012, including crude oil, liquids-rich and natural gas producing properties, of which $340 million has closed to date. With a continued focus on the balance sheet in 2012, EOG plans to maintain a net debt-to-total capitalization ratio below 30 percent at year-end.

EOG has hedged approximately 23 percent of its North American crude oil production for 2012. For the period February 1 through June 30, 2012, EOG has crude oil financial price swap contracts in place for approximately 33 percent of its production at a weighted average price of $105.36 per barrel, excluding unexercised options. For the period July 1 through December 31, 2012, EOG has 14 percent of its production hedged at a weighted average price of $104.26 per barrel, excluding unexercised options.

For 2012, EOG has hedged approximately 45 percent of its North American natural gas production. For the period March 1 through December 31, 2012, EOG has natural gas financial price swap contracts in place for 525,000 million British thermal units per day (MMBtud) at a weighted average price of $5.44 per million British thermal units (MMBtu), excluding unexercised options. For each of the years 2013 and 2014, EOG has natural gas financial price swap contracts of 150,000 MMBtud in place at a weighted average price of $4.79 per MMBtu, excluding unexercised options. (For a comprehensive summary of crude oil and natural gas derivative contracts, please refer to the attached tables.)

Dividend Increase

Following an increase in the common stock dividend in 2011, EOG’s Board of Directors has again increased the cash dividend on the common stock. Effective with the dividend payable on April 30, 2012, to holders of record as of April 16, 2012, the quarterly dividend on the common stock will be $0.17 per share, an increase of 6.25 percent over the previous indicated annual rate. The indicated annual rate of $0.68 per share reflects the 13th increase in 13 years.

Conference Call Scheduled for February 17, 2012

EOG’s full year 2011 results conference call will be available via live audio webcast at 8 a.m. Central time (9 a.m. Eastern time) on Friday, February 17, 2012. To listen, log on to www.eogresources.com. The webcast will be archived on EOG’s website through March 2, 2012.

EOG Resources, Inc. is one of the largest independent (non-integrated) crude oil and natural gas companies in the United States with proved reserves in the United States, Canada, Trinidad, the United Kingdom and China. 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, 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 and costs 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," "goal," "may," "will" 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 or 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 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 and unknown risks, events or circumstances that may be outside EOG's control.  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 and extent of changes in prices for, and demand for, crude oil, 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 can optimize reserve recovery and economically develop its plays utilizing horizontal and vertical drilling and advanced completion technologies;
• the extent to which EOG is successful in its efforts to economically develop its acreage in, and to produce reserves and achieve anticipated production levels from, its existing and future crude oil and natural gas exploration and development projects, given the risks and uncertainties inherent in drilling, completing and operating crude oil and natural gas wells and the potential for interruptions of development and production, whether involuntary or intentional as a result of market or other conditions;
• the extent to which EOG is successful in its efforts to market its crude oil, natural gas and related commodity production;
• the availability, proximity and capacity of, and costs associated with, gathering, processing, compression and transportation 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;
• the impact of, and changes in, government policies, laws and regulations, including tax laws and regulations, environmental laws and regulations relating to air emissions, waste disposal and hydraulic fracturing and laws and regulations imposing conditions and restrictions on drilling and completion operations;
• 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 employees and other personnel, equipment, materials and services and, related thereto, the availability and cost of employees and other personnel, equipment, materials 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 of production, gathering, processing, 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;
• 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 developments around the world, including in the areas in which EOG operates;
• the timing and impact of liquefied natural gas imports and exports;
• the use of competing energy sources and the development of alternative energy sources;
• the extent to which EOG incurs uninsured losses and liabilities;
• acts of war and terrorism and responses to these acts; and
• the other factors described under Item 1A, "Risk Factors", on pages 14 through 20 of EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2010 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 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.

Effective January 1, 2010, 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). As noted above, 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, 2010, 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.  

Investors
Maire A. Baldwin
(713) 651-6EOG (651-6364)
Elizabeth M. Ivers
(713) 651-7132

Media
K Leonard
(713) 571-3870