HOUSTON, Feb. 25, 2021 /PRNewswire/ -- EOG Resources, Inc. (EOG) today reported fourth quarter and full-year 2020 results. Supplemental financial tables, a related presentation and schedules for the reconciliation of non-GAAP measures to GAAP measures and related definitions are available on EOG's website at http://investors.eogresources.com/investors . Such reconciliation schedules are also included herein.

Key Financial Results
In millions of USD, except per-share and ratio data

From William R. "Bill" Thomas, Chairman and Chief Executive Officer

"EOG made significant improvements to its operating performance during 2020, across every area of the company. The benefits of these improvements are reflected in our fourth quarter results, and have created strong momentum as we set out to drive even better performance in 2021. I want to thank our talented employees for their ongoing dedication and focus, which drove significant progress and innovation in a challenging environment.

"We implemented countless innovations across the company in 2020 that sustainably reduced well costs and operating costs. We also made progress on a number of new exploration plays with the objective of increasing capital efficiency and returns while lowering the production decline rate. And we remained focused on strong environmental and safety performance which, together with our low cost structure, position EOG to be a significant part of the long–term energy solution."

 

 

Fourth Quarter and Full-Year 2020 Highlights

 

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Volumes and Capital Expenditures

Full–Year 2020

• Generated $1.6 billion free cash flow at $39 average WTI oil price
• Earned $850 million adjusted net income in 2020, or $1.46 per share
• Reduced well costs 15% and per–unit cash operating costs 4%
• Replaced 159% of production at $6.98 per Boe finding and development cost

Fourth Quarter 2020

• Generated $666 million free cash flow
• Capital expenditures 6% below guidance midpoint with oil production 1% above guidance midpoint
• Per–unit cash operating cost 11% below guidance midpoint

2021 Plan

• Increased common stock dividend by 10% to $1.65 indicated annual rate
• Capital plan of $3.7 to $4.1 billion maintains oil production at 4Q 2020 rate and funds growing exploration program along with targeted cost and emissions reduction projects
• 2021 capital plan and dividend funded with discretionary cash flow at less than $40 WTI oil price
• Sets goal to achieve zero routine flaring by 2025 and set ambition to reach net zero scope 1 and scope 2 GHG emissions by 2040

Fourth Quarter 2020 Financial Performance

 

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Adjusted Earnings per Share 4Q 2020 vs 3Q 2020

Price and Hedges
Higher prices for natural gas, natural gas liquids and crude oil all contributed to higher QoQ earnings. This was partially offset by a decrease in hedge settlements, to $72 million received in 4Q 2020 from $275 million received in 3Q 2020.

Volume
Total company crude oil production of 444,800 Bopd in the fourth quarter was above the guidance midpoint and increased 18% QoQ. Production increased 1% for NGLs and increased 9% for natural gas, for a 12% increase in total company equivalent volumes.

Per-Unit Costs
EOG demonstrated significant operating discipline as most per‐unit cost categories decreased QoQ. The largest contributors to cost improvements were DD&A, taxes other than income, G&A and exploration.

Other
The effective tax rate on an adjusted basis decreased 1.1% QoQ, offset by a decrease in other income.

 

Change in Cash 4Q 2020 vs 3Q 2020

Free Cash Flow
Net cash provided by operating activities, plus exploration expense and changes in working capital, yielded discretionary cash flow of $1.5 billion in 4Q 2020. EOG incurred $829 million of cash capital expenditures before acquisitions, resulting in $666 million of free cash flow.

Capital Expenditures
Cash capital expenditures before acquisitions were below the low end of the guidance range due to lower than forecast exploration and infrastructure spending.

 

Full-Year 2020 Financial Performance

 

 

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Adjusted Earnings per Share 2020 vs 2019

Price and Hedges
Crude oil prices declined by 33% in 2020 compared with 2019, while prices for NGLs and natural gas declined by 16% and 23%, respectively. This was partially offset by an increase in hedge settlements, to $1.1 billion received in 2020 from $231 million received in 2019.

Volume
In response to low crude oil prices, EOG shut‐in certain wells during 2020 to defer production to future periods with higher prices, reducing 2020 crude oil volumes by 25,000 Bopd. Total company crude oil volumes in 2020 were 409,200 Bopd, 10% lower than 2019. For the year, NGL volumes increased 1% while natural gas volumes decreased 8%, contributing to 8% lower total company daily production.

Per-Unit Costs
EOG achieved significant per‐unit cost reductions during 2020, driven by sustainable efficiency improvements. Lease and well costs declined 16% on a per‐unit basis compared with 2019, to $3.85 per Boe. This was the largest contributor to the overall 4% reduction in per‐unit cash operating costs. A 2% decrease in per‐unit rates for DD&A and lower taxes other than income also contributed to the YoY cost improvement.

Other
Lower marketing margin (gathering, processing and marketing revenue less marketing costs), other revenue and other income contributed to lower adjusted EPS in 2020 vs. 2019. The effective tax rate on an adjusted basis in 2020 was similar compared with 2019.

Change in Cash 2020 vs 2019

Free Cash Flow
Net cash provided by operating activities, plus exploration expense and changes in working capital, yielded discretionary cash flow of $5.1 billion in 2020. EOG incurred $3.5 billion of cash capital expenditures before acquisitions, resulting in $1.6 billion of free cash flow.

Capital Expenditures
Cash capital expenditures before acquisitions of $3.5 billion decreased 44% from 2019.

 

Fourth Quarter 2020 Operating Performance

 

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Lease and Well
LOE costs declined 17% compared with the prior–year period and were also $0.51 below the 4Q 2020 guidance midpoint, representing the largest contribution to the per–unit total cash cost performance compared with guidance. Lower workover and water handling costs were the largest contributors to the strong LOE performance.

General and Administrative
EOG maintained its staffing and salary levels during 2020, with a focus on protecting its unique culture and organizational effectiveness. Reductions in certain employee-related costs were the primary contributors to lower per-unit G&A costs.

Transportation, Gathering and Processing
Increased production volumes from the return of shut–in wells and the startup of new wells contributed to the per–unit cost reductions in 4Q 2020 compared with 3Q 2020.

Depreciation, Depletion and Amortization
The addition of new wells with lower finding costs and positive revisions from lower production costs contributed to the overall reduction in per–unit DD&A costs.

 

2020 Reserves and Dividend Increase

 

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Finding and Development Cost

• Finding and development cost, excluding price revisions, declined 15% YoY in 2020 to $6.98 per Boe.
• Proved developed finding cost, excluding price revisions, declined 33% compared with 2019 to $7.41 per Boe.
• Total drilling finding and development cost, excluding revisions, fell by 27% to $5.79 per Boe.
• For the 33rd consecutive year, internal reserves estimates were within five percent of estimates independently prepared by DeGolyer and McNaughton.

2020 Reserve Replacement

• Net proved reserve additions from all sources, excluding price revisions, replaced 159% of 2020 production. Extensions and discoveries were the largest contributor to the additions
• Reduction in the number of wells in our future development plan, partially offset by lower forecast production costs, drove other than price (OTP) revision.

Sustainable, Growing Dividend Since 1999

• The Board of Directors declared a dividend of $0.4125 per share on EOG's Common Stock.
• The new dividend represents a 10% increase from the prior level and a cumulative increase of 146% since 2017.
• The dividend is payable April 30, 2021 to stockholders of record as of April 16, 2021.
• The indicated annual rate is $1.65.

 

2021 Capital Plan

 

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Low Breakeven Unhedged Oil Price with Significant Free Cash Flow Leverage

• Capital plan of $3.7 to $4.1 billion and dividend funded at less than $40 WTI oil price, before considering cash received or paid for settlements of commodity derivative contracts
• Plan maintains 2021 crude oil volumes of 434,000 to 446,000 Bopd, approximately flat with 4Q 2020
• No plans to increase capital expenditures or grow production volumes during 2021, even in higher commodity price environment
• Focused on double–premium potential locations – minimum 60% ATROR at flat $40 WTI and $2.50 HH
• Complete approximately 500 net wells in 2021 focused on Delaware Basin, Eagle Ford and Powder River Basin
• Accelerating leasing and testing of numerous high–impact exploration projects
• Capital plan also funds international plays and environmental projects

Additional Comments from Bill Thomas
"The 2021 capital plan is consistent with the strategy we have followed over the last year of not growing production in an oversupplied market. We are focused on increasing returns, generating free cash flow and maintaining our productive capacity while the oil market rebalances. In addition, we continue to invest in infrastructure to support reliable, safe, low-cost and low-emissions operations. With the improvements we have made in our operations and the size and quality of our premium inventory, we can now focus our capital allocation on the top half of our premium inventory – wells that are double–premium or better. Using double-premium investment metrics will make a step-change improvement in EOG's future performance.

"We continue to press forward in our exploration efforts and are allocating more capital in 2021 to test high–impact oil plays and lease acreage. While much of the industry is scaling back or abandoning exploration, we are confident that our pipeline of new high–return plays can significantly increase the long–term value of EOG and we are pursuing them aggressively.

"The increase in the regular dividend reflects the significant progress EOG has made in the past 12 months. We have lowered operating costs and well costs, in turn reducing the breakeven oil price needed to maintain our production. It also demonstrates the confidence we have in the resiliency of our business. We will evaluate all options to maximize total shareholder return as cash becomes available."

 

Committed to ESG Performance

 

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EOG Sustainability Ambitions

• Endorsed World Bank Zero Routine Flaring by 2030 Initiative with goal to achieve that standard by 2025
• Set goal to capture 99.8% of wellhead gas in 2021 compared with 99.6% in 2020
• Expanding first–of–its–kind closed–loop gas capture project in partnership with New Mexico Oil Conservation Division to minimize flaring caused by downstream market interruptions
• Set ambition to reach net zero scope 1 and scope 2 GHG emissions3 by 2040
• EOG believes achieving our net zero ambition helps support the broader framework of the Paris Agreement

Additional Comments from Bill Thomas
"I'm very proud of our employees for their efforts to deliver significant improvements in EOG's safety and environmental results the past several years. It is a strong testament to EOG's culture and only happens when everyone is focused and working together.

"We are moving aggressively to continue to improve our strong record of environmental performance. We are aiming to capture 99.8% of wellhead gas in 2021 and our goal is to eliminate routine flaring by 2025. We also keep raising the bar on water management, procuring more of our water from reuse sources every year. These efforts both reduce our environmental footprint and lower our costs.

"In the long run, our environmental ambitions are as bold as the rest of our operations. We have made significant progress the past several years, applying innovation and technology through our decentralized culture to reduce our emissions intensity. This progress, along with our ambition to reduce scope 1 and scope 2 GHG emissions to net zero by 2040, motivates us to pursue further innovations for the future. EOG is focused on being among the lowest cost, highest return and lowest emissions producers, playing a significant role in the long–term future of energy."

 

Fourth Quarter 2020 Results vs Guidance

 

 

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First Quarter and Full-Year 2021 Guidance

 

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Fourth Quarter 2020 Results Webcast
Friday, February 26, 2021, 9:00 a.m. Central time (10:00 a.m. Eastern time)
Webcast will be available on EOG's website for one year.
http://investors.eogresources.com/Investors

About EOG
EOG Resources, Inc. (NYSE: EOG) is one of the largest crude oil and natural gas exploration and production companies in the United States with proved reserves in the United States, Trinidad, and China. To learn more visit www.eogresources.com.

Investor Contacts
David Streit 713–571–4902
Neel Panchal 713–571–4884

Media and Investor Contact
Kimberly Ehmer 713–571–4676

Category: Earnings

Endnotes

1. Metric tons of gross operated GHG emissions (Scope 1), on a CO2e basis, per Mboe of total gross operated U.S. production.
2. Mcf of gross operated methane emissions (Scope 1) per Mcf of total gross operated U.S. natural gas production.
3. Total gross operated Scope 1 and 2 GHG emissions on a CO2e basis.

 

This press release may include 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, goals, returns and rates of return, budgets, reserves, levels of production, capital expenditures, costs and asset sales, statements regarding future commodity prices 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," "aims," "goal," "may," "will," "focused on," "should" 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, generate returns and rates of return, replace or increase drilling locations, reduce or otherwise control operating costs and capital expenditures, generate cash flows, pay down or refinance indebtedness, achieve, reach or otherwise meet goals or ambitions with respect to emissions, other environmental matters, safety matters or other ESG (environmental/social/governance) matters, or pay and/or increase dividends 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, unknown or currently unforeseen risks, events or circumstances that may be outside EOG's control. Furthermore, this press release and any accompanying disclosures may include or reference certain forward–looking, non–GAAP financial measures, such as free cash flow or discretionary cash flow, and certain related estimates regarding future performance, results and financial position. Because we provide these measures on a forward–looking basis, we cannot reliably or reasonably predict certain of the necessary components of the most directly comparable forward–looking GAAP measures, such as future impairments and future changes in working capital. Accordingly, we are unable to present a quantitative reconciliation of such forward–looking, non–GAAP financial measures to the respective most directly comparable forward–looking GAAP financial measures. Management believes these forward–looking, non–GAAP measures may be a useful   tool for the investment community in comparing EOG's forecasted financial performance to the forecasted financial performance of other companies in the industry. Any such forward–looking measures and estimates are intended to be illustrative only and are not intended to reflect the results that EOG will necessarily achieve for the period(s) presented; EOG's actual results may differ materially from such measures and estimates. 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, extent and duration of changes in prices for, supplies of, and demand for, crude oil and condensate, natural gas liquids, 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 is successful in its efforts to (i) economically develop its acreage in, (ii) produce reserves and achieve anticipated production levels and rates of return from, (iii) decrease or otherwise control its drilling, completion, operating and capital costs related to, and (iv) maximize reserve recovery from, its existing and future crude oil and natural gas exploration and development projects and associated potential and existing drilling locations;
• the extent to which EOG is successful in its efforts to market its production of crude oil and condensate, natural gas liquids, and natural gas;
• security threats, including cybersecurity threats and disruptions to our business and operations from breaches of our information technology systems, physical breaches of our facilities and other infrastructure or breaches of the information technology systems, facilities and infrastructure of third parties with which we transact business;
• the availability, proximity and capacity of, and costs associated with, appropriate gathering, processing, compression, storage, transportation, refining, and export 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, and EOG's ability to retain mineral licenses and leases;
• the impact of, and changes in, government policies, laws and regulations, including any changes or other actions which may result from the recent U.S. elections and change in U.S. administration and including tax laws and regulations; climate change and other environmental, health and safety laws and regulations relating to air emissions, disposal of produced water, drilling fluids and other wastes, hydraulic fracturing and access to and use of water; laws and regulations affecting the leasing of acreage and permitting for oil and gas drilling and the calculation of royalty payments in respect of oil and gas production; laws and regulations imposing additional permitting and disclosure requirements, additional operating restrictions and conditions or restrictions on drilling and completion operations and on the transportation of crude oil and natural gas; laws and regulations with respect to derivatives and hedging activities; and laws and regulations with respect to the import and export of crude oil, natural gas and related commodities;
• 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 drilling, completing and operating 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 the acquisition of licenses, leases and properties, employees and other personnel, facilities, equipment, materials and services;
• the availability and cost of employees and other personnel, facilities, equipment, materials (such as water and tubulars) 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 (by EOG or third parties) of production, gathering, processing, refining, compression, storage, transportation, and export 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, and
• to otherwise satisfy its capital expenditure requirements;
• the extent to which EOG is successful in its completion of planned asset dispositions;
• 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;
• the duration and economic and financial impact of epidemics, pandemics or other public health issues, including the COVID-19 pandemic;
• geopolitical factors and political conditions and developments around the world (such as the imposition of tariffs or trade or other economic sanctions, political instability and armed conflict), including in the areas in which EOG operates;
• the use of competing energy sources and the development of alternative energy sources;
• the extent to which EOG incurs uninsured losses and liabilities or losses and liabilities in excess of its insurance coverage;
• acts of war and terrorism and responses to these acts; and
• the other factors described under ITEM 1A, Risk Factors, of EOG's Annual Report on Form 10–K for the fiscal year ended December 31, 2020 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 duration or 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.

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). Statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any reserve or resource estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include "potential" reserves, "resource potential" and/or other estimated reserves or estimated resources 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, 2020, 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. In addition, reconciliation and calculation schedules for non–GAAP financial measures can be found on the EOG website at www.eogresources.com.

Income Statements

 

Wellhead Volumes and Prices

 

 

 

Balance Sheets

 

Cash Flows Statements

 

Non-GAAP Financial Measures

 

Adjusted Net Income (Loss)

 

Adjusted Net Income (Loss)

 

Adjusted Net Income (Loss)

 

Adjusted Net Income per Share

 

Adjusted Net Income per Share

 

Discretionary Cash Flow and Free Cash Flow

 

Discretionary Cash Flow and Free Cash Flow

 

Discretionary Cash Flow and Free Cash Flow

 

Total Expenditures

 

EBITDAX and Adjusted EBITDAX

 

Net Debt-to-Total Capitalization Ratio

 

Net Debt-to-Total Capitalization Ratio

 

Net Debt-to-Total Capitalization Ratio

 

Net Debt-to-Total Capitalization Ratio

 

Net Debt-to-Total Capitalization Ratio

 

Proved Reserves and Reserve Replacement Data

 

Reserve Replacement Cost Data

 

Reserve Replacement Cost Data

 

Reserve Replacement Cost Data

 

Definitions

 

Financial Commodity Derivative Contracts

 

Definitions

 

Direct After-Tax Rate of Return

 

ROCE & ROE

 

ROCE & ROE

 

ROCE & ROE

 

ROCE & ROE

 

ROCE & ROE

 

Costs per Barrel of Oil Equivalent

 

Costs per Barrel of Oil Equivalent

 

Cost per Barrel of Oil Equivalent

 

Cost per Barrel of Oil Equivalent

 

Quarter and Full Year Guidance

 

Quarter and Full Year Guidance

 

Definitions

 

 

 

 

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SOURCE EOG Resources, Inc.