EXHIBIT 99.1 | ||
EOG Resources, Inc. | ||
News Release | ||
For Further Information Contact: | Investors | |
Maire A. Baldwin | ||
(713) 651-6EOG (651-6364) | ||
Media and Investors | ||
Elizabeth M. Ivers | ||
(713) 651-7132 | ||
EOG RESOURCES REPORTS FIRST QUARTER 2010 RESULTS
- Total Company Crude Oil Production Increased 25 Percent Year-Over-Year
- On Track to Achieve 13 Percent Total Company Production Growth in 2010
- Realizing Strong, Consistent Results from Horizontal Crude Oil Plays
FOR IMMEDIATE RELEASE: Monday, May 3, 2010
HOUSTON - EOG Resources, Inc. (EOG) today reported first quarter 2010 net income of $118.0 million, or $0.46 per share. This compares to first quarter 2009 net income of $158.7 million, or $0.63 per share.
The results for the first quarter 2010 included a $16.6 million ($9.9 million after tax, or $0.04 per share) revision in the estimated fair value of a contingent consideration liability associated with a previously disclosed acquisition of unproved acreage and a previously disclosed non-cash net gain of $7.8 million ($5.0 million after tax, or $0.02 per share) on the mark-to-market of financial commodity transactions. During the quarter, the net cash inflow related to financial commodity contracts was $23.0 million ($14.7 million after tax, or $0.06 per share). 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 $117.8 million, or $0.46 per share. Adjusted non-GAAP net income for the first quarter 2009 was $132.7 million, or $0.53 per share. (Please refer to the attached tables for the reconciliation of adjusted non-GAAP net income to GAAP net inc ome.)
Operational Highlights and Targets
Driven primarily by production growth from its North Dakota Bakken and Fort Worth Basin Barnett Combo crude oil operations, EOG reported a 25 percent increase in crude oil production compared to the first quarter 2009.
During the latter part of the first quarter, EOG began completing wells in the North Dakota Bakken following its winter drilling-only program. In the Parshall Field, the Van Hook 11-02H, in which EOG has 68 percent working interest, began production at 1,565 barrels of oil per day (Bopd). Also drilled in the Parshall Field, the Fertile 13-18H and Austin 23-32H began producing at 1,153 and 955 Bopd, respectively. EOG has 92 and 46 percent working interest in the wells, respectively. Outside of the Parshall Field in the Bakken Lite in Mountrail County, EOG drilled the Sidonia 18-14, which commenced production at 719 Bopd. EOG has 97 percent working interest in the well. EOG is operating 12 drilling rigs on its 580,000 net acre position in the North Dakota Bakken where it expects to average 32,500 barrels of oil equivalent per day (Boepd), net in 2010.
EOG completed several multi-well patterns in the Fort Worth Basin Barnett Combo using enhanced completion techniques. In Montague County, the three-well pattern of Alamo A Unit #1H, #2H and #3H was drilled on 55-acre spacing. The wells, in which EOG has 97 percent working interest, began production at a combined rate of over 900 Bopd with 2.4 million cubic feet of natural gas per day (MMcfd). Further assessing recovery efficiencies in one of the thickest parts of the formation in Cooke County, the Settle B# 1H was drilled horizontally in an area that had previously been tested with vertical wells. With an initial production rate of 1,852 Bopd and 3.7 MMcfd of liquids-rich natural gas, it is EOG's best well to date in the Barnett Combo. The successful test, in which EOG has 97 percent working interest, has set up new horizontal locations on its eastern acreage limits of Cooke County.
In the South Texas Eagle Ford where EOG holds 505,000 net acres in the mature oil window, the Harper Unit #4H was completed to sales in Karnes County. The well, the 17th that EOG has drilled across a six-county area in the play, began production at a rate of 602 Bopd with 650 thousand cubic feet per day of natural gas. EOG has 100 percent working interest in the well. To date, EOG's initial production results in the play are consistent with the average well commencing production at an approximate 800 Bopd rate. EOG is operating a six-rig drilling program in the Eagle Ford and plans to significantly increase production in 2011.
In the Mid-Continent Cleveland Play where EOG had previously drilled vertical wells, it is now developing its 60,000-acre position with horizontal drilling and enhanced completion technology at economic rates of return. Recoverable reserves per well in this play have increased by a factor of four. In Lipscomb County, the Appel 438 #5H and #6H recently began producing at 1,000 and 840 Bopd with 2.5 and 1.0 MMcfd, respectively. EOG has 100 percent working interest in the wells.
"An overview of EOG's first quarter results reflect our progress in developing crude oil and natural gas liquids from our cadre of horizontal oil plays," said Mark G. Papa, Chairman and Chief Executive Officer. "With the strong liquids production growth that EOG is delivering, we are on track both to achieve our goal of total crude oil and natural gas liquids growth of 47 percent this year and further increase the liquids weighting of our production portfolio. We continue to target total company organic production growth of 13 percent for 2010."
Capital Structure
At March 31, 2010, EOG's total debt outstanding was $2,797 million for a debt-to-total capitalization ratio of 22 percent. Taking into account cash on the balance sheet of $230 million, at the end of the quarter EOG's net debt was $2,567 million and the net debt-to-total capitalization ratio was 20 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).) To maintain a strong balance sheet with a low net debt-to-total capitalization ratio, EOG's goal is to generate cash proceeds by selling select North American natural gas producing assets or considering a joint venture transaction on certain natural gas shale properties by year-end 2010.
"EOG has a multi-year, high rate-of-return, liquids-rich drilling inventory. We plan to execute our drilling program and achieve our production growth targets while maintaining a strong balance sheet, with a net debt-to-total capitalization ratio at or below 25 percent. Given our liquids-driven total company production growth targets for the next three years of 13 percent, 19 percent and 21 percent combined with current NYMEX strip prices, we expect to be in a free cash flow position in 2012," Mr. Papa said.
Conference Call Scheduled for May 4, 2010
EOG's first quarter 2010 results conference call will be available via live audio webcast at 8 a.m. Central Daylight Time (9 a.m. Eastern Daylight Time) on Tuesday, May 4, 2010. To listen, log on to www.eogresources.com. The webcast will be archived on EOG's website through May 18, 2010.
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, 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, including the accompanying forecast and benchmark commodity pricing information, 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 natural gas, crude oil and related commodities;
- changes in demand for natural gas, crude oil and related commodities, including ammonia and methanol;
- the extent to which EOG is successful in its efforts to discover and market reserves and to acquire natural gas and crude oil properties;
- 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 natural gas and crude oil exploration and development projects, given the risks and uncertainties inherent in drilling, completing and operating natural gas and crude oil wells and the potential for interruptions of production, whether involuntary or intentional as a result of market or other conditions;
- 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;
- changes in government policies, laws and regulations, including environmental and tax laws and regulations;
- 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;
- EOG's ability to obtain access to surface locations for drilling and production facilities;
- the extent to which EOG's third-party-operated natural gas and crude oil properties are operated successfully and economically;
- EOG's ability to effectively integrate acquired natural gas and crude oil 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;
- weather, including its impact on natural gas and crude oil 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 accuracy of reserve estimates, which by their nature involve the exercise of professional judgment and may therefore be imprecise;
- 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 extent and effect of any hedging activities engaged in by EOG;
- the timing and impact of liquefied natural gas imports;
- 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 19 of EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
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) now 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 estimated reserves not necessarily calculated in accordance with, or contemplated by, the SEC's latest reserve reporting guidelines. Investors are ur ged to consider closely the disclosure in EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, 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.
| EOG RESOURCES, INC. | ||||||||||
| FINANCIAL REPORT | ||||||||||
| (Unaudited; in millions, except per share data) | ||||||||||
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2010 | 2009 | |||||||||
| Net Operating Revenues | $ | 1,370.7 | $ | 1,158.2 | ||||||
| Net Income | $ | 118.0 | $ | 158.7 | ||||||
| Net Income Per Share | ||||||||||
| Basic | $ | 0.47 | $ | 0.64 | ||||||
| Diluted | $ | 0.46 | $ | 0.63 | ||||||
| Average Number of Shares Outstanding | ||||||||||
| Basic | 250.4 | 248.0 | ||||||||
| Diluted | 253.9 | 250.2 | ||||||||
| SUMMARY INCOME STATEMENTS | ||||||||||
| (Unaudited; in thousands, except per share data) | ||||||||||
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2010 | 2009 | |||||||||
| Net Operating Revenues | ||||||||||
| Natural Gas | $ | 676,982 | $ | 567,578 | ||||||
| Crude Oil, Condensate and Natural Gas Liquids | 509,189 | 200,328 | ||||||||
| Gains on Mark-to-Market Commodity Derivative Contracts | 7,803 | 351,383 | ||||||||
| Gathering, Processing and Marketing | 171,943 | 37,842 | ||||||||
| Other, Net | 4,776 | 1,078 | ||||||||
| Total | 1,370,693 | 1,158,209 | ||||||||
| Operating Expenses | ||||||||||
| Lease and Well | 165,992 | 145,506 | ||||||||
| Transportation Costs | 88,711 | 68,862 | ||||||||
| Gathering and Processing Costs | 15,661 | 17,713 | ||||||||
| Exploration Costs | 51,197 | 49,623 | ||||||||
| Dry Hole Costs | 23,077 | 2,994 | ||||||||
| Impairments | 69,595 | 65,471 | ||||||||
| Marketing Costs | 168,764 | 31,953 | ||||||||
| Depreciation, Depletion and Amortization | 431,906 | 389,329 | ||||||||
| General and Administrative | 60,423 | 57,946 | ||||||||
| Taxes Other Than Income | 75,465 | 47,400 | ||||||||
| Total | 1,150,791 | 876,797 | ||||||||
| Operating Income | 219,902 | 281,412 | ||||||||
| Other Income, Net | 2,683 | 1,739 | ||||||||
| Income Before Interest Expense and Income Taxes | 222,585 | 283,151 | ||||||||
| Interest Expense, Net | 25,428 | 18,376 | ||||||||
| Income Before Income Taxes | 197,157 | 264,775 | ||||||||
| Income Tax Provision | 79,142 | 106,065 | ||||||||
| Net Income | $ | 118,015 | $ | 158,710 | ||||||
| Dividends Declared per Common Share | $ | 0.155 | $ | 0.145 | ||||||