SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------------
Form 10-Q
-------------------------
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-9743
EOG RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 47-0684736
(State or other (I.R.S. Employer
jurisdiction Identification No.)
of incorporation or
organization)
1200 Smith Street, Suite 300, Houston, Texas 77002-7361
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: 713-651-7000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [x] No [ ].
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of April 25, 2001.
Title of each class Number of shares
------------------- ----------------
Common Stock, $.01 par value 115,951,347
2
EOG RESOURCES, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page No.
--------
ITEM 1. Financial Statements
Consolidated Statements of Income - Three Months Ended March 31,
2001 and 2000................................................... 3
Consolidated Balance Sheets - March 31, 2001 and December 31,
2000............................................................ 4
Consolidated Statements of Cash Flows - Three Months Ended March
31, 2001 and 2000............................................... 5
Notes to Consolidated Financial Statements........................ 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.......................................... 12
ITEM 6. Exhibits and Reports on Form 8-K........................... 12
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EOG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
Three Months Ended
March 31,
---------------------
2001 2000
---------- ----------
NET OPERATING REVENUES
Natural Gas $ 521,477 $ 186,200
Crude Oil, Condensate and Natural Gas Liquids 75,194 73,067
Gains on Sales of Reserves and Related Assets and Other, Net 582 629
--------- ---------
TOTAL 597,253 259,896
OPERATING EXPENSES
Lease and Well 42,574 33,739
Exploration Costs 20,265 12,945
Dry Hole Costs 15,684 5,761
Impairments 15,764 8,402
Depreciation, Depletion and Amortization 93,961 84,137
General and Administrative 17,949 16,287
Taxes Other Than Income 37,032 18,415
--------- ---------
TOTAL 243,229 179,686
--------- ---------
OPERATING INCOME 354,024 80,210
OTHER INCOME (EXPENSE), NET (639) 17
--------- ---------
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES 353,385 80,227
INTEREST EXPENSE, NET 13,289 14,568
--------- ---------
INCOME BEFORE INCOME TAXES 340,096 65,659
INCOME TAX PROVISION 124,849 24,169
--------- ---------
NET INCOME 215,247 41,490
PREFERRED STOCK DIVIDENDS (2,721) (2,654)
--------- ---------
NET INCOME AVAILABLE TO COMMON $ 212,526 $ 38,836
========= =========
NET INCOME PER SHARE AVAILABLE TO COMMON
Basic $ 1.83 $ 0.33
========= =========
Diluted $ 1.79 $ 0.33
========= =========
AVERAGE NUMBER OF COMMON SHARES
Basic 116,384 117,827
========= =========
Diluted 118,952 118,273
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
4
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
EOG RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 31, December 31,
2001 2000
- ---------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 30,849 $ 20,152
Accounts Receivable 286,778 342,579
Inventories 20,307 16,623
Other 20,981 15,073
----------- -----------
TOTAL 358,915 394,427
OIL AND GAS PROPERTIES (SUCCESSFUL EFFORTS METHOD) 5,251,407 5,122,728
Less: Accumulated Depreciation, Depletion and Amortization (2,681,866) (2,597,721)
----------- -----------
Net Oil and Gas Properties 2,569,541 2,525,007
OTHER ASSETS 83,824 81,381
----------- -----------
TOTAL ASSETS $ 3,012,280 $ 3,000,815
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 241,402 $ 246,030
Accrued Taxes Payable 128,371 78,838
Dividends Payable 5,081 4,525
Other 31,227 40,285
----------- -----------
TOTAL 406,081 369,678
LONG-TERM DEBT 644,871 859,000
OTHER LIABILITIES 56,546 51,133
DEFERRED INCOME TAXES 372,508 340,079
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 Par, 10,000,000 Shares Authorized:
Series B, 100,000 Shares Issued, Cumulative,
$100,000,000 Liquidation Preference 97,939 97,879
Series D, 500 Shares Issued, Cumulative,
$50,000,000 Liquidation Preference 49,330 49,285
Common Stock, $.01 Par, 320,000,000 Shares Authorized;
124,730,000 Shares Issued 201,247 201,247
Additional Paid In Capital 9,687 4,221
Unearned Compensation (10,051) (3,756)
Accumulated Other Comprehensive Income (48,377) (31,756)
Retained Earnings 1,508,953 1,301,067
Common Stock Held in Treasury, 8,491,430 shares at
March 31, 2001 and 7,825,708 shares at December 31, 2000 (276,454) (237,262)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 1,532,274 1,380,925
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,012,280 $ 3,000,815
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
5
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
EOG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
- -------------------------------------------------------------------------------------------------------
2001 2000
- -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of Net Income to Net Operating Cash Inflows:
Net Income $ 215,247 $ 41,490
Items Not Requiring Cash
Depreciation, Depletion and Amortization 93,961 84,137
Impairments 15,764 8,402
Deferred Income Taxes 34,452 17,045
Other, Net 5,393 826
Exploration Costs 20,265 12,945
Dry Hole Costs 15,684 5,761
Gains on Sales of Reserves and Related Assets and Other, Net 316 1,571
Tax Benefits From Stock Options Exercised 5,246 239
Other, Net (3,233) (2,129)
Changes in Components of Working Capital and Other Liabilities
Accounts Receivable 55,824 (30,410)
Inventories (3,684) 1,862
Accounts Payable (4,897) 20,289
Accrued Taxes Payable 49,533 (529)
Other Liabilities 2,135 3,924
Other, Net (14,966) 4,600
Changes in Components of Working Capital Associated with Investing and
Financing Activities (7,833) 5,059
--------- ---------
NET OPERATING CASH INFLOWS 479,207 175,082
INVESTING CASH FLOWS
Additions to Oil and Gas Properties (169,443) (75,944)
Exploration Costs (20,265) (12,945)
Dry Hole Costs (15,684) (5,761)
Proceeds from Sales of Reserves and Related Assets 1,419 20,621
Changes in Components of Working Capital Associated with Investing Activities 7,813 (5,266)
Other, Net (5,873) (2,864)
--------- ---------
NET INVESTING CASH OUTFLOWS (202,033) (82,159)
FINANCING CASH FLOWS
Long-Term Debt (214,129) (49,386)
Dividends Paid (6,701) (6,330)
Treasury Stock Purchased (55,590) (30,253)
Proceeds from Sales of Treasury Stock 9,987 854
Other, Net (44) 714
--------- ---------
NET FINANCING CASH OUTFLOWS (266,477) (84,401)
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 10,697 8,522
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,152 24,836
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 30,849 $ 33,358
========= =========
The accompanying notes are an integral part of these consolidated financial statements.
6
PART I. FINANCIAL INFORMATION (Continued)
ITEM 1. FINANCIAL STATEMENTS (Continued)
EOG RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.The consolidated financial statements of EOG Resources, Inc. and
subsidiaries ("EOG") included herein have been prepared by management
without audit pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, they reflect all adjustments
which are, in the opinion of management, necessary for a fair
presentation of the financial results for the interim periods.
Certain information and notes normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted pursuant
to such rules and regulations. However, management believes that the
disclosures are adequate to make the information presented not
misleading. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes
thereto included in EOG's 2000 Annual Report to Shareholders.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Certain reclassifications have been made to prior period financial
statements to conform with the current presentation. Beginning first
quarter of 2001, the "Impairment of Unproved Oil and Gas Properties"
caption on the Consolidated Statements of Income was renamed
"Impairments" to include the impairment loss of long-lived assets as
described in Statement of Financial Accounting Standards No. 121 --
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed of" ("SFAS 121 Impairments"). As a
result, EOG reclassified all prior periods to reflect such SFAS 121
Impairments in Impairments, instead of Depreciation, Depletion and
Amortization ("DD&A") as previously reported. SFAS 121 Impairments
reclassified from DD&A to Impairments were $0.4 million for the
first quarter of 2000.
As more fully discussed in Notes 1 and 12 to the consolidated
financial statements included in EOG's 2000 Annual Report to
Shareholders, EOG engages in price risk management activities from
time to time. Derivative financial instruments (primarily price
swaps and costless collars) are utilized selectively to hedge the
impact of market fluctuations on natural gas and crude oil market
prices. EOG adopted on January 1, 2001 Statement of Financial
Accounting Standards ("SFAS") No. 133 -- "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 137 and
138 ("SFAS 133"). SFAS 133 requires that changes in the
derivative's fair value be recognized currently in earnings using
the mark-to-market accounting method unless specific hedge
accounting criteria are met. The adoption of SFAS 133 did not have
a material impact on EOG's financial statements. During the first
quarter of 2001, EOG elected not to designate any of its price risk
management activities as hedges, and accordingly, accounted for them
using the mark-to-market accounting method. The application of the
mark-to-market accounting method during the first quarter of 2001
did not have a material impact on EOG's financial statements.
2.The following table sets forth the computation of basic and
diluted earnings from net income available to common (in thousands,
except per share amounts):
Quarter Ended
March 31,
----------------------
2001 2000
---------- ----------
Numerator for basic and diluted earnings per share -
Net income available to common $212,526 $ 38,836
======== ========
Denominator for basic earnings per share -
Weighted average shares 116,384 117,827
Potential dilutive common shares -
Stock options 2,342 394
Restricted stock and units 226 52
-------- --------
Denominator for diluted earnings per share -
Adjusted weighted average shares 118,952 118,273
======== ========
Net income per share of common stock
Basic $ 1.83 $ 0.33
======== ========
Diluted $ 1.79 $ 0.33
======== ========
7
PART I. FINANCIAL INFORMATION (Continued)
ITEM 1. FINANCIAL STATEMENTS (Continued)
EOG RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3.The following table presents the components of EOG's
comprehensive income:
Three Months Ended
March 31,
---------------------
2001 2000
---------- ---------
(In Thousands)
Net Income $215,247 $ 41,490
Other Comprehensive Income
Unrealized Gain on Available-for-Sale Security,
net of tax of $180 in 2001 334 -
Foreign Currency Translation Adjustment (16,955) (2,099)
-------- --------
Comprehensive Income $198,626 $ 39,391
======== ========
- ---------------------------------------------------------------------------------
4.Selected financial information about operating segments is
reported below for the three-month periods ended March 31, 2001 and
2000:
Three Months Ended
March 31,
--------------------
2001 2000
-------- ---------
(In Thousands)
NET OPERATING REVENUES
United States $503,989 $206,249
Canada 74,530 32,755
Trinidad 18,708 20,883
Other 26 9
-------- --------
TOTAL $597,253 $259,896
======== ========
OPERATING INCOME (LOSS)
United States $300,847 $ 59,792
Canada 52,905 14,126
Trinidad 5,985 7,031
Other (5,713) (739)
-------- --------
TOTAL 354,024 80,210
RECONCILING ITEMS
Other Income (Expense), Net (639) 17
Interest Expense, Net 13,289 14,568
-------- --------
INCOME BEFORE INCOME TAXES $340,096 $ 65,659
======== ========
- -------------------------------------------------------------------------
5.As reported in EOG's 2000 Annual Report to Shareholders, two
stockholders of EOG filed separate lawsuits purportedly on behalf of
EOG against Enron Corp. and directors of EOG, alleging that Enron
Corp. and directors of EOG breached their fiduciary duties of good
faith and loyalty in approving the Share Exchange transaction in the
third quarter of 1999. The lawsuits have been consolidated and seek
to temporarily and permanently enjoin the Share Exchange transaction
and seek to rescind the transaction or to receive monetary damages and
costs and expenses, including reasonable attorneys' and experts' fees.
EOG, Enron Corp. and directors of EOG believe the lawsuits are without
merit and intend to vigorously contest them.
During the first quarter of 2001, EOG favorably resolved a
disagreement over the timing of the conversion of a 5% overriding
royalty interest held by a third party in EOG's Trinidad SECC block
to a 15% working interest. There are various other suits and claims
against EOG that have arisen in the ordinary course of business.
However, management does not believe these suits and claims will
individually or in the aggregate have a material adverse effect on
the financial condition or results of operations of EOG. EOG has
been named as a potentially responsible party in certain
Comprehensive Environmental Response Compensation and Liability Act
proceedings. However, management does not believe that any potential
assessments resulting from such proceedings will individually or in
the aggregate have a materially adverse effect on the financial
condition or results of operations of EOG.
8
PART I. FINANCIAL INFORMATION (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EOG RESOURCES, INC.
The following review of operations for the three-month periods ended
March 31, 2001 and 2000 should be read in conjunction with the
consolidated financial statements of EOG Resources, Inc. and
subsidiaries ("EOG") and Notes thereto.
Results of Operations
Three Months Ended March 31, 2001 vs. Three Months Ended March 31,
2000
EOG generated first quarter net income available to common of $213
million compared to net income of $39 million for the first quarter of
2000. Net operating revenues were $597 million compared to $260
million for the first quarter of 2000. Following is an explanation of
the variances causing this increase.
Wellhead volume and price statistics are summarized below:
- ------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------
Natural Gas Volumes (MMcf per day)(1)
United States 704 656
Canada 117 132
------ ------
North America 821 788
Trinidad 120 128
------ ------
TOTAL 941 916
====== ======
Average Natural Gas Prices ($/Mcf)(2)
United States $ 6.97 $ 2.53
Canada 6.60 2.17
North America Composite 6.91 2.47
Trinidad 1.22 1.17
COMPOSITE 6.19 2.29
Crude Oil/Condensate Volumes (MBbl per day)(1)
United States 23.0 20.7
Canada 1.7 2.3
------ ------
North America 24.7 23.0
Trinidad 2.2 2.9
------ ------
TOTAL 26.9 25.9
====== ======
Average Crude Oil/Condensate Prices ($/Bbl)(2)
United States $28.09 $28.14
Canada 25.25 26.83
North America Composite 27.89 28.01
Trinidad 28.84 27.85
COMPOSITE 27.97 27.99
Natural Gas Liquids Volumes (MBbl per day)(1)
United States 3.0 4.3
Canada 0.5 0.8
------ ------
TOTAL 3.5 5.1
====== ======
Average Natural Gas Liquids Prices ($/Bbl) (2)
United States $23.95 $20.64
Canada 23.46 13.64
COMPOSITE 23.88 19.58
Natural Gas Equivalent Volumes (MMcfe per day)(3)
United States 860 805
Canada 131 151
------ ------
North America 991 956
Trinidad 132 145
------ ------
TOTAL 1,123 1,101
====== ======
Total Bcfe(3)Deliveries 101 100
- ----------------------------------------------------------------------------
(1) Million cubic feet per day or thousand barrels per day, as applicable.
(2) Dollars per thousand cubic feet or per barrel, as applicable.
(3) Million cubic feet equivalent per day or billion cubic feet equivalent,
as applicable.
9
PART I. FINANCIAL INFORMATION (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
EOG RESOURCES, INC.
Wellhead revenues increased 125% to $599 million in the first
quarter of 2001 compared to $266 million in the first quarter of 2000,
primarily due to higher average wellhead prices worldwide for natural
gas and natural gas liquids.
Average wellhead natural gas prices were up by 170%, increasing net
operating revenues by $330 million. Average wellhead crude oil and
condensate prices were basically flat with those a year ago. First
quarter 2001, U.S. wellhead natural gas deliveries were approximately
7% higher than the comparable period in 2000. The increase in volumes
is primarily due to increased production in the Midland, Offshore and
Tyler divisions. Combined with reduced production in Trinidad, due to
takes above the take or pay contracted volume by the Trinidadian
government in the first quarter of 2000, and decreased production in
the Canada division, due to plant curtailment in the first quarter of
2001, the overall natural gas production growth was approximately 3%
higher than the comparable period in 2000, increasing net operating
revenues by $3 million. Wellhead crude oil and condensate deliveries
were approximately 4% higher than the prior year period, increasing
net operating revenues by $2 million. The increase is primarily due
to increased U.S. crude oil production from the Denver, Midland and
Oklahoma City divisions, partially offset by decreased crude oil
production from the Canada and International divisions. Natural gas
liquids decreased net operating revenues by $2 million primarily due
to a decrease in deliveries of 31%, partially offset by an increase in
prices of 22% compared to a year ago.
Operating expenses of $243 million for the first quarter of 2001
were approximately $64 million higher than the first quarter of 2000.
Taxes other than income were $19 million higher due to increased
wellhead revenues in North America. Depreciation, depletion and
amortization ("DD&A") increased $10 million primarily due to increased
production volumes and increased per unit DD&A rates in certain North
America locations. Lease and well expenses were $9 million higher
than the comparable period in 2000 primarily due to an industry-wide
increase in costs and increased North America production activities to
maximize the volumes delivered at higher product prices. Exploration
expenses of $20 million and dry hole expenses of $16 million increased
$7 million and $10 million, respectively, primarily due to increased
North America and international exploratory drilling activities.
Impairments, which includes writedowns of unproved leases and losses
from reduction of carrying values of certain long-lived assets as
a result of future cash flow analysis,increased $7 million compared
to the comparable period in 2000.
The per unit operating costs of EOG for lease and well, DD&A,
general and administrative ("G&A") expenses, interest expense, and
taxes other than income averaged $2.03 per Mcfe during the first
quarter of 2001 compared to $1.67 per Mcfe during the first quarter of
2000. The increase is primarily due to a higher per unit rate of
DD&A, lease and well, G&A expense and taxes other than income
partially offset by a lower per unit rate of interest expense.
Income tax provision for the first quarter of 2001 was $125 million
(effective tax rate of 36.7%) compared to $24 million (effective tax
rate of 36.8%) for the comparable period of 2000, primarily due to
higher pre-tax income.
10
PART I. FINANCIAL INFORMATION (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued)
EOG RESOURCES, INC.
Capital Resources and Liquidity
EOG's primary sources of cash during the three months ended March
31, 2001 included funds generated from operations, proceeds from sales
of reserves and related assets and proceeds from sales of treasury
stock. Primary cash outflows included funds used in operations,
exploration and development expenditures, repayments of debt,
dividends and common stock repurchases.
Net operating cash flows of $479 million for the first three months
of 2001 increased approximately $304 million as compared to the first
three months of 2000 primarily reflecting higher operating revenues,
partially offset by higher cash operating expenses.
Net investing cash outflows of approximately $202 million for the
first three months of 2001 increased by $120 million versus the
comparable prior year period due primarily to higher exploration and
development expenditures and lower proceeds from sales of reserves and
related assets. Changes in Components of Working Capital Associated
with Investing Activities included changes in accounts payable
associated with the accrual of exploration and development
expenditures and changes in inventories which represent materials and
equipment used in drilling and related activities.
Exploration and development expenditures for the first three months
of 2001 and 2000 are as follows (in millions):
-----------------------------------------------------------
2001 2000
-----------------------------------------------------------
United States $173 $ 74
Canada 12 11
---- ----
North America 185 85
Trinidad 14 9
Other 6 1
---- ----
TOTAL $205 $ 95
==== ====
-----------------------------------------------------------
Exploration and development expenditures of $205 million for the
first three months of 2001 were $110 million higher than the prior
year period due primarily to increased development and exploratory
activities.
The level of exploration and development expenditures will vary in
future periods depending on energy market conditions and other related
economic factors. EOG has significant flexibility with respect to
financing alternatives and the ability to adjust its exploration and
development expenditure budget as circumstances warrant. There are no
material continuing commitments associated with expenditure plans.
Cash used by financing activities was $266 million for the first
three months of 2001 compared to $84 million for the comparable prior
year period. Financing activities for 2001 included repayment of debt
of $214 million, repurchases of EOG's common stock of $56 million,
proceeds from sales of treasury stock of $10 million and cash dividend
payment of $7 million.
On February 13, 2001, EOG announced a 14% increase in the annual
dividend rate from $.14 per share to $.16 per share beginning with
dividends payable after April 19, 2001.
Based upon existing economic and market conditions, management
believes net operating cash flow and available financing alternatives
will be sufficient to fund net investing and other cash requirements
of EOG for the foreseeable future.
At March 31, 2001, EOG had outstanding swap contracts covering
notional volumes of approximately 1.0 million barrels of crude oil and
condensate for the period April 2001 to December 2001 at an average
price of $26.89 per barrel. EOG elected not to designate these crude
oil swap contracts as a hedge of its crude oil production, and
accordingly, is accounting for these swap contracts under mark-to-market
accounting. At March 31, 2001, the fair value of these oil price swap
contracts was $0.5 million.
11
PART I. FINANCIAL INFORMATION - (Concluded)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Concluded)
EOG RESOURCES, INC.
At March 31, 2001, EOG also had outstanding swap contracts covering
notional volumes of 100,000 million British thermal units of natural gas
per day ("MMBtu/d") for the months of April and May 2001 at an average
price of $5.16 per MMBtu. EOG is accounting for these swap contracts
under mark-to-market accounting. At March 31, 2001, the fair value of
these natural gas price swap contracts was negative $0.4 million.
During the period of April 30, 2001 to May 2, 2001, EOG entered into
price swap agreements covering notional volumes of 200,000 MMBtu/d for
the month of June 2001 at an average price of $4.61 per MMBtu. EOG
will account for these swap contracts under mark-to-market accounting.
During the period of April 30, 2001 to May 2, 2001, EOG also entered
into price collars that set a floor price of $4.40 per MMBtu and
ceiling prices that average $6.15 per MMBtu covering notional volumes
of 200,000 MMBtu/d for the period July 2001 to November 2001 at an
average premium of $0.15 per MMBtu. EOG will account for these swap
contracts under mark-to-market accounting.
Information Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. All
statements other than statements of historical facts, including, among
others, statements regarding EOG's future financial position, business
strategy, budgets, reserve information, projected levels of
production, projected costs and plans and objectives of management for
future operations, are forward-looking statements. EOG typically uses
words such as "expect," "anticipate," "estimate," "strategy,"
"intend," "plan," "target" and "believe" or the negative of those
terms or other variations of them or by comparable terminology to
identify its forward-looking statements. In particular, statements,
express or implied, concerning future operating results or the ability
to increase reserves or to generate income or cash flows are forward-
looking statements. Forward-looking statements are not guarantees of
performance. Although EOG believes its expectations reflected in
forward-looking statements are based on reasonable assumptions, no
assurance can be given that these expectations will be achieved.
Important factors that could cause actual results to differ materially
from the expectations reflected in the forward-looking statements
include, among others: timing and extent of changes in commodity
prices for crude oil, natural gas and related products and interest
rates; extent of EOG's success in discovering, developing, marketing
and producing reserves and in acquiring oil and gas properties;
political developments around the world; and financial market
conditions.
In light of these risks, uncertainties and assumptions, the events
anticipated by EOG's forward-looking statements might not occur. EOG
undertakes no obligations to update or revise its forward-looking
statements, whether as a result of new information, future events or
otherwise.
12
PART II. OTHER INFORMATION
EOG RESOURCES, INC.
ITEM 1. Legal Proceedings
See Part 1, Item 1, Note 5 to Consolidated Financial Statements,
which is incorporated herein by reference.
ITEM 5. Other Information
On May 8, 2001, the Board of Directors further amended the By-laws
of EOG to (i) delete the requirement that the annual meeting of shareholders
occur within 13 months of the prior annual meeting, (ii) provide that
directors be elected by a majority of the votes of the shares of EOG present
in person or represented by proxy at a shareholders meeting and entitled to
vote on the election of directors, (iii) require that at least three-fifths
of the members of the Board of Directors be independent directors, as that
term is defined in the amendments to the By-laws, (iv) provide that a
majority of the total number of directors, at least half of whom are
independent directors, shall constitute a quorum for the transaction of
business of the Board of Directors, and (v) increase the mandatory
retirement age for incumbent directors serving EOG as of September 7, 1999,
to 76 years of age. The foregoing description of the amendments to the
By-laws does not purport to be complete and is qualified in its entirety by
reference to the By-laws, as amended and restated effective as of May 8,
2001, which is attached as an exhibit hereto and incorporated herein by
reference.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3.1 - By-Laws of EOG Resources, Inc., as amended and
restated effective as of May 8, 2001.
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
and Combined Fixed Charges and Preferred Dividends
(b) Reports on Form 8-K
Current Report on Form 8-K filed on February 7, 2001, to
provide estimate for the first quarter and full year 2001 in
Item 9 - Regulation FD Disclosure.
Current Report on Form 8-K filed on February 23, 2001, to
report certain crude oil and natural gas price swap contracts
and natural gas physical contracts in Item 5 - Other Events.
Current Report on Form 8-K filed on February 27, 2001, to
present management's discussion and analysis of financial
condition and results of operations for 2000, financial
statements for 2000, and related exhibits in Item 7 -
Financial Statements and Exhibits.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
EOG RESOURCES, INC.
(Registrant)
Date: May 8, 2001 By /S/ T. K. DRIGGERS
-----------------------------
T. K. Driggers
Vice President, Accounting
and Land Administration
(Principal Accounting Officer)
14
Exhibit 12
EOG RESOURCES, INC.
Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends
(In Thousands)
(Unaudited)
Year Ended December 31,
Three Months Ended --------------------------------------------------
March 31, 2001 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
EARNINGS AVAILABLE FOR
FIXED CHARGES:
Net Income $215,247 $396,931 $569,094 $ 56,171 $121,970 $140,008
Less: Capitalized Interest Expense (2,047) (6,708) (10,594) (12,711) (13,706) (9,136)
Add: Fixed Charges 15,336 67,714 72,413 61,290 41,423 21,997
Income Tax Provision 124,849 236,626 (1,382) 4,111 41,500 50,954
-------- -------- -------- -------- -------- --------
EARNINGS AVAILABLE $353,385 $694,563 $629,531 $108,861 $191,187 $203,823
======== ======== ======== ======== ======== ========
FIXED CHARGES:
Interest Expense $ 13,289 $ 61,006 $ 61,819 $ 48,463 $ 27,369 $ 12,370
Capitalized Interest 2,047 6,708 10,594 12,711 13,706 9,136
Rental Expense Representative of Interest
Factor - - - 116 348 491
-------- -------- -------- -------- -------- --------
TOTAL FIXED CHARGES 15,336 67,714 72,413 61,290 41,423 21,997
Preferred Dividends on a Pre-tax Basis 4,299 17,602 660 - - -
-------- -------- -------- -------- -------- --------
TOTAL FIXED CHARGES AND
PREFERRED DIVIDENDS $ 19,635 $ 85,316 $ 73,073 $ 61,290 $ 41,423 $ 21,997
======== ======== ======== ======== ======== ========
RATIO OF EARNINGS TO
FIXED CHARGES 23.04 10.26 8.69 1.78 4.62 9.27
RATIO OF EARNINGS TO
FIXED CHARGES AND
PREFERRED DIVIDENDS 18.00 8.14 8.62 1.78 4.62 9.27