EOG Resources Reports Outstanding Crude Oil Production in Third Quarter 2012 and Increases Growth Rate Target

HOUSTON, Nov. 5, 2012 /PRNewswire/ --

  • Reports Strong Year-Over-Year Growth in Adjusted Non-GAAP Earnings Per Share, Discretionary Cash Flow and Adjusted EBITDAX
  • Achieves 42 Percent Crude Oil and Condensate Production Increase and 40 Percent Increase in Total Liquids Production Over Third Quarter 2011
  • Increases 2012 Total Company Crude Oil Production Growth Target to 40 Percent from 37 Percent and Full Year Total Liquids Growth Target to 38 Percent from 35 Percent
  • Raises 2012 Total Company Production Growth Target to 10.6 Percent from 9 Percent
  • Generates Continued Momentum with Eagle Ford and Bakken/Three Forks Well Results
  • Realizes Premium Crude Oil Prices for Eagle Ford and Bakken Volumes
  • Increases 2012 Total Asset Sales Target to Approximately $1.3 Billion

EOG Resources, Inc. (NYSE: EOG) (EOG) today reported third quarter 2012 net income of $355.5 million, or $1.31 per share. This compares to third quarter 2011 net income of $540.9 million, or $2.01 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 third quarter 2012 was $468.7 million, or $1.73 per share. Adjusted non-GAAP net income for the third quarter 2011 was $223.2 million, or $0.83 per share. The results for the third quarter 2012 include net gains on asset dispositions of $43.4 million, net of tax ($0.16 per share) and a previously disclosed non-cash net gain of $4.7 million ($3.0 million after tax, or $0.01 per share) on the mark-to-market of financial commodity contracts. During the third quarter, the net cash inflow related to financial commodity contracts was $249.2 million ($159.6 million after tax, or $0.59 per share). (Please refer to the attached tables for the reconciliation of adjusted non-GAAP net income to GAAP net income.)

EOG's overall financial metrics were enhanced by successfully linking a significant portion of its Eagle Ford and Bakken crude oil and condensate production to markets which provide premium crude oil pricing. For the third quarter, adjusted non-GAAP net income per share increased 108 percent, discretionary cash flow increased 37 percent and adjusted EBITDAX increased 39 percent as compared to the third quarter 2011. (Please refer to the attached tables for the reconciliation of adjusted non-GAAP net income per share to GAAP net income per share, non-GAAP discretionary cash flow to net cash provided by operating activities (GAAP) and adjusted EBITDAX (non-GAAP) to income before interest expense and income taxes (GAAP).)

EOG exceeded its third quarter crude oil and condensate production forecasts by continuing to modify completion techniques in its South Texas Eagle Ford; North Dakota Bakken and Three Forks; and Permian Basin Wolfcamp and Leonard plays. In North America, crude oil production increased 45 percent in the third quarter and 51 percent for the first nine months of 2012 compared to prior year periods. Total North American liquids (crude oil, condensate and natural gas liquids) production increased 42 percent for the third quarter and 48 percent for the first three quarters of 2012 over the same periods a year ago. On a total company basis, total crude oil and condensate production increased 42 percent and total liquids production rose 40 percent for the third quarter compared to the same period in 2011.

"With especially strong, consistent individual well results, EOG's best plays have become even better," said Mark G. Papa, Chairman and Chief Executive Officer. "Therefore, based on nine months of robust crude oil production, we are setting the bar higher for the third time this year. EOG has increased its 2012 crude oil production growth target to 40 percent from 37 percent. Because our outstanding oil results also impact total liquids production, we are also raising our total liquids production growth target to 38 percent from 35 percent and increasing our total company production target to 10.6 percent from 9 percent."

Operational Highlights

"Simply put, EOG's excellent third quarter performance reflects the success of our groundwork. Over the last few years, we captured the best crude oil acreage in the United States.  Now we are executing a development program that has exceeded our initial expectations. In addition, we implemented innovative marketing logistics such as our crude-by-rail transportation system," Papa said. "During the third quarter, higher volumes combined with higher realized crude oil prices and good unit cost control added substantial value to EOG's bottom line."

In the South Texas Eagle Ford, EOG continued to post outstanding well results. In Gonzales County, the Baker-DeForest Unit #4H came on line at 4,598 barrels of oil per day (Bopd) with 488 barrels per day (Bpd) of natural gas liquids (NGLs) and 2.9 million cubic feet per day (MMcfd) of natural gas. The Baker-DeForest Unit #1H, #2H, #3H and #12H were turned to sales at initial rates ranging from 3,346 to 4,216 Bopd with 457 to 537 Bpd of NGLs and 2.7 to 3.2 MMcfd of natural gas. EOG has 100 percent working interest in these five Baker-DeForest wells.

Drilled in Gonzales County near the DeWitt County line, a new area for EOG, the Reilly Unit #1H had an initial oil production rate of 3,579 Bopd with 483 Bpd of NGLs and 2.9 MMcfd of natural gas. EOG has 70 percent working interest in this well. Also in the new area northeast of the Reilly, the Boysen Unit #1H and Baird Heirs Unit #4H were completed at 2,540 and 2,242 Bopd with 268 and 181 Bpd of NGLs and 1.6 and 1.1 MMcfd of natural gas, respectively. EOG has 100 percent working interest in both wells. EOG also has 100 percent working interest in the Henkhaus Unit #8H, which was completed offsetting the previously drilled Henkhaus Unit #10H and #11H. The #8H had an initial production rate of 4,012 Bopd with 495 Bpd of NGLs and 3.0 MMcfd of natural gas.

In the western region of its Eagle Ford acreage where EOG increased drilling activity in the second half of the year, the Lowe Pasture #9H and #10H were completed in McMullen County at initial production rates of 1,905 and 2,075 Bopd with 112 and 115 Bpd of NGLs and 673 and 688 thousand cubic feet per day (Mcfd) of natural gas, respectively. The Martindale L&C #1H and #2H in La Salle County began sales at 1,522 and 1,876 Bopd with 220 and 208 Bpd of NGLs and 1.3 and 1.2 MMcfd of natural gas, respectively. EOG has 100 percent working interest in these four wells.

EOG focused its third quarter North Dakota drilling activity in the Bakken Core and Antelope Extension, an area 25 miles southwest of the Core. Two recent wells further validated the success of EOG's 320-acre infill drilling program in the Bakken Core where EOG introduced refined completion techniques simultaneously with tighter spacing tests. In Mountrail County, the Fertile 46-1608H was turned to sales at an initial rate of 1,732 Bopd with 90 Bpd of NGLs and 363 Mcfd of natural gas. The Fertile 47-0712H began sales at 1,258 Bopd with 83 Bpd of NGLs and 332 Mcfd of natural gas. EOG has 92 and 78 percent working interest, respectively, in these wells. EOG plans to test denser drilling in the Core before year-end.

In the Antelope Extension where EOG is developing its acreage on 320-acre spacing, both the Bakken and Three Forks formations have proven to be highly productive and economic. In McKenzie County, the Clarks Creek 15-0805H and Bear Den 19-2116H were drilled in the Bakken with initial maximum rates of 1,067 and 1,886 Bopd, respectively, with associated rich natural gas. EOG has 85 and 76 percent working interest, respectively, in these wells. In the Three Forks, EOG completed the Mandaree 101-20H, Bear Den 104-2116H and Hawkeye 100-2501H at maximum rates of 1,285, 2,226 and 3,196 Bopd, respectively, with associated rich natural gas. EOG has 90 percent, 76 percent and 73 percent working interest, respectively, in these wells.

EOG posted favorable ongoing results from its Leonard and Wolfcamp shale activities in the West Texas and southeast New Mexico Permian Basin by drilling economic wells that produce crude oil with a liquids-rich natural gas stream. In the New Mexico Delaware Basin, the Diamond 8 Fed Com #3H, #4H and #5H were completed in the Leonard shale at initial production rates of 962, 1,148 and 1,162 Bopd with 134, 171 and 188 Bpd of NGLs and 963, 941 and 1,036 Mcfd of natural gas, respectively. EOG has 96 percent working interest in these Lea County wells.

In the West Texas Wolfcamp, EOG tested multiple zones across its acreage to determine their prospectivity. The Mayer SL #5013LH was completed to sales at 1,290 Bopd with 95 Bpd of NGLs and 539 Mcfd of natural gas in the lower Wolfcamp. EOG has 77 percent working interest in this Irion County well. In Crockett County, the University 40-B #1602H, in which EOG has 80 percent working interest, began production from the middle Wolfcamp at an initial rate of 916 Bopd with 127 Bpd of NGLs and 726 Mcfd of natural gas. The University 43 #0911H, 43 #1009H and 43 #1011H were completed in the same zone at initial production rates ranging from 840 to 1,212 Bopd with 60 to 110 Bpd of NGLs and 330 to 600 Mcfd of natural gas. EOG has 75 percent working interest in these three Irion County wells.

EOG also reported positive results from its Fort Worth Barnett Combo play, another prominent contributor to the company's 2012 liquids production. EOG extended the boundaries of the play by completing the Nunnely A-#1H, B-#2H, B-#3H and C-#1H at initial rates ranging from 412 Bopd to 705 Bopd with 43 to 57 Bpd of NGLs and 240 to 316 Mcfd of natural gas. EOG has 100 percent working interest in these Montague County wells.

"EOG's current position as a crude oil producer at the forefront of the large cap independent peer group indicates the exceptional quality of our asset portfolio," Papa said. 

Hedging Activity

EOG has hedged approximately 26 percent of its North American crude oil production for the period November and December 2012. From November 1 through December 31, 2012, EOG has crude oil financial price swap contracts in place for an average of 42,000 Bopd at a weighted average price of $105.19 per barrel, excluding unexercised options.

With the goal of maintaining a strong balance sheet while minimizing the gap between capital expenditures and cash flow, EOG is pursuing an opportunistic hedging strategy for 2013. For the period January 1 through June 30, 2013, EOG has crude oil financial price swap contracts in place for an average of 98,000 Bopd at a weighted average price of $99.39 per barrel, excluding unexercised options. For the period July 1 through December 31, 2013, EOG has an average of 68,000 Bopd hedged at a weighted average price of $99.45 per barrel, excluding unexercised options.

Although EOG plans to pursue very minimal natural gas drilling activity in 2013, financial price swap contracts are in place for 150,000 million British thermal units per day of natural gas at a weighted average price of $4.79 per million British thermal units, excluding unexercised options for the calendar year. (For a comprehensive summary of EOG's crude oil and natural gas derivative contracts, please refer to the attached tables.)  

Capital Structure

Through September 30, 2012, EOG's cash proceeds from asset sales were approximately $1.2 billion. EOG is targeting an additional $100 million of asset sales for a full-year total of approximately $1.3 billion. EOG revised its 2012 total capital expenditure program to approximately $7.6 billion.

At September 30, 2012, EOG's total debt outstanding was $6,312 million for a debt-to-total capitalization ratio of 31 percent. Taking into account cash on the balance sheet of $1,113 million at the end of the third quarter, EOG's net debt was $5,199 million for a net debt-to-total capitalization ratio of 27 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).)

Conference Call Scheduled for Tuesday, November 6, 2012

EOG's third quarter 2012 results conference call will be available via live audio webcast at 8 a.m. Central time (9 a.m. Eastern time) on Tuesday, November 6, 2012. To listen, log on to www.eogresources.com. The webcast will be archived on EOG's website through November 20, 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, generate income or cash flows or pay 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 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 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 can optimize reserve recovery and economically develop its plays utilizing horizontal and vertical drilling, advanced completion technologies and hydraulic fracturing;
  • 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 and capital expenditure requirements 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, hydraulic fracturing and access to and use of water, laws and regulations imposing conditions and restrictions on drilling and completion operations and laws and regulations with respect to derivatives and hedging activities;
  • 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, and to otherwise satisfy its capital expenditure requirements;
  • 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 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," on pages 15 through 23 of EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2011 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.