EOG Resources Reports Fourth Quarter and Full Year 2014 Results and Announces Return-Driven Capital Program for 2015

HOUSTON, Feb. 18, 2015 /PRNewswire/ --

• Realizes 16 Percent ROE and 14 Percent ROCE for 2014
• Delivers 31 Percent Year-Over-Year Total Company Crude Oil Production Growth and 17 Percent Total Company Production Growth
• Reports Robust Year-Over-Year Increases in Adjusted Non-GAAP Net Income Per Share and Discretionary Cash Flow
• Increases Reserves 18 Percent and Replaces 273 Percent of its Production at Low Finding Costs
• Continues to Achieve Outstanding Performance from the Eagle Ford, Bakken and Delaware Basin
• Announces Disciplined 2015 Capital Program, Plans to Delay Well Completions and Targets Flat Year-Over-Year Crude Oil Production

EOG Resources, Inc. (NYSE: EOG) (EOG) today reported fourth quarter 2014 net income of $445 million, or $0.81 per share. This compares to fourth quarter 2013 net income of $580 million, or $1.06 per share. For the full year, EOG reported net income of $2,915 million, or $5.32 per share, compared to $2,197 million, or $4.02 per share, for the full year 2013.

Adjusted non-GAAP net income for the fourth quarter 2014 was $432 million, or $0.79 per share, and for the fourth quarter 2013 was $548 million, or $1.00 per share. Adjusted non-GAAP net income for the full year 2014 was $2,716 million, or $4.95 per share, and for the full year 2013 was $2,246 million, or $4.11 per share. Adjusted non-GAAP net income is calculated by matching realizations to settlement months and making certain other adjustments in order to exclude one-time items. (Please refer to the attached tables for the reconciliation of non-GAAP measures to GAAP.)

EOG achieved strong financial metrics for 2014. Adjusted non-GAAP net income per share increased 20 percent and discretionary cash flow increased 14 percent, compared to 2013. For the year, EOG posted ROE of 16 percent and ROCE of 14 percent. (Please refer to the attached tables for the reconciliation of non-GAAP measures to GAAP and for return calculations.)

In the fourth quarter 2014, EOG increased its U.S. crude oil and condensate production by 28 percent, while total company crude oil and condensate production rose by 26 percent, compared to the same prior year period.

For the full year, crude oil and condensate production increased 31 percent year over year, driven by 33 percent growth in the United States. Natural gas liquids (NGLs) production increased 23 percent, while natural gas production was flat. Overall total company production increased 17 percent.

"EOG delivered both high returns and strong growth in 2014, a unique accomplishment in the energy sector," said William R. "Bill" Thomas, Chairman and Chief Executive Officer. "Our returns-focused capital discipline has been at the core of EOG's culture since the very beginning. We are confident we will continue to earn healthy returns on our capital program during this commodity down cycle and, more importantly, emerge stronger and poised for significant long-term growth."

2015 Capital Plan

EOG's primary goal for 2015 is to position the company to resume long-term growth once crude oil prices recover. The company is not interested in accelerating crude oil production in a low-price environment.

Capital expenditures for 2015 are expected to range from $4.9 to $5.1 billion, including production facilities and midstream expenditures, and excluding acquisitions. This 40 percent reduction compared to 2014 reflects EOG's commitment to capital discipline in a low crude oil price environment.

Capital will be allocated primarily to EOG's highest rate-of-return oil assets, the Eagle Ford, Delaware Basin and Bakken plays. To further enhance capital efficiency, EOG plans to utilize rigs under existing commitments and delay a significant number of completions. Delaying completions increases returns, adds substantial net present value and prepares the company to resume strong oil growth when commodity prices recover.

Due to reduced capital spending and delayed completions, EOG expects to complete approximately 45 percent fewer wells in 2015 versus 2014. Therefore, the midpoint for 2015 total company crude oil production guidance is essentially flat year over year. Once again, EOG plans to minimize investment in domestic dry natural gas drilling. As a result, its U.S. natural gas production and total company production are expected to decline modestly.

Year after year, EOG has relentlessly focused on advancing its industry-leading completion technology and driving down unit costs through efficiency gains. That will not change in 2015.

Finally, the company expects to use its strong balance sheet to capitalize on unique opportunities created by this low-price environment to add high-quality acreage.

"The downturn in oil prices will drive significant reductions in global supply and the market will rebalance," Thomas said. "Our goal at EOG is to exit this downturn in better shape than we entered it.

"The current environment brings more opportunities to lower our finding costs, improve our returns and add high-quality drilling inventory. As prices recover, EOG will be poised to resume strong U.S. oil growth," Thomas added.

South Texas Eagle Ford

The Eagle Ford continues to drive EOG's long-term crude oil growth. Each year since its operations began five years ago, EOG has improved per-well productivity and successfully downspaced wells through advancements in completion technology. Estimated potential net reserves have grown 250 percent from 900 million barrels of oil equivalent (MMBoe) in 2009 to 3.2 billion barrels of oil equivalent today. EOG has over 5,500 remaining net well locations in the Eagle Ford – over a decade of drilling. This world-class play will continue to be EOG's primary source of returns and growth for years to come.

During the fourth quarter of 2014, the Eagle Ford continued to deliver impressive well results across EOG's acreage. The Korth Unit 6H through 9H had initial production rates ranging from 3,955 to 5,480 barrels of oil per day (Bopd), 355 to 535 barrels per day (Bpd) of NGLs and 2.1 to 3.1 million cubic feet per day (MMcfd) of natural gas. This four-well pattern drilled in Karnes County initially produced over 19,000 Bopd, 1,700 Bpd of NGLs and 10 MMcfd of natural gas, collectively.

On the western side of EOG's Eagle Ford acreage in La Salle County, the Naylor Jones Unit 14-1H and 15-1H had initial production rates of 2,460 and 2,850 Bopd, plus 165 and 190 Bpd of NGLs and 975 thousand cubic feet per day (Mcfd) and 1.1 MMcfd of natural gas, respectively. In McMullen County, the Los Compadres Unit 1H was brought online at an initial production rate of 2,535 Bopd, with 180 Bpd of NGLs and 1.1 MMcfd of natural gas.

In 2015, EOG will execute a balanced drilling program across the length of its Eagle Ford acreage. Due to advancements achieved in the western acreage during the last two years, returns are competitive with the east and a balanced drilling program will maximize operational efficiencies. EOG plans to complete about 345 net wells in the Eagle Ford compared to 534 in 2014.

Delaware Basin

In 2014, EOG expanded activity in the Delaware Basin resulting in the identification of considerable new potential across three separate targets. EOG's technical understanding of the basin advanced, confirmed by a series of impressive well results in the second half of the year. With lower costs and improved well productivity, EOG's drilling program across the Delaware Basin is now consistently generating rates-of-return which are on par with the Eagle Ford and Bakken plays.

In the Second Bone Spring Sand, EOG applied advanced completion techniques and determined that at least 90,000 net acres of its leasehold are prospective in the oil window. In the Leonard, the company continued to make technical progress. EOG piloted multiple downspacing tests which could eventually increase the size of its crude oil drilling inventory in the Leonard play.

In the Delaware Basin Wolfcamp, EOG made significant advancements in well productivity, breaking its own record initial production rates with each successive well. Most recently, EOG completed three wells in Reeves County. The State Harrison Ranch 57 #1501H and #2101H and the State Apache 57 #202H had initial production rates ranging from 1,500 to over 2,000 Bopd, with 550 to 700 Bpd of NGLs and 4.0 to 4.5 MMcfd of natural gas.

Also in 2014, EOG confirmed that 90,000 net acres of its total 140,000 net-acre Wolfcamp position are in the oil window.

In 2015, capital expenditures will increase in the Permian Basin as EOG expects to complete about 95 net wells, a 53 percent increase compared to 2014. Capital will be directed to development drilling in the northern Delaware Basin targeting EOG's three highest-return plays – the Leonard, the Second Bone Spring Sand and the Wolfcamp. Ongoing technical work will determine the most efficient approach to develop these three plays and enable EOG to test additional prospective zones.

North Dakota Bakken

In 2014, EOG's drilling activity in North Dakota was directed to two key areas, the Bakken Core and the Antelope Extension. The focus this past year has been to drive down drilling costs and further advance completions to improve well performance and allow for additional downspacing. In the fourth quarter, EOG completed a six-well pattern in the Bakken Core area spaced at 700 feet between wells which delivered a combined initial production rate of 9,450 Bopd and 5 MMcfd of rich natural gas. Initial results from these completion and downspacing pilots are very encouraging, and additional pilots and testing in 2015 are designed to uncover the best long-term development plan for this crude oil growth play.  

Also in 2014, EOG stepped out from the Bakken to test the Three Forks formation, particularly in the Antelope Extension, with some notable well results. Due to the low-price crude oil environment, additional development of this high-potential target will be put on hold.

Capital allocated to the Bakken will decrease significantly in 2015. EOG expects to complete about 25 net wells compared to 59 in 2014. 

Wyoming Rockies

2014 was a big year for exploration in Wyoming as EOG announced four Rockies plays, the Codell and Niobrara in the DJ Basin, and the Parkman and Turner in the Powder River Basin. All four plays generated strong rates of return and consistent well results in 2014.

EOG completed several excellent wells in the fourth quarter in these emerging plays. In the DJ Basin Codell, the Windy 515-1819H and Windy 509-1806H had initial production rates of 1,490 and 1,355 Bopd, with 145 and 110 Bpd of NGLs, and 515 and 375 Mcfd of natural gas, respectively.

In the Powder River Basin, three recently completed Parkman wells, the Mary's Draw 4-0310H, 26-0310H and 209-0310H, had initial production rates of 1,160, 1,425 and 1,205 Bopd, with 460, 525, 1,015 Mcfd of rich natural gas, respectively. Two Turner completions are the Mary's Draw 7-24H and 8-24RH with initial production rates of 915 Bopd and 1.9 MMcfd of rich natural gas, and 925 Bopd and 1.9 MMcfd of rich natural gas, respectively.

EOG does not plan significant development of its DJ Basin or Powder River Basin assets until crude oil prices improve.

"EOG continues to demonstrate its leadership in growing high-return drilling inventory organically," Thomas said. "Last year at this time, we announced an increase to the reserves and drilling inventory in the Eagle Ford. A quarter later, we announced four plays in the Rockies. By the third quarter, we had delineated the Second Bone Spring Sand and identified the Wolfcamp oil window in the Delaware Basin. As in years past, we added more high-return inventory than we drilled during the year."

Reserves

Driven almost entirely by strong liquids reserves growth in the United States, EOG increased total company net proved reserves 18 percent in 2014. At year-end, total company net proved reserves were 2,497 MMBoe, comprised of 46 percent crude oil and condensate, 19 percent NGLs and 35 percent natural gas.

Net proved reserve additions replaced 273 percent of EOG's 2014 production at a finding and development cost of $12.16 per barrel of oil equivalent (Boe). Excluding reserve revisions due to commodity price changes, the replacement ratio was 249 percent at a cost of $13.25 per Boe. (For more reserves detail, including calculation of reserve replacement ratios and reserve replacement costs, please refer to the attached tables.)

For the 27^th consecutive year, internal reserve estimates were within 5 percent of estimates independently prepared by DeGolyer and MacNaughton.

Hedging Activity

For February 1 through June 30, 2015, EOG has crude oil financial price swap contracts in place for 47,000 Bopd at a weighted average price of $91.22 per barrel. For July 1 through December 31, 2015, EOG has crude oil financial price swap contracts in place for 10,000 Bopd at a weighted average price of $89.98 per barrel, excluding unexercised options.

For March 1 through December 31, 2015, EOG has natural gas financial price swap contracts in place for approximately 182,000 million British thermal units per day at a weighted average price of $4.51 per million British thermal units, excluding unexercised options. (For a comprehensive summary of crude oil and natural gas derivative contracts, please refer to the attached tables.)

Capital Structure

During 2014, EOG's cash flows from operating activities exceeded total capital expenditures. Total proceeds from asset sales were $569 million.

At December 31, 2014, EOG's total debt outstanding was $5,910 million for a debt-to-total capitalization ratio of 25 percent. Taking into account cash on the balance sheet of $2,087 million at year-end, EOG's net debt was $3,823 million for a net debt-to-total capitalization ratio of 18 percent, down from 23 percent at year-end 2013. (Please refer to the attached tables for the reconciliation of non-GAAP debt measures to GAAP.)

Dividend

The board of directors declared a dividend of $0.1675 per share on EOG's Common Stock, payable April 30, 2015, to stockholders of record as of April 16, 2015. The indicated annual rate is $0.67 per share.

Conference Call February 19, 2015

EOG's fourth quarter and full year 2014 results conference call will be available via live audio webcast at 8 a.m. Central time (9 a.m. Eastern time) on Thursday, February 19, 2015. To listen, log on to www.eogresources.com. The webcast will be archived on EOG's website through March 5, 2015.

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, 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," "goal," "may," "will," "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 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, unknown or currently unforeseen 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, extent and duration 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 is successful in its efforts to economically develop its acreage in, produce reserves and achieve anticipated production levels from, and optimize reserve recovery from, its existing and future crude oil and natural gas exploration and development projects;
• 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, appropriate gathering, processing, compression, transportation and refining 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 tax laws and regulations; 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 imposing 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 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, facilities, equipment, materials and services;
• the availability and cost of employees and other personnel, facilities, equipment, materials (such as water) 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 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 conditions and developments around the world (such as 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;
• physical, electronic and cyber security breaches; and
• the other factors described under Item 1A, "Risk Factors", on pages 13 through 20 of EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2014 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.

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 estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include "potential" reserves and/or other estimated reserves not necessarily calculated in accordance with, or contemplated by, the SEC's latest reserve reporting guidelines.  Investors are urged to consider closely the disclosure in EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, 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.

Investors
Cedric W. Burgher
(713) 571-4658
David J. Streit
(713) 571-4902
Kimberly M. Ehmer
(713) 571-4676

Media
K Leonard
(713) 571-3870

SOURCE EOG Resources, Inc.

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