-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Crk2DRTl1ac1wlesyDq/VxhtAbWSxrFSmpb3AG06UnuB2ZjvuMcR2WnjQf1fafxT GgitEV/h91tCH2lMlZqyoQ== 0000821189-02-000013.txt : 20020415 0000821189-02-000013.hdr.sgml : 20020415 ACCESSION NUMBER: 0000821189-02-000013 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 22 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020320 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EOG RESOURCES INC CENTRAL INDEX KEY: 0000821189 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 470684736 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09743 FILM NUMBER: 02580257 BUSINESS ADDRESS: STREET 1: 333 CLAY SUITE 4200 CITY: HOUSTON STATE: TX ZIP: 77002-7361 BUSINESS PHONE: 7136517000 MAIL ADDRESS: STREET 1: 333 CLAY STREET SUITE 4200 CITY: HOUSTON STATE: TX ZIP: 77002-7361 FORMER COMPANY: FORMER CONFORMED NAME: ENRON OIL & GAS CO DATE OF NAME CHANGE: 19920703 10-K 1 eogform10k.txt ANNUAL REPORT ON FORM 10-K =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- Form 10-K ------------------- [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 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 jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 333 Clay Street, Suite 4200, Houston, Texas 77002-7361 (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: 713-651-7000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------------------- ----------------------------------------- Common Stock, $.01 par value New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None. 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [x]. Aggregate market value of the voting stock held by nonaffiliates of the registrant, based on the closing sale price in the daily composite list for transactions on the New York Stock Exchange on March 11, 2002 was $39.49. As of March 11, 2002, there were 115,799,126 shares of the registrant's Common Stock, $.01 par value, outstanding. Documents incorporated by reference. Portions of the following documents are incorporated by reference into the indicated parts of this report: 2001 Annual Report to Stockholders - Part I, II and IV; and Proxy Statement for the May 7, 2002 Annual Meeting of Shareholders to be filed within 120 days after December 31, 2001 ("Proxy Statement") - Part III. =============================================================================== (i) TABLE OF CONTENTS Page PART I Item 1. Business......................................................... 1 General......................................................... 1 Business Segments............................................... 1 Exploration and Production...................................... 1 Marketing....................................................... 4 Wellhead Volumes and Prices, and Lease and Well Expenses....... 5 Competition..................................................... 6 Regulation...................................................... 6 Transactions with Enron Corp. .................................. 8 Other Matters................................................... 9 Current Executive Officers of the Registrant.................... 11 Item 2. Properties Oil and Gas Exploration and Production Properties and Reserves.. 12 Item 3. Legal Proceedings................................................ 15 Item 4. Submission of Matters to a Vote of Security Holders.............. 15 PART II Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters............................................. 15 Item 6. Selected Financial Data.......................................... 16 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 16 Item 7A. Quantitative and Qualitative Disclosures About Market Risk....... 17 Item 8. Financial Statements and Supplementary Data...................... 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................................ 17 PART III Item 10. Directors and Executive Officers of the Registrant............... 17 Item 11. Executive Compensation........................................... 18 Item 12. Security Ownership of Certain Beneficial Owners and Management... 18 Item 13. Certain Relationships and Related Transactions................... 18 PART IV Item 14. Financial Statements and Financial Statement Schedule, Exhibits and Reports on Form 8-K................................. 18 1 PART I ITEM 1. Business General EOG Resources, Inc., a Delaware corporation organized in 1985 ("EOG"), together with its subsidiaries, explores for, develops, produces and markets natural gas and crude oil primarily in major producing basins in the United States, as well as in Canada and Trinidad and, to a lesser extent, selected other international areas. EOG's principal producing areas are further described under "Exploration and Production" below. At December 31, 2001, EOG's estimated net proved natural gas reserves were 3,796 billion cubic feet ("Bcf") and estimated net proved crude oil, condensate and natural gas liquids reserves were 72 million barrels ("MMBbl") (see "Supplemental Information to Consolidated Financial Statements" on page 36 of EOG's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 28, 2002, which included financial statements of EOG for the fiscal year ended December 31, 2001 (the "Form 8-K filed on February 28, 2002")). At such date, approximately 55% of EOG's reserves (on a natural gas equivalent basis) was located in the United States, 16% in Canada and 29% in Trinidad. As of December 31, 2001, EOG employed approximately 960 persons, including foreign national employees. EOG's business strategy is to maximize the rate of return on investment of capital by controlling all operating and capital costs. This strategy is intended to enhance the generation of cash flow and earnings from each unit of production on a cost-effective basis. EOG focuses its drilling activity toward natural gas deliverability in addition to natural gas reserve replacement and to a lesser extent crude oil exploitation. EOG focuses on the cost-effective utilization of advances in technology associated with the gathering, processing and interpretation of three-dimensional seismic data, the development of reservoir simulation models, the use of new and/or improved drill bits, mud motors and mud additives, and formation logging techniques and reservoir fracturing methods. These advanced technologies are used, as appropriate, throughout EOG to reduce the risks associated with all aspects of oil and gas reserve exploration, exploitation and development. EOG implements its strategy by emphasizing the drilling of internally generated prospects in order to find and develop low cost reserves. EOG also makes selected tactical acquisitions that result in additional economies of scale or land positions with significant additional prospects. Achieving and maintaining the lowest possible operating cost structure that is consistent with prudent and safe operations are also important goals in the implementation of EOG's strategy. With respect to information on EOG's working interest in wells or acreage, "net" oil and gas wells or acreage are determined by multiplying "gross" oil and gas wells or acreage by EOG's working interest in the wells or acreage. Unless otherwise defined, all references to wells are gross. Business Segments EOG's operations are all natural gas and crude oil exploration and production related. Exploration and Production North America Operations EOG's North American operations are organized into eight largely autonomous business units or divisions, each focusing on one or more basins, utilizing personnel who have developed experience and expertise unique to the geology of the region, thereby leveraging EOG's knowledge and cost structure into enhanced returns on invested capital. At December 31, 2001, 86% of EOG's proved United States reserves (on a natural gas equivalent basis) was natural gas and 14% was crude oil, condensate and natural gas liquids. A substantial portion of EOG's United States natural gas reserves is in long-lived fields with well-established production histories. EOG believes that opportunities exist to increase production in many of these fields through continued development and application of new technology. EOG will also continue an active exploration program, designed to extend existing fields and add new trends to our broad portfolio of North American plays. The following is a summary of significant developments during 2001 and certain drilling plans for 2002 for EOG's North American operating divisions. 2 Midland, Texas Division. The division operations are primarily focused in the Delaware, Val Verde, and Midland Basin areas of West Texas, and Southeast New Mexico. During 2001, the Midland Division increased net average daily production by 7% from 145 million cubic feet equivalent ("MMcfe") per day in 2000 to 155 MMcfe per day during 2001. The division drilled 89 wells in 2001. During the year a new play was initiated in the Devonian horizontal trend with completion of nine horizontal gas wells. With these encouraging results, EOG increased acreage positions in the Devonian trend to 153,000 gross acres. The division also continued to have success in the Montoya horizontal trend, Permo-Penn Carbonate trend, and in Southeast New Mexico. Denver, Colorado Division. Key producing areas for the Denver Division remain in the traditional core areas of Big Piney - LaBarge Platform; Vernal - Chapita / Natural Buttes; and Southwest Wyoming - Washakie Basin. Throughout 2001, the division continued developing these core areas while also exploring in new areas and drilling deeper on our existing core properties. For 2001, the division drilled or participated in 195 development wells and 21 wildcats. Net production for the division in 2001 averaged 123 million cubic feet ("MMcf") per day of natural gas and 6.0 thousand barrels ("MBbl") per day of crude oil and condensate. Natural gas volumes were 7% lower than in 2000 as a result of voluntary curtailment in response to low gas prices, and crude oil and condensate volumes were up 18% from 2000 due to the successful drilling in the California, North Shafter area. Oklahoma City/Mid-Continent Division. The Mid-Continent Division increased net average daily production by 17% from 75 MMcfe per day in 2000 to 88 MMcfe per day in 2001. Based in Oklahoma City, the division's activities are focused in the Oklahoma and Texas panhandles and in the deeper Anadarko Basin where in 2001 the division drilled 152 wells replacing reserves by 142%. Most notable for 2001, the division expanded its successful Council Grove horizontal play in Texas County, Oklahoma, drilling more than 35 wells to date that average 1 billion cubic feet equivalent ("Bcfe") each. In addition, the division had numerous stratigraphic discoveries in other plays such as the Morrow, Tonkawa, and Cherokee formations throughout the basin. Tyler, Texas Division. Key areas of production for the division are the Sabine Uplift Region, Upper Texas Coast, and Mississippi Salt Basin. During 2001, the division drilled or participated in 128 wells. Net production for the division averaged approximately 123 MMcf per day of natural gas and 4.7 MBbl per day of crude oil, condensate and natural gas liquids in 2001. The division acquired an additional 65,000 net acres during 2001, mainly in the Louisiana Bossier play and in the horizontal Georgetown play. Corpus Christi, Texas Division. The Corpus Christi Division had an active year in 2001, drilling 67 wells. During 2001, net production for the division averaged approximately 150 MMcf per day of natural gas and 2.0 MBbl per day of crude oil, condensate and natural gas liquids. The principal areas of activity are in the Frio trend in Matagorda County, the Wilcox trend in Duval County, and the Lobo/Roleta trends in Webb and Zapata Counties. EOG expects that drilling will continue to be strong through 2002 in Matagorda, Duval, Webb and Zapata counties. Pittsburgh, Pennsylvania Division. In 2001, the division completed the acquisition of Energy Search, Inc., a small independent exploration and production company with producing properties in Ohio and West Virginia. The acquisition added proved reserves and 300 additional drilling locations. The division drilled 137 wells during 2001 and expanded the land position for exploratory plays by 100,000 acres. The division added over 10,000 miles of two-dimensional seismic. Net average daily production grew from 10 MMcfe per day in January of 2001 to over 19 MMcfe per day in December of 2001. During 2002, the division plans to fully implement the exploitation of its development acreage and drill several exploratory wells. Houston,Texas/Offshore Division. The Offshore Division focuses on the Gulf of Mexico in Texas and Louisiana. Two fields, Eugene Island 135 and Matagorda Island 623, account for over half of the division's production. During 2001, total daily production averaged approximately 100 MMcfe per day, a 10% increase over the 91 MMcfe per day in 2000. During 2001, the division drilled or participated in four wildcats with a 75% success rate and two successful development wells. The division entered the deep water play in 2001, participating in two wells and the Eastern Gulf lease sale. EOG was apparent high bidder on three tracts in that sale, two of which received five bids each. Calgary, Canada Division. The Calgary Division is engaged in the exploration for and the development, production and marketing of natural gas, crude oil and natural gas liquids in Western Canada, principally in the Provinces of Alberta, Saskatchewan and Manitoba. EOG is also carrying out exploration activities in several onshore frontier Canadian basins in the Maritime Provinces and the Northwest Territories. 3 The division conducts operations through EOG's Canadian subsidiary, EOG Resources Canada Inc., from offices in Calgary, Alberta. During 2001, the division was again successful with its strategy of drilling a large number of shallow gas wells in Western Canada, increasing its reserve base and production potential. Strategic property and small corporate acquisitions were also utilized to expand the shallow gas platform area in Southwest Saskatchewan and Southeast Alberta. Division production during 2001 averaged 139 MMcfe per day versus 146 MMcfe per day during 2000. A record 1,037wells were drilled during 2001, most of which were shallow gas. New wells coming on stream late in the year have increased December 2001 net average deliverability to 158 MMcfe per day. Further new wells will be coming on stream during the first quarter of 2002. Key producing areas were Sandhills, Blackfoot and Grande Prairie - Wapiti, as well as new shallow gas development projects in Southeast Alberta at Bindloss, Connorsville and Rattlesnake. Outside North America Operations EOG has producing operations offshore Trinidad and is evaluating exploration, exploitation and development opportunities in selected other international areas. Trinidad. In November 1992, EOG was awarded a 95% working interest concession in the South East Coast Consortium ("SECC") Block offshore Trinidad, encompassing three undeveloped fields previously held by three government-owned energy companies. The Kiskadee and Ibis fields have since been developed. The Oilbird field was successfully appraised by the drilling of two wells in the fourth quarter of 2001 and will be developed over the next few years with production scheduled for late 2003. The Oilbird 2 well encountered 380 feet of net pay and the Oilbird 3 well encountered 290 feet of net pay. Existing surplus processing and transportation capacity at the Pelican field facilities owned and operated by Trinidad and Tobago government-owned companies is being used to process and transport the production. Natural gas is being sold into the local market under a take-or-pay agreement with the National Gas Company of Trinidad and Tobago. In 2001, deliveries net to EOG averaged 115 MMcf per day of natural gas and 2.1 MBbl per day of crude oil and condensate. In 1996, EOG signed a production sharing contract with the Government of Trinidad and Tobago for the Modified U(a) Block where EOG holds a 100% working interest. EOG drilled its first commitment well, OA-1, on this block in 1998. This well encountered over 500 feet of net pay. In the first quarter of 2001, EOG drilled the OA-2 well which encountered 305 feet of net pay and increased gross proved reserves to a field total of 870 Bcfe. In September 2001, EOG set a platform and jacket in preparation for first production anticipated in the third quarter of 2002. This field will supply approximately 60 MMcf per day under a 15-year natural gas supply contract to a 1,850 metric ton per day anhydrous ammonia plant which is being constructed by Caribbean Nitrogen Company Limited, a Trinidadian company in which EOG has a 16% interest. The construction of the plant is anticipated to be completed by the third quarter of 2002. In March 2002, EOG and certain subsidiaries participated in the execution of certain closing documents relating to the investment of one of the subsidiaries in a Trinidadian company named Nitrogen (2000) Unlimited which plans to construct a 1,850 metric ton per day anhydrous ammonia plant similar to the plant mentioned above. EOG owns an approximate 31% interest in the company. The other shareholders in this company are subsidiaries of Ferrostall AG, Halliburton and CL Financial Ltd. The total cost of the plant is estimated to be approximately $320 million of which approximately 72% will be non-recourse debt and 28% equity. EOG's equity investment in the company is anticipated to be approximately $28 million. EOG is expected to supply approximately 60 MMcf per day under a 15-year natural gas contract to the plant. Assuming timely regulatory and related approvals and other conditions for loan disbursement, the construction of the plant is anticipated to be completed by the fourth quarter of 2004. In September 2001, EOG was the sole bidder for the Lower Reverse "L" Block in the Trinidad and Tobago licensing round. EOG is currently in negotiation with the Ministry of Energy for the award of the block which is located adjacent to the SECC Block. At December 31, 2001, EOG held approximately 52,600 net undeveloped acres in Trinidad. Other International. EOG continues to evaluate other selected conventional natural gas and crude oil opportunities outside North America primarily by pursuing exploitation opportunities in countries where indigenous natural gas and crude oil reserves have been identified. 4 Marketing Wellhead Marketing. EOG's North America wellhead natural gas production is currently being sold on the spot market and under long- term natural gas contracts at market-responsive prices. In many instances, the long-term contract prices closely approximate the prices received for natural gas being sold on the spot market. Wellhead natural gas volumes from Trinidad are sold at prices that are based on a fixed price schedule with annual escalations. Prior to the Share Exchange (as described in "Transactions with Enron Corp." on page 8) and under terms of the production sharing contracts, natural gas volumes in India were sold to a nominee of the Government of India at a price linked to a basket of world market fuel oil quotations with floor and ceiling limits. Substantially all of EOG's wellhead crude oil and condensate is sold under various terms and arrangements at market-responsive prices. During 2001, sales to a major utility company accounted for 14% of EOG's oil and gas revenues. No other individual purchaser accounted for 10% or more of EOG's oil and gas revenues for the same period. EOG does not believe that the loss of any single purchaser will have a material adverse effect on the financial condition or results of operations of EOG. Other Marketing. EOG Resources Marketing, Inc. ("EOGM"), a wholly owned subsidiary of EOG, is a marketing company engaging in various marketing activities. EOGM contracts to provide natural gas to various purchasers and then aggregates the necessary supplies for the sales with purchases from various sources, including third-party producers, marketing companies, pipelines or from EOG's own production and arranges for any necessary transportation to the points of delivery. In addition, EOGM has purchased and constructed several small gas gathering systems in order to facilitate its entry into the gas gathering business on a limited basis. 5 Wellhead Volumes and Prices, and Lease and Well Expenses The following table sets forth certain information regarding EOG's wellhead volumes of and average prices for natural gas per thousand cubic feet ("Mcf"), crude oil and condensate, and natural gas liquids per barrel ("Bbl"), and average lease and well expenses per thousand cubic feet equivalent ("Mcfe"-natural gas equivalents are determined using the ratio of 6.0 Mcf of natural gas to 1.0 Bbl of crude oil, condensate or natural gas liquids) delivered during each of the three years in the period ended December 31, 2001. Year Ended December 31, - ----------------------------------------------------------------------------- 2001 2000 1999 - ----------------------------------------------------------------------------- Natural Gas Volumes (MMcf per day) United States 680 654 654 Canada 126 129 115 Trinidad 115 125 123 India(1) - - 46 Total 921 908 938 Crude Oil and Condensate Volumes (MBbl per day) United States 22.0 22.8 14.4 Canada 1.7 2.1 2.6 Trinidad 2.1 2.6 2.4 India(1) - - 4.1 Total 25.8 27.5 23.5 Natural Gas Liquids Volumes (MBbl per day) United States 3.5 4.0 2.6 Canada 0.5 0.7 0.8 Total 4.0 4.7 3.4 Average Natural Gas Prices ($/Mcf) United States $ 4.26 $ 3.96 $ 2.20 Canada 3.78 3.33 1.88 Trinidad 1.22 1.17 1.08 India(1) - - 2.09 Composite 3.81 3.49 2.01 Average Crude Oil and Condensate Prices ($/Bbl) United States $ 25.06 $29.68 $18.55 Canada 22.70 27.76 16.77 Trinidad 24.14 30.14 16.21 India(1) - - 12.80 Composite 24.83 29.57 17.12 Average Natural Gas Liquids Prices ($/Bbl) United States $ 17.17 $20.45 $13.41 Canada 15.05 16.75 8.23 Composite 16.89 19.87 12.24 Lease and Well Expenses ($/Mcfe) United States $ .45 $ .35 $ .33 Canada .62 .52 .46 Trinidad .15 .16 .13 India(1) - - .35 Composite .44 .35 .33 - ---------------------------------------------------------------------------- (1) See "Transactions with Enron Corp." regarding the Share Exchange Agreement on Page 8.
6 Competition EOG actively competes for reserve acquisitions and exploration/exploitation leases, licenses and concessions, frequently against companies with substantially larger financial and other resources. To the extent EOG's exploration budget is lower than that of certain of its competitors, EOG may be disadvantaged in effectively competing for certain reserves, leases, licenses and concessions. Competitive factors include price, contract terms, and quality of service, including pipeline connection times and distribution efficiencies. In addition, EOG faces competition from other producers and suppliers, including competition from other world wide energy supplies, such as natural gas from Canada. Regulation United States Regulation of Natural Gas and Crude Oil Production. Natural gas and crude oil production operations are subject to various types of regulation, including regulation in the United States by state and federal agencies. United States legislation affecting the oil and gas industry is under constant review for amendment or expansion. Also, numerous departments and agencies, both federal and state, are authorized by statute to issue and have issued rules and regulations which, among other things, require permits for the drilling of wells, regulate the spacing of wells, prevent the waste of natural gas and liquid hydrocarbon resources through proration and restrictions on flaring, require drilling bonds and regulate environmental and safety matters. The regulatory burden on the oil and gas industry increases its cost of doing business and, consequently, affects its profitability. A substantial portion of EOG's oil and gas leases in the Big Piney area and in the Gulf of Mexico, as well as some in other areas, are granted by the federal government and administered by the Bureau of Land Management (the "BLM") and the Minerals Management Service (the "MMS"), both federal agencies. Operations conducted by EOG on federal oil and gas leases must comply with numerous statutory and regulatory restrictions concerning the above and other matters. Certain operations must be conducted pursuant to appropriate permits issued by the BLM and the MMS. BLM and MMS leases contain relatively standardized terms requiring compliance with detailed regulations and, in the case of offshore leases, orders pursuant to the Outer Continental Shelf Lands Act (which are subject to change by the MMS). Such offshore operations are subject to numerous regulatory requirements, including the need for prior MMS approval for exploration, development, and production plans, stringent engineering and construction specifications applicable to offshore production facilities, regulations restricting the flaring or venting of production, and regulations governing the plugging and abandonment of offshore wells and the removal of all production facilities. Under certain circumstances, the MMS may require operations on federal leases to be suspended or terminated. Any such suspension or termination could adversely affect EOG's interests. The MMS amended the regulations governing the calculation of royalties and the valuation of crude oil produced from federal leases, effective June 1, 2000. The new rules modified the valuation procedures for both arm's-length and non-arm's-length crude oil transactions to decrease reliance on oil posted prices and assign a value to crude oil that, in the opinion of MMS, better reflects its market value. Two industry trade associations have sought judicial review of the new rules in federal district court. EOG cannot predict what effect the outcome of the litigation will be or what effect, if any, it will have on EOG's operations. In March 2000, a federal district court vacated MMS regulations which sought to clarify the types of costs that are deductible transportation costs for purposes of royalty valuation of production sold off the lease. In particular, MMS disallowed deduction of costs associated with marketer fees, cash out and other pipeline imbalance penalties, or long-term storage fees. The United States has appealed the district court ruling. EOG cannot predict what the outcome of the appeal will be or what effect, if any, it will have on EOG's operations. Sales of crude oil, condensate and natural gas liquids by EOG are made at unregulated market prices. The transportation and sale for resale of natural gas in interstate commerce are regulated pursuant to the Natural Gas Act of 1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the "NGPA"). These statutes are administered by the Federal Energy Regulatory Commission (the "FERC"). Effective January 1, 1993, the Natural Gas Wellhead Decontrol Act of 1989 deregulated natural gas prices for all "first sales" of natural gas, which includes all sales by EOG of its own production. All other sales of natural gas by EOG, such as those of natural gas purchased from third parties, remain jurisdictional sales subject to a blanket sales certificate under the NGA, which has flexible terms and conditions. Consequently, all of EOG's sales of natural gas currently may be made at market prices, subject to applicable contract provisions. EOG's jurisdictional sales, however, are 7 subject to the future possibility of greater federal oversight, including the possibility the FERC might prospectively impose more restrictive conditions on such sales. Since 1985, the FERC has endeavored to enhance competition in natural gas markets by making natural gas transportation more accessible to natural gas buyers and sellers on an open and nondiscriminatory basis. These efforts culminated in Order No. 636 and various rehearing orders ("Order No. 636"), which mandate a fundamental restructuring of interstate natural gas pipeline sales and transportation services, including the "unbundling" by interstate natural gas pipelines of the sales, transportation, storage, and other components of their service, and to separately state the rates for each unbundled service. Order No. 636 does not directly regulate EOG's activities, but has an indirect effect because of its broad scope. Order No. 636 has ended interstate pipelines' traditional role as wholesalers of natural gas, and substantially increased competition in natural gas markets. In spite of this uncertainty, Order No. 636 may enhance EOG's ability to market and transport its natural gas production, although it may also subject EOG to more restrictive pipeline imbalance tolerances and greater penalties for violation of such tolerances. EOG owns, directly or indirectly, certain natural gas pipelines that it believes meet the traditional tests the FERC has used to establish a pipeline's status as a gatherer not subject to FERC jurisdiction under the NGA. State regulation of gathering facilities generally includes various safety, environmental, and in some circumstances, nondiscriminatory take requirements, but does not generally entail rate regulation. Natural gas gathering may receive greater regulatory scrutiny at both the state and federal levels as a result of pipeline restructuring under Order No. 636. For example, the Texas Railroad Commission has approved changes to its regulations governing transportation and gathering services performed by intrastate pipelines and gatherers, which prohibit such entities from unduly discriminating in favor of their affiliates. EOG's gathering operations could be adversely affected should they be subject in the future to the application of state or federal regulation of rates and services. EOG's natural gas gathering operations also may be or become subject to safety and operational regulations relating to the design, installation, testing, construction, operation, replacement, and management of facilities. Additional rules and legislation pertaining to these matters are considered or adopted from time to time. EOG cannot predict what effect, if any, such legislation might have on its operations, but the industry could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes. The FERC recently began a broad review of its transportation regulations, including how they operate in conjunction with state proposals for retail gas marketing restructuring, whether to eliminate cost-of-service rates for short-term transportation, whether to allocate all short-term capacity on the basis of competitive auctions, and whether changes to its long-term transportation policies may also be appropriate to alleviate a market bias toward short-term contracts. This review culminated in part with the FERC's issuance of Order No. 637 on February 9, 2000. Order No. 637 revises the FERC's current regulatory framework for purposes of improving the efficiency of the market and providing captive pipeline customers with the opportunity to reduce their cost of holding long-term pipeline capacity while continuing to protect against the exercise of market power. Order No. 637 revises FERC pricing policy by waiving price ceilings for short-term released capacity for a two-year period and permitting pipelines to file for peak/off-peak and term differentiated rate structures. Order No. 637 does not, however, require the allocation of all short-term capacity on the basis of competitive auctions--as had been proposed by the FERC. Order No. 637 adopts changes in regulations relating to scheduling procedures, capacity segmentation and pipeline penalties to improve the competitiveness and efficiency of the interstate pipeline grid. It also narrows pipeline customers' right of first refusal to remove economic biases in the current rule, while still protecting captive customers' ability to resubscribe to long-term capacity. Finally, it improves the FERC's reporting requirements to provide more transparent pricing information and permit more effective monitoring of the market. Appeals of Order No. 637 are pending court review. EOG cannot predict what the outcome of that review will be or what effect it will have on EOG's operations. While Order No. 637, and any subsequent FERC action will affect EOG only indirectly, the Order and related inquiries are intended to further enhance competition in natural gas markets, while maintaining adequate consumer protections. EOG cannot predict the effect that any of the aforementioned orders or the challenges to such orders will ultimately have on EOG's operations. Additional proposals and proceedings that might affect the natural gas industry are considered from time to time by Congress, the FERC and the courts. EOG cannot predict when or whether any such proposals or proceedings may become effective. It should also be noted that the natural gas industry historically has been very heavily regulated; therefore, there is no assurance that the less regulated approach currently being pursued by the FERC will continue indefinitely. 8 Environmental Regulation. Various federal, state and local laws and regulations covering the discharge of materials into the environment, or otherwise relating to the protection of the environment, affect EOG's operations and costs as a result of their effect on natural gas and crude oil exploration, development and production operations and could cause EOG to incur remediation or other corrective action costs in connection with a release of regulated substances, including crude oil, into the environment. In addition, EOG has acquired certain oil and gas properties from third parties whose actions with respect to the management and disposal or release of hydrocarbons or other wastes were not under EOG's control. Under environmental laws and regulations, EOG could be required to remove or remediate wastes disposed of or released by prior owners or operators. Compliance with such laws and regulations increases EOG's overall cost of business, but has not had a material adverse effect on EOG's operations or financial condition. It is not anticipated, based on current laws and regulations, that EOG will be required in the near future to expend amounts that are material in relation to its total exploration and development expenditure program in order to comply with each environmental law and regulation, but inasmuch as such laws and regulations are frequently changed, EOG is unable to predict the ultimate cost of compliance. EOG also could incur costs related to the clean up of sites to which it sent regulated substances for disposal and for damages to natural resources or other claims related to releases of regulated substances at such sites. In this regard, EOG has been named as a potentially responsible party in certain proceedings initiated pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act and may be named as a potentially responsible party in other similar proceedings in the future. It is not anticipated that the costs incurred by EOG in connection with the presently pending proceedings will, individually or in the aggregate, have a materially adverse effect on the financial condition or results of operations of EOG. Canadian Regulation. In Canada, the petroleum industry is subject to extensive controls and operates under various provincial and federal legislation and regulations governing land tenure, royalties, taxes, production rates, operational standards, environmental protection, health and safety, exports and other matters. EOG operates within this regulatory framework and continues to monitor and evaluate the impact of the regulatory regime when determining parameters for engaging in oil and gas activities and investments in Canada. The price of natural gas and crude oil in Canada has been deregulated and is determined by market conditions and negotiations between buyers and sellers in a North American market place. The North American Free Trade Agreement supports the on-going cross-border commercial transactions of the natural gas and crude oil business. Various matters relating to the transportation and export of natural gas continue to be subject to regulation by provincial agencies and federally, by the National Energy Board; however, the North American Free Trade Agreement may have reduced the risk of altering existing cross-border commercial transactions through the assurance of fair implementation of regulatory changes, minimal disruption of contractual arrangements and the prohibition of discriminatory order restrictions and export taxes. Canadian governmental regulations may have a material effect on the economic parameters for engaging in oil and gas activities in Canada and may have a material effect on the advisability of investments in Canadian oil and gas drilling activities. EOG is monitoring political, regulatory and economic developments in Canada. Other International Regulation. EOG's exploration and production operations outside North America are subject to various types of regulations imposed by the respective governments of the countries in which EOG's operations are conducted, and may affect EOG's operations and costs within that country. EOG currently has operations offshore Trinidad. Transactions with Enron Corp. Enron Corp. Bankruptcy. In December 2001, Enron Corp. and certain of its affiliates, including Enron North America Corp., filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code. EOG recorded $19.2 million in charges associated with the Enron bankruptcies in the fourth quarter of 2001 related to certain contracts with Enron affiliates, including 2001 and 2002 natural gas and crude oil derivative contracts. EOG has other contractual relationships with Enron Corp. and certain of its affiliates. Based on EOG's review of these other matters, EOG believes that Enron Corp.'s Chapter 11 proceedings will not have a material adverse effect on EOG's financial position. Share Exchange. On August 16, 1999, EOG and Enron Corp. closed the Share Exchange Agreement in which EOG acquired 62,270,000 shares of EOG's common stock out of 82,270,000 shares owned by Enron Corp., and in return Enron Corp. received all of the stock of EOGI-India, Inc., a subsidiary of EOG ("Share Exchange"). EOGI-India, Inc. owned, through subsidiaries, all of EOG's assets and operations in India and China, and had received from EOG an indirect $600 million cash capital contribution, plus certain intercompany receivables, prior to the Share Exchange. EOG recognized a $575 million tax-free gain on the Share Exchange based on the fair value of the shares received, net of transaction fees of $14 million. On the closing of the Share Exchange, all of Enron Corp.'s officers and directors then serving as EOG directors resigned from EOG's board. 9 Immediately prior to the closing of the Share Exchange, Enron Corp. owned 82,270,000 shares of EOG's common stock, representing approximately 53.5 percent of all of the shares of EOG's common stock that were issued and outstanding. As a result of the closing of the Share Exchange, the sale by Enron Corp. of 8,500,000 shares of EOG's common stock as a selling stockholder in a public offering in which EOG also sold 27,000,000 shares of its common stock, and the completion on August 17, 1999 and August 20, 1999 of the offering of Enron Corp. notes mandatorily exchangeable at maturity into a minimum of 9,746,250 up to a maximum of 11,500,000 shares of EOG's common stock, Enron Corp's maximum remaining interest in EOG after the automatic conversion of its notes on July 31, 2002, will be under two percent (assuming the notes are exchanged for less than the 11,500,000 shares of EOG's common stock). As a result of Enron Corp.'s bankruptcy filing and because the Enron Corp. notes were unsecured, EOG believes it is unlikely that they will be exchanged for the shares of EOG's common stock. The entire 11,500,000 shares of EOG's common stock are included in EOG's outstanding common share count. Two entities not affiliated with Enron Corp. have recently filed Schedule 13Gs with the Securities and Exchange Commission with respect to these shares. Other Matters Energy Prices. Since EOG is primarily a natural gas company, it is more significantly impacted by changes in natural gas prices than in the prices for crude oil, condensate or natural gas liquids. Average North America wellhead natural gas prices have fluctuated, at times rather dramatically, during the last three years. These fluctuations resulted in a 11% increase in the average wellhead natural gas price for North America received by EOG from 1998 to 1999, an increase of 80% from 1999 to 2000, and an increase of 9% from 2000 to 2001. Wellhead natural gas volumes from Trinidad are sold at prices that are based on a fixed schedule with annual escalations. Substantially all of EOG's wellhead crude oil and condensate is sold under various terms and arrangements at market responsive prices. Crude oil and condensate prices also have fluctuated during the last three years. Due to the many uncertainties associated with the world political environment, the availabilities of other world wide energy supplies and the relative competitive relationships of the various energy sources in the view of consumers, EOG is unable to predict what changes may occur in natural gas, crude oil and condensate prices in the future. Risk Management. EOG engages in price risk management activities from time to time. These activities are intended to manage EOG's exposure to fluctuations in commodity prices for natural gas and crude oil. EOG utilizes derivative financial instruments, primarily price swaps and costless collars, and fixed price physical contracts as a means to manage this price risk. The following is a summary of EOG's price swap and physical contract positions at March 18, 2002: (a) 2002 Price Swap Positions o Natural Gas Price Swaps - Tabulated below is a summary of EOG's 2002 natural gas price swap positions with prices expressed in dollars per million British thermal units ($/MMBtu) and notional volumes in million British thermal units per day (MMBtud). EOG accounts for these swap contracts under mark-to-market accounting. Average Price Volume 2002 ($/MMBtu) (MMBtud) --------------------- ------------- -------- January (closed) $ 3.21 140,000 February (closed) $ 3.13 190,000 March (closed) $ 3.13 140,000 April and May $ 2.74 390,000 June $ 2.84 300,000 July through December $ 3.26 100,000 o Crude Oil Price Swaps - Notional volumes of two thousand barrels of oil per day for the period March 2002 to December 2002 at an average price of $21.50 per barrel. EOG accounts for these swap contracts under mark-to-market accounting. 10 (b) 2002 Natural Gas Physical Contracts EOG had 2002 natural gas physical contracts for 95,000 MMBtud at an average price of $3.03 per MMBtu for January and February 2002 in the U.S. In Canada, EOG has 2002 natural gas physical contracts for approximately 24,000 MMBtud at an average price of US$3.35 per MMBtu for the period of January through March 2002, approximately 34,000 MMBtud at an average price of US$3.19 per MMBtu for the period of April through June 2002, and approximately 24,000 MMBtud at an average price of US$3.35 per MMBtu for the period of July through December 2002. At December 31, 2001, based on EOG's tax position and the portion of EOG's anticipated natural gas volumes for 2001 for which prices have not, in effect, been hedged using NYMEX-related commodity market transactions and long-term marketing contracts, EOG's price sensitivity for each $0.10 per Mcf change in average wellhead natural gas prices is $15 million (or $0.13 per share) for net income and $23 million for current operating cash flow. EOG is not impacted as significantly by changing crude oil prices for those volumes not otherwise hedged. EOG's price sensitivity for each $1.00 per barrel change in average wellhead crude oil prices is $5 million (or $0.04 per share) for net income and $8 million for current operating cash flow. Tight Gas Sand Tax Credits (Section 29) and Severance Tax Exemption. United States federal tax law provides a tax credit for production of certain fuels produced from nonconventional sources (including natural gas produced from tight formations), subject to a number of limitations. Fuels qualifying for the credit must be produced from a well drilled or a facility placed in service after November 5, 1990 and before January 1, 1993, and must be sold before January 1, 2003. The credit, which is currently approximately $.52 per million British thermal unit of natural gas, is computed by reference to the price of crude oil, and is phased out as the price of crude oil exceeds $23.50 in 1980 dollars (adjusted for inflation) with complete phaseout if such price exceeds $29.50 in 1980 dollars (similarly adjusted). Under this formula, the commencement of phaseout would be triggered if the average price for crude oil rose above approximately $48 per barrel in current dollars. Significant benefits from the tax credit have accrued and continue to accrue to EOG since a portion (and in some cases a substantial portion) of EOG's natural gas production from new wells drilled after November 5, 1990, and before January 1, 1993, on EOG's leases in several of EOG's significant producing areas qualify for this tax credit. In 1999 and 2000, EOG entered into arrangements with a third party whereby certain Section 29 credits were sold by EOG to the third party, and payments for such credits will be received on an as-generated basis. Natural gas production from wells spudded or completed after May 24, 1989 and before September 1, 1996 in tight formations in Texas qualifies for a ten-year exemption from severance taxes, subject to certain limitations, during the period beginning September 1, 1991 and ending August 31, 2001. In addition, natural gas production from qualifying wells spudded or completed after August 31, 1996 and before September 1, 2010 is entitled to use of a reduced severance tax rate. However, the cumulative value of the tax reduction cannot exceed 50 percent of the drilling and completion costs incurred on a well by well basis. Other. All of EOG's natural gas and crude oil activities are subject to the risks normally incident to the exploration for and development and production of natural gas and crude oil, including blowouts, cratering and fires, each of which could result in damage to life and property. Offshore operations are subject to usual marine perils, including hurricanes and other adverse weather conditions. EOG's activities are also subject to governmental regulations as well as interruption or termination by governmental authorities based on environmental and other considerations. In accordance with customary industry practices, insurance is maintained by EOG against some, but not all, of the risks. Losses and liabilities arising from such events could reduce revenues and increase costs to EOG to the extent not covered by insurance. EOG's operations outside of North America are subject to certain risks, including expropriation of assets, risks of increases in taxes and government royalties, renegotiation of contracts with foreign governments, political instability, payment delays, limits on allowable levels of production and currency exchange and repatriation losses, as well as changes in laws, regulations and policies governing operations of foreign companies generally. 11 Current Executive Officers of the Registrant The current executive officers of EOG and their names and ages are as follows: Name Age Position - --------------------- ----- ------------------------------------- Mark G. Papa 55 Chairman of the Board and Chief Executive Officer; Director Edmund P. Segner, III 48 President and Chief of Staff; Director Loren M. Leiker 48 Executive Vice President, Exploration and Development Gary L. Thomas 52 Executive Vice President, North America Operations Barry Hunsaker, Jr. 51 Senior Vice President and General Counsel Timothy K. Driggers 40 Vice President, Accounting and Land Administration David R. Looney 45 Vice President, Finance Mark G. Papa was elected Chairman of the Board and Chief Executive Officer in August 1999, President and Chief Executive Officer and Director of EOG in September 1998, President and Chief Operating Officer in September 1997, President in December 1996 and was President-North America Operations from February 1994 to September 1998. Mr. Papa joined Belco Petroleum Corporation, a predecessor of EOG, in 1981. Edmund P. Segner, III became President and Chief of Staff and Director of EOG in August 1999. He became Vice Chairman and Chief of Staff of EOG in September 1997. Mr. Segner was a director of EOG from January 1997 to October 1997. Prior to joining EOG, Mr. Segner held various managerial positions with EOG's former majority shareholder, Enron Corp. Loren M. Leiker joined EOG in April 1989 as Senior Vice President, Exploration. He was elected Executive Vice President, Exploration in May 1998 and Executive Vice President, Exploration and Development in February 2000. Gary L. Thomas was elected Executive Vice President, North America Operations in May 1998. He was previously Senior Vice President and General Manager of EOG's Midland Division. Mr. Thomas joined a predecessor of EOG in July 1978. Barry Hunsaker, Jr. has been Senior Vice President and General Counsel since he joined EOG in May 1996. Timothy K. Driggers was elected Vice President and Controller of EOG in October 1999 and was subsequently named Vice President, Accounting and Land Administration. He held a management position in Enron Corp.'s accounting department from October 1998 through September 1999. Mr. Driggers held management positions in the Financial Planning and Reporting Department of EOG from August 1995 through September 1998. David R. Looney was elected Vice President, Finance of EOG in August 1999. He joined EOG as Assistant Treasurer in February 1998. Prior to joining EOG, Mr. Looney spent over 17 years in the commercial banking industry, specializing in capital formation for companies involved in the energy industry. There are no family relationships among the officers listed, and there are no arrangements or understandings pursuant to which any of them were elected as officers. Officers are appointed or elected annually by the Board of Directors at its first meeting prior to the Annual Meeting of Shareholders, each to hold office until the corresponding meeting of the Board in the next year or until a successor shall have been elected, appointed or shall have qualified. 12 ITEM 2. Properties Oil and Gas Exploration and Production Properties and Reserves Reserve Information. For estimates of EOG's net proved and proved developed reserves of natural gas and liquids, including crude oil, condensate and natural gas liquids, see "Supplemental Information to Consolidated Financial Statements" in the Form 8-K filed on February 28, 2002. There are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of development expenditures, including many factors beyond the control of the producer. The reserve data set forth in Supplemental Information to Consolidated Financial Statements represent only estimates. Reserve engineering is a subjective process of estimating underground accumulations of natural gas and liquids, including crude oil, condensate and natural gas liquids, that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the amount and quality of available data and of engineering and geological interpretation and judgment. As a result, estimates of different engineers normally vary. In addition, results of drilling, testing and production subsequent to the date of an estimate may justify revision of such estimate. Accordingly, reserve estimates are often different from the quantities ultimately recovered. The meaningfulness of such estimates is highly dependent upon the accuracy of the assumptions upon which they were based. In general, the volume of production from oil and gas properties owned by EOG declines as reserves are depleted. Except to the extent EOG acquires additional properties containing proved reserves or conducts successful exploration, exploitation and development activities, the proved reserves of EOG will decline as reserves are produced. Volumes generated from future activities of EOG are therefore highly dependent upon the level of success in finding or acquiring additional reserves and the costs incurred in so doing. EOG's estimates of reserves filed with other federal agencies agree with the information set forth in Supplemental Information to Consolidated Financial Statements. 13 Acreage. The following table summarizes EOG's developed and undeveloped acreage at December 31, 2001. Excluded is acreage in which EOG's interest is limited to owned royalty, overriding royalty and other similar interests. Developed Undeveloped Total ---------------------- ------------------------- ----------------------- Gross Net Gross Net Gross Net ---------- ---------- ----------- ----------- ---------- ---------- United States Texas........................... 463,980 280,860 751,115 636,792 1,215,095 917,652 Wyoming......................... 293,332 181,511 603,359 341,542 896,691 523,053 Oklahoma........................ 172,131 107,882 179,425 136,797 351,556 244,679 Montana......................... 119,566 630 284,920 229,661 404,486 230,291 New Mexico...................... 144,064 80,605 246,688 143,060 390,752 223,665 Offshore Gulf of Mexico......... 287,474 78,901 215,412 124,451 502,886 203,352 Utah............................ 217,447 76,572 201,634 119,326 419,081 195,898 Pennsylvania.................... 67,637 67,637 82,500 82,500 150,137 150,137 California...................... 2,736 1,626 110,287 99,902 113,023 101,528 New York........................ - - 87,981 77,547 87,981 77,547 South Dakota.................... - - 52,238 52,238 52,238 52,238 Mississippi..................... 9,711 9,390 35,783 33,700 45,494 43,090 Colorado........................ 24,884 1,425 113,058 39,641 137,942 41,066 Louisiana....................... 11,645 9,415 36,263 27,670 47,908 37,085 Kansas.......................... 13,533 11,991 28,292 24,836 41,825 36,827 Ohio............................ 9,761 7,330 22,190 22,169 31,951 29,499 North Dakota.................... 3,854 1,659 18,447 18,274 22,301 19,933 Michigan........................ - - 22,697 11,349 22,697 11,349 West Virginia................... 240 - 7,411 7,329 7,651 7,329 Arkansas........................ 1,434 427 1,483 638 2,917 1,065 Alabama......................... - - 212 193 212 193 --------- ---------- --------- --------- --------- --------- Total United States.......... 1,843,429 917,861 3,101,395 2,229,615 4,944,824 3,147,476 Canada Saskatchewan.................... 352,425 327,488 137,018 133,858 489,443 461,346 Alberta......................... 619,699 423,944 405,128 338,234 1,024,827 762,178 Manitoba........................ 11,874 10,492 56,924 56,604 68,798 67,096 British Columbia................ 656 164 14,334 7,221 14,990 7,385 Northwest Territories........... - - 806,328 224,312 806,328 224,312 --------- --------- --------- --------- --------- --------- Total Canada................. 984,654 762,088 1,419,732 760,229 2,404,386 1,522,317 Other International Trinidad........................ 41,926 40,740 55,335 52,568 97,261 93,308 France.......................... - - 168,032 168,032 168,032 168,032 --------- --------- --------- --------- --------- --------- Total Other International..... 41,926 40,740 223,367 220,600 265,293 261,340 --------- --------- --------- --------- --------- --------- Total......................... 2,870,009 1,720,689 4,744,494 3,210,444 7,614,503 4,931,133 ========= ========= ========= ========= ========= =========
Producing Well Summary. The following table reflects EOG's ownership in gas and oil wells located in Texas, the Gulf of Mexico, Oklahoma, New Mexico, Utah, Pennsylvania, Wyoming, and various other states, Canada and Trinidad at December 31, 2001. Gross gas and oil wells include 546 with multiple completions. Productive Wells ------------------ Gross Net -------- -------- Gas....................................... 10,525 7,771 Oil....................................... 1,470 1,215 ------- ------ Total................................. 11,995 8,986 ======= ======
14 Drilling and Acquisition Activities. During the years ended December 31, 2001, 2000, and 1999 EOG spent approximately $1,163 million, $710 million and $461 million, respectively, for exploratory and development drilling and acquisition of leases and producing properties. EOG drilled, participated in the drilling of or acquired wells as set out in the table below for the periods indicated: Year Ended December 31, ------------------------------------------------------------ 2001 2000 1999 ------------------ ------------------ ------------------ Gross Net Gross Net Gross Net ------- -------- ------- -------- ------- -------- Development Wells Completed North America Gas..................................... 1,550 1,311.86 743 611.93 613 515.64 Oil..................................... 124 107.06 93 83.46 53 52.02 Dry..................................... 95 81.68 51 44.03 68 58.43 ------ -------- ------ -------- ----- ------- Total................................ 1,769 1,500.60 887 739.42 734 626.09 Outside North America Gas..................................... 3 2.90 - - 6 2.00 Oil..................................... - - - - 6 1.90 Dry..................................... - - - - - - ------ -------- ------ -------- ------ ------- Total................................. 3 2.90 - - 12 3.90 ------ -------- ------ -------- ------ ------- Total Development....................... 1,772 1,503.50 887 739.42 746 629.99 ------ -------- ------ -------- ------ ------- Exploratory Wells Completed North America Gas..................................... 24 18.38 19 11.85 21 14.57 Oil..................................... 10 7.10 4 4.00 2 2.00 Dry..................................... 29 23.05 26 20.00 19 14.55 ------ -------- ------ -------- ------ ------- Total................................. 63 48.53 49 35.85 42 31.12 Outside North America Gas..................................... - - - - 1 0.30 Oil..................................... - - - - - - Dry..................................... 1 0.25 1 1.00 1 1.00 ------ -------- ------ -------- ------ ------- Total................................. 1 0.25 1 1.00 2 1.30 ------ -------- ------ -------- ------ ------- Total Exploratory....................... 64 48.78 50 36.85 44 32.42 ------ -------- ------ -------- ------ ------- Total................................ 1,836 1,552.28 937 776.27 790 662.41 Wells in Progress at end of period........ 71 59.04 46 40.19 25 21.34 ------ -------- ------ -------- ------ ------- Total................................ 1,907 1,611.32 983 816.46 815 683.75 ====== ======== ====== ======== ====== ======= Wells Acquired* Gas..................................... 1,089 981.53 1,315 985.37 576 380.01 Oil..................................... 53 51.04 168 120.70 422 402.34 ------ -------- ------ -------- ------ ------- Total............................... 1,142 1,032.57 1,483 1,106.07 998 782.35 ====== ======== ====== ======== ====== ======= - ----------------------------- *Includes the acquisition of additional interests in certain wells in which EOG previously owned an interest. All of EOG's drilling activities are conducted on a contract basis with independent drilling contractors. EOG owns no drilling equipment.
15 ITEM 3. Legal Proceedings The information required by this item is incorporated by reference from the Contingencies section in Note 7 of Notes to Consolidated Financial Statements included in the Form 8-K filed on February 28, 2002. ITEM 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders during the fourth quarter of 2001. PART II ITEM 5. Market for the Registrant's Common Equity and Related Shareholder Matters The following table sets forth, for the periods indicated, the high and low sales prices per share for the common stock of EOG, as reported on the New York Stock Exchange Composite Tape, and the amount of cash dividends declared per share. Price Range --------------------- Cash High Low Dividend ------ ------- -------- 2000 - ---- First Quarter $24.06 $13.69 $0.030 Second Quarter 34.88 21.75 0.035 Third Quarter 40.88 26.69 0.035 Fourth Quarter 56.69 35.31 0.035 2001 - ---- First Quarter $55.50 $39.30 $0.035 Second Quarter 49.86 34.91 0.040 Third Quarter 36.99 25.80 0.040 Fourth Quarter 39.66 27.65 0.040 As of March 11, 2002, there were approximately 370 record holders of EOG's common stock, including individual participants in security position listings. There are an estimated 57,700 beneficial owners of EOG's common stock, including shares held in street name. EOG currently intends to continue to pay quarterly cash dividends on its outstanding shares of common stock. However, the determination of the amount of future cash dividends, if any, to be declared and paid will depend upon, among other things, the financial condition, funds from operations, level of exploration, exploitation and development expenditure opportunities and future business prospects of EOG. On December 5, 2001, EOG's indirect, wholly owned subsidiary EOG Company of Canada issued $120,000,000 principal amount of 7.00% Senior Notes due 2011 which were fully and unconditionally guaranteed by EOG (the "Senior Notes") to Salomon Smith Barney Inc., Banc One Capital Markets, Inc., Deutsche Bank Alex. J.P. Morgan Securities Inc. and TD Securities (USA) Inc., as initial purchasers, for resale to "qualified institutional buyers" as defined in Rule 144A of the Securities Act of 1933, and outside the United States in accordance with Regulation S of the Securities Act of 1933. The aggregate offering price of the Senior Notes was $118,875,600 and the aggregate commission was $780,000. 16 ITEM 6. Selected Financial Data Year Ended December 31, ------------------------------------------------------------- (In Thousands, Except Per Share Amounts) 2001 2000 1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------------- Statement of Income Data: Net operating revenues.............................. $1,654,887 $1,489,895 $ 842,099 $ 808,252 $ 820,451 Operating expenses Lease and well...................................... 175,446 140,915 132,233 137,932 133,014 Exploration costs................................... 67,467 67,196 52,773 65,940 57,696 Dry hole costs...................................... 71,360 17,337 11,893 22,751 17,303 Impairments......................................... 79,156 46,478 161,817(1) 32,904 34,542 Depreciation, depletion and amortization............ 392,399 359,265 329,668 314,278 270,850 General and administrative.......................... 79,963 66,932 82,857 69,010 54,415 Taxes other than income............................. 95,333 94,909 52,670 51,776 59,856 Charges associated with Enron bankruptcy............ 19,211 - - - - ------------------------------------------------------------- Total............................................... 980,335 793,032 823,911 694,591 627,676 ------------------------------------------------------------- Operating Income...................................... 674,552 696,863 18,188 113,661 192,775 Other income (expense), net........................... 2,003 (2,300) 611,343(2) (4,800) (1,588) Interest expense (net of interest capitalized)........ 45,110 61,006 61,819 48,579 27,717 ------------------------------------------------------------- Income before income taxes............................ 631,445 633,557 567,712 60,282 163,470 Income tax provision (benefit)(3)..................... 232,829 236,626 (1,382) 4,111(4) 41,500(5) ------------------------------------------------------------- Net income............................................ 398,616 396,931 569,094 56,171 121,970 Preferred stock dividends............................. 10,994 11,028 535 - - ------------------------------------------------------------- Net income available to common........................ $ 387,622 $ 385,903 $ 568,559 $ 56,171 $ 121,970 ============================================================= Net income per share available to common Basic............................................... $ 3.35 $ 3.30 $ 4.04 $ 0.36 $ 0.78 ============================================================= Diluted............................................. $ 3.30 $ 3.24 $ 4.01 $ 0.36 $ 0.77 ============================================================= Average number of common shares Basic............................................... 115,765 116,934 140,648 154,002 157,092 ============================================================= Diluted............................................. 117,488 119,102 141,627 154,573 157,663 =============================================================
At December 31, --------------------------------------------------------------- (In Thousands) 2001 2000 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------- Balance Sheet Data: Oil and gas properties - net.......................... $3,055,910 $2,525,007 $2,334,928 $2,676,363 $2,387,207 Total assets.......................................... 3,414,044 3,001,253 2,610,793 3,018,095 2,723,355 Long-term debt Third Party......................................... 855,969 859,000 990,306 942,779 548,775 Affiliate........................................... - - - 200,000 192,500 Deferred revenue...................................... - - - 4,198 39,918 Shareholders' equity.................................. 1,642,686 1,380,925 1,129,611 1,280,304 1,281,049 (1) Includes $133 million non-cash charges in connection with impairments and/or EOG's decision to dispose of projects no longer deemed central to its business. (2) Includes a $575 million tax-free gain on the share exchange transactions (See "Transactions with Enron Corp." on Page 8). (3) Includes benefits of approximately $8 million, $12 million and $12 million in 1999, 1998 and 1997, respectively, relating to tight gas sands federal income tax credits. (4) Includes a benefit of $2 million related to the final audit assessments of India taxes for certain prior years, a benefit of $3.8 million related to reduced deferred franchise taxes, and $3.5 million related to cumulative Venezuela deferred tax benefits. (5) Includes a benefit of $15 million primarily associated with the refiling of certain Canadian tax returns and the sale of certain international assets and subsidiaries.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Information required by this item is incorporated by reference from pages 4 through 12 of the Form 8-K filed on February 28, 2002. 17 Information Regarding Forward-Looking Statements This Annual Report on Form 10-K 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, the ability to increase reserves, or the ability 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: the timing and extent of changes in commodity prices for crude oil, natural gas and related products and interest rates; the extent and effect of any hedging activities engaged in by EOG; the extent of EOG's success in discovering, developing, marketing and producing reserves and in acquiring oil and gas properties; the accuracy of reserve estimates, which by their nature involve the exercise of professional judgment and may therefore be imprecise; political developments around the world, including terrorist activities and responses to such activities; 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. ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk EOG's exposure to interest rate risk and commodity price risk is discussed respectively in the Financing and Outlook sections of the "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Capital Resources and Liquidity," which is incorporated by reference from pages 6 through 10 of the Form 8-K filed on February 28, 2002. EOG's exposure to foreign currency exchange rate risks and other market risks is insignificant. ITEM 8. Financial Statements and Supplementary Data Information required by this item is incorporated by reference from portions of the Form 8-K filed on February 28, 2002 as indicated: Cross Reference to Applicable Sections of Form 8-K filed on February 28, 2002 Page ----------------------------------------------------------------------- Report of Independent Public Accountants........................ 14 Consolidated Financial Statements............................... 15 Notes to Consolidated Financial Statements...................... 19 Supplemental Information to Consolidated Financial Statements... 36 Unaudited Quarterly Financial Information....................... 44 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The required information has been previously reported in Item 4 of EOG's Current Report on Form 8-K filed with the Securities and Exchange Commission on March 1, 2002. PART III ITEM 10. Directors and Executive Officers of the Registrant The information required by this Item regarding directors is incorporated by reference from the Proxy Statement to be filed within 120 days after December 31, 2001, under the caption entitled "Election of Directors." See list of "Current Executive Officers of the Registrant" in Part I located elsewhere herein. 18 ITEM 11. Executive Compensation The information required by this Item is incorporated by reference from the Proxy Statement to be filed within 120 days after December 31, 2001, under the caption "Compensation of Directors and Executive Officers." ITEM 12. Security Ownership of Certain Beneficial Owners and Management The information required by this Item is incorporated by reference from the Proxy Statement to be filed within 120 days after December 31, 2001, under the captions "Election of Directors" and "Compensation of Directors and Executive Officers." ITEM 13. Certain Relationships and Related Transactions The information required by this Item is incorporated by reference from the Proxy Statement to be filed within 120 days after December 31, 2001, under the caption "Certain Transactions." PART IV ITEM 14. Financial Statements and Financial Statement Schedule, Exhibits and Reports on Form 8-K (a)(1) Financial Statements and Supplemental Data Cross Reference to Applicable Sections of Form 8-K filed on February 28, 2002 Page --------------------------------------------------------------------- Consolidated Financial Statements............................... 15 Notes to Consolidated Financial Statements...................... 19 Supplemental Information to Consolidated Financial Statements... 36 Unaudited Quarterly Financial Information....................... 44 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To EOG Resources, Inc.: We have audited in accordance with auditing standards generally accepted in the United States the financial statements included in EOG Resources, Inc.'s Current Report on Form 8-K dated February 27, 2002, incorporated by reference in this Form 10-K, and have issued our report thereon dated February 21, 2002. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule included in this item is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Houston, Texas February 21, 2002 19 (a)(2) Financial Statement Schedule Schedule II EOG RESOURCES, INC. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the Years Ended December 31, 2001, 2000 and 1999 (In Thousands) - ----------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E - ----------------------------------------------------------------------------------------------------- Additions Deductions for Balance at Charged to Purpose for Balance at Beginning of Costs and Which Reserves End of Description Year Expenses Were Created Year - ----------------------------------------------------------------------------------------------------- 2001 Reserves deducted from assets to which they apply-- Revaluation of Accounts Receivable....... $ 1,558 $19,211 $ 655 $20,114 ======= ======= ======= ======= 2000 Reserves deducted from assets to which they apply-- Revaluation of Accounts Receivable....... $ 1,060 $ 500 $ 2 $ 1,558 ======= ======= ======= ======= 1999 Reserves deducted from assets to which they apply-- Revaluation of Accounts Receivable....... $11,375 $ 1,972 $12,287 $ 1,060 ======= ======= ======= ======= Other financial statement schedules have been omitted because they are inapplicable or the information required therein is included elsewhere in the consolidated financial statements or notes thereto.
(a)(3) Exhibits See pages 20 through 24 for a listing of the exhibits. (b) Reports on Form 8-K Current Report on Form 8-K filed on October 3, 2001 to report a new 10 million share repurchase authorization of its common stock in Item 5 - Other Events; and to provide estimate for the third and fourth quarters and full year 2001 in Item 9 - Regulation FD Disclosure. Current Report on Form 8-K filed on December 14, 2001 to report an amendment to EOG's Rights Agreement dated as of February 14, 2000 between EOG and First Chicago Trust Company of New York in Item 5 - Other Events; to present as an exhibit the said amendment in Item 7 - Financial Statements, Pro Forma Financial Information and Exhibits; and to provide estimate for the fourth quarter and full year 2001 in Item 9 - Regulation FD Disclosure. 20 EXHIBITS Exhibits not incorporated herein by reference to a prior filing are designated by an asterisk (*) and are filed herewith; all exhibits not so designated are incorporated herein by reference to EOG's Form S-1 Registration Statement, Registration No. 33-30678, filed on August 24, 1989 ("Form S-1"), or as otherwise indicated. Exhibit Number Description - ------- ------------- 3.1(a) -- Restated Certificate of Incorporation (Exhibit 3.1 to Form S-1). 3.1(b) -- Certificate of Amendment of Restated Certificate of Incorporation (Exhibit 4.1(b) to Form S-8 Registration Statement No. 33-52201, filed February 8, 1994). 3.1(c) -- Certificate of Amendment of Restated Certificate of Incorporation (Exhibit 4.1(c) to Form S-8 Registration Statement No. 33-58103, filed March 15, 1995). 3.1(d) -- Certificate of Amendment of Restated Certificate of Incorporation, dated June 11, 1996 (Exhibit 3(d) to Form S-3 Registration Statement No. 333-09919, filed August 9, 1996). 3.1(e) -- Certificate of Amendment of Restated Certificate of Incorporation, dated May 7, 1997 (Exhibit 3(e) to Form S-3 Registration Statement No. 333-44785, filed January 23, 1998). 3.1(f) -- Certificate of Ownership and Merger, dated August 26, 1999 (Exhibit 3.1(f) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 3.1(g) -- Certificate of Designations of Series E Junior Participating Preferred Stock, dated February 14, 2000 (Exhibit 2 to Form 8-A Registration Statement, filed February 18, 2000). 3.1(h) -- Certificate of Designation, Preferences and Rights of Fixed Rate Cumulative Perpetual Senior Preferred Stock, Series B, dated July 19, 2000 (Exhibit 3.1(h) to EOG's Registration Statement on Form S-3 Registration Statement No. 333-46858, filed September 28, 2000). 3.1(i) -- Certificate of Designation, Preferences and Rights of the Flexible Money Market Cumulative Preferred Stock, Series D, dated July 25, 2000 (Exhibit 3.1(i) to EOG's Registration Statement on Form S-3 Registration Statement No. 333-46858, filed September 28, 2000). 3.1(j) -- Certificate of Elimination of the Fixed Rate Cumulative Perpetual Senior Preferred Stock, Series A, dated September 15, 2000 (Exhibit 3.1(j) to EOG's Registration Statement on Form S-3 Registration Statement No. 333-46858, filed September 28, 2000). 3.1(k) -- Certificate of Elimination of the Flexible Money Market Cumulative Preferred Stock, Series C, dated September 15, 2000 (Exhibit 3.1(k) to EOG's Registration Statement on Form S-3 Registration Statement No. 333-46858, filed September 28, 2000). 3.2 -- By-laws, dated August 23, 1989, as amended and restated effective as of May 8, 2001. (Exhibit 3.1 to EOG's Quarterly Report on Form 10-Q for the three months ended March 31, 2001). 4.1(a) -- Specimen of Certificate evidencing the Common Stock (Exhibit 3.3 to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 4.1(b) -- Specimen of Certificate Evidencing Fixed Rate Cumulative Perpetual Senior Preferred Stock, Series B (Exhibit 4.3(g) to EOG's Registration Statement on Form S-4 Registration Statement No. 333-36056, filed June 7, 2000). 21 Exhibit Number Description - ------- ------------- 4.1(c) -- Specimen of Certificate Evidencing Flexible Money Market Cumulative Preferred Stock, Series D (Exhibit 4.3(g) to EOG's Registration Statement on Form S-4 Registration Statement No. 333-36416, filed June 12, 2000). 4.2 -- Rights Agreement, dated as of February 14, 2000, between EOG and First Chicago Trust Company of New York, which includes the form of Rights Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C (Exhibit 1 to EOG's Registration Statement on Form 8-A, filed February 18, 2000). 4.3 -- Form of Rights Certificate (Exhibit 3 to EOG's Registration Statement on Form 8-A, filed February 18, 2000). 4.4 -- Indenture dated as of September 1, 1991, between EOG and Chase Bank of Texas National Association (formerly, Texas Commerce Bank National Association) (Exhibit 4(a) to EOG's Registration Statement on Form S-3 Registration Statement No. 33-42640, filed September 6, 1991). 4.5 -- Indenture dated as of _________, 2000, between EOG and The Bank of New York (Exhibit 4.6 to EOG's Registration Statement on Form S-3 Registration Statement No. 333-46858, filed September 28, 2000). 4.6 -- Amendment, dated as of December 13, 2001, to the Rights Agreement, dated as of February 14, 2000, between EOG and First Chicago Trust Company of New York, as rights agent (Exhibit 2 to Amendment No. 1 to EOG's Registration Statement on Form 8-A/A filed December 14, 2001). 4.7 -- Letter dated December 13, 2001, from First Chicago Trust Company of New York to EOG resigning as rights agent effective January 12, 2002 (Exhibit 3 to Amendment No. 2 to EOG's Registration Statement on Form 8-A/A filed February 7, 2002). 4.8 -- Amendment, dated as of December 20, 2001, to the Rights Agreement, dated as of February 14, 2000, between EOG and First Chicago Trust Company of New York, as rights agent (Exhibit 4 to Amendment No. 2 to EOG's Registration Statement on Form 8-A/A filed February 7, 2002). 4.9 -- Letter dated December 20, 2001, from EOG Resources, Inc. to EquiServe Trust Company, N.A. appointing EquiServe Trust Company, N.A. as successor rights agent (Exhibit 5 to Amendment No. 2 to EOG's Registration Statement on Form 8- A/A filed February 7, 2002). 10.1(a) -- Amended and Restated 1994 Stock Plan (Exhibit 4.3 to Form S-8 Registration Statement No. 33-58103, filed March 15, 1995). 10.1(b) -- Amendment to Amended and Restated 1994 Stock Plan, dated effective as of December 12, 1995 (Exhibit 4.3(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1995). 10.1(c) -- Amendment to Amended and Restated 1994 Stock Plan, dated effective as of December 10, 1996 (Exhibit 4.3(a) to Form S-8 Registration Statement No. 333-20841, filed January 31, 1997). 10.1(d) -- Third Amendment to Amended and Restated 1994 Stock Plan, dated effective as of December 9, 1997 (Exhibit 4.3(d) to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.1(e) -- Fourth Amendment to Amended and Restated 1994 Stock Plan, dated effective as of May 5, 1998 (Exhibit 4.3(e) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.1(f) -- Fifth Amendment to Amended and Restated 1994 Stock Plan, dated effective as of December 8, 1998 (Exhibit 4.3(f) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). *10.1(g) -- Sixth Amendment to Amended and Restated 1994 Stock Plan, dated effective as of May 8, 2001. 22 Exhibit Number Description - ------- ------------- 10.2(a) -- Stock Restriction and Registration Agreement dated as of August 23, 1989 (Exhibit 10.2 to Form S-1). 10.2(b) -- Amendment to Stock Restriction and Registration Agreement, dated December 9, 1997, between EOG and Enron Corp. (Exhibit 10.2(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.3 -- Tax Allocation Agreement, entered into effective as of the Deconsolidation Date, between Enron Corp., EOG, and the subsidiaries of EOG listed therein as additional parties (Exhibit 10.3 to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.4(a) -- Share Exchange Agreement, dated as of July 19, 1999, between Enron Corp. and EOG (Exhibit 2 to Form S-3 Registration Statement No. 333-83533, filed July 23, 1999). 10.4(b) -- Letter Amendment, dated July 30, 1999, to Share Exchange Agreement, between Enron Corp. and EOG (Exhibit 2.2 to EOG's Current Report on Form 8-K, filed August 31, 1999). 10.4(c) -- Letter Amendment, dated August 10, 1999, to Share Exchange Agreement, between Enron Corp. and EOG (Exhibit 2.3 to EOG's Current Report on Form 8-K, filed August 31, 1999). 10.4(d) -- Consent Agreement between EOG, Enron Corp., Enron Finance Partners, LLC, Enron Intermediate Holdings, LLC, Enron Asset Holdings, LLC and Aeneas, LLC, dated November 28, 2000. 10.5(a) -- 1993 Nonemployee Directors Stock Option Plan (Exhibit 10.14 to EOG's Annual Report on Form 10-K for the year ended December 31, 1992). 10.5(b) -- First Amendment to 1993 Nonemployee Directors Stock Option Plan (Exhibit 10.14(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1996). *10.5(c) -- Second Amendment to 1993 Nonemployee Directors Stock Option Plan, dated effective as of May 8, 2001. 10.6 -- ISDA Master Agreement, dated as of November 1, 1993, between EOG and Enron Risk Management Services Corp., and Confirmation Nos. 1268.0, 1286.0, 1291.0, 1292.0, 1304.0, 1305.0, 1321.0, 1335.0, 1338.0, 1370.0, 1471.0, 1485.0, 1486.0, 1494.0, 1495.0, 1509.0, 1514.0, 1533.01, 1569.0, 1986.0, 2217.0, 2227.0, 2278.0, 2299.0, 2372.0, 2647.0 (Exhibit 10.18 to EOG's Annual Report on Form 10-K for the year ended December 31, 1993). 10.7(a) -- 1992 Stock Plan (As Amended and Restated Effective June 28, 1999) (Exhibit A to EOG's Proxy Statement, dated June 4, 1999, with respect to EOG's Annual Meeting of Shareholders). *10.7(b) -- First Amendment to 1992 Stock Plan (As Amended and Restated Effective June 28, 1999), dated effective as of May 8, 2001. 10.8 -- Equity Participation and Business Opportunity Agreement, dated December 9, 1997, between EOG and Enron Corp. (Exhibit 10 to Form S-3 Registration Statement No. 333-44785, filed January 23, 1998). 10.9(a) -- 1996 Deferral Plan (Exhibit 10.63(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.9(b) -- First Amendment to 1996 Deferral Plan, dated effective as of December 9, 1997 (Exhibit 10.63(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.9(c) -- Second Amendment to 1996 Deferral Plan, dated effective as of December 8, 1998 (Exhibit 10.63(c) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 23 Exhibit Number Description - ------- ------------- 10.9(d) -- 1996 Deferral Plan, as amended and restated effective May 8, 2001 (Exhibit 4.4 to Form S-8 Registration Statement No. 333-84014, filed March 8, 2002). 10.10(a) -- Executive Employment Agreement between EOG and Mark G. Papa, effective as of November 1, 1997 (Exhibit 10.64 to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.10(b) -- First Amendment to Executive Employment Agreement between EOG and Mark G. Papa, effective as of February 1, 1999 (Exhibit 10.64(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.10(c) -- Second Amendment to Executive Agreement between EOG and Mark G. Papa, effective as of June 28, 1999 (Exhibit 10.64(c) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.10(d) --Third Amendment to Executive Employment Agreement between EOG and Mark G. Papa, entered into on June 20, 2001, and made effective as of June 1, 2001. *10.10(e) --Change of Control Agreement between EOG and Mark G. Papa, effective as of June 20, 2001. 10.11(a) -- Executive Employment Agreement between EOG and Edmund P. Segner, III, effective as of September 1, 1998 (Exhibit 10.65(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.11(b) -- First Amendment to Executive Employment Agreement between EOG and Edmund P. Segner, III, effective as of February 1, 1999 (Exhibit 10.65(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.11(c) -- Second Amendment to Executive Employment Agreement between EOG and Edmund P. Segner, III, effective as of June 28, 1999 (Exhibit 10.65(c) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.11(d) -- Third Amendment to Executive Employment Agreement between EOG and Edmund P. Segner, III, entered into on June 22, 2001, and made effective as of June 1, 2001. *10.11(e) -- Change of Control Agreement between EOG and Edmund P. Segner, III, effective as of June 22, 2001. 10.12(a) -- Executive Employment Agreement between EOG and Barry Hunsaker, Jr., effective as of September 1, 1998 (Exhibit 10.66(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 10.12(b) -- First Amendment to Executive Employment Agreement between EOG and Barry Hunsaker, Jr., effective as of December 21, 1998 (Exhibit 10.66(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 10.12(c) -- Second Amendment to Executive Employment Agreement between EOG and Barry Hunsaker, Jr., effective as of February 1, 1999 (Exhibit 10.66(c) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.12(d) -- Third Amendment to Executive Employment Agreement between EOG and Barry Hunsaker, Jr., entered into on June 29, 2001, and made effective as of June 1, 2001. *10.12(e) -- Change of Control Agreement between EOG and Barry Hunsaker, Jr., effective as of June 29, 2001. 10.13(a) -- Executive Employment Agreement between EOG and Loren M Leiker, effective as of March 1, 1998 (Exhibit 10.67(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 24 Exhibit Number Description - ------- ------------- 10.13(b) -- First Amendment to Executive Employment Agreement between EOG and Loren M. Leiker, effective as of February 1, 1999 (Exhibit 10.67(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.13(c) -- Second Amendment to Executive Employment Agreement between EOG and Loren M. Leiker, entered into on July 1, 2001, and made effective as of June 1, 2001. *10.13(d) -- Change of Control Agreement between EOG and Loren M. Leiker, effective as of July 1, 2001. 10.14(a) -- Executive Employment Agreement between EOG and Gary L. Thomas, effective as of September 1, 1998 (Exhibit 10.68(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 10.14(b) -- First Amendment to Executive Employment Agreement between EOG and Gary L. Thomas, effective as of February 1, 1999 (Exhibit 10.68(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.14(c) -- Second Amendment to Executive Employment Agreement between EOG and Gary L. Thomas, entered into on July 1, 2001, and made effective as of June 1, 2001. *10.14(d) -- Change of Control Agreement between EOG and Gary L. Thomas, effective as of July 1, 2001. *10.15 -- Change of Control Severance Plan, (as Amended and Restated Effective May 8, 2001). 10.16 -- Employee Stock Purchase Plan (Exhibit 4.4 to Form S-8 Registration Statement No. 333-62256, filed June 4, 2001). 10.17 -- Savings Plan (Exhibit 4.4 to Form S-8 Registration Statement No. 333-63184, filed June 15, 2001. 10.18 -- Executive Officer Annual Bonus Plan (Exhibit C to EOG's Proxy Statement, dated March 30, 2001, with respect to EOG's Annual Meeting of Shareholders). *12 -- Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends. 16.1 -- Letter regarding change in certifying accountant (Exhibit 16.1 to EOG's Current Report on Form 8-K, filed March 1, 2002). *21 -- List of subsidiaries. *23.1 -- Consent of DeGolyer and MacNaughton. 23.2 -- Opinion of DeGolyer and MacNaughton dated January 25, 2002 (Exhibit 23.2 to EOG's Current Report on Form 8-K, filed on February 28, 2002). *23.3 -- Consent of Arthur Andersen LLP. *24 -- Powers of Attorney. *99 -- Current Report on Form 8-K, filed on February 28, 2002. 25 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, on the 20th day of March, 2002. EOG RESOURCES, INC. (Registrant) By /s/TIMOTHY K. DRIGGERS --------------------------- (Timothy K. Driggers) Vice President Accounting and Land Administration (Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of registrant and in the capacities with EOG Resources, Inc. indicated and on the 20th day of March, 2002. Signature Title ----------- --------- /s/ MARK G. PAPA Chairman and Chief Executive Officer and -------------------------- Director (Principal Executive Officer) (Mark G. Papa) /s/ TIMOTHY K. DRIGGERS Vice President Accounting -------------------------- and Land Administration (Timothy K. Driggers) (Principal Accounting Officer) /s/ DAVID R. LOONEY Vice President Finance -------------------------- (Principal Financial Officer) (David R. Looney *EDMUND P. SEGNER, III President and Chief of Staff and Director --------------------------- (Edmund P. Segner, III) *GEORGE A. ALCORN Director --------------------------- (George A. Alcorn) *EDWARD RANDALL, III Director --------------------------- (Edward Randall, III) *DONALD F. TEXTOR Director --------------------------- (Donald F. Textor) *FRANK G. WISNER Director --------------------------- (Frank G. Wisner) *By /s/ PATRICIA L. EDWARDS ---------------------------- (Patricia L. Edwards) (Attorney-in-fact for persons indicated) 26 Exhibit Number Description - ------- ------------- 3.1(a) -- Restated Certificate of Incorporation (Exhibit 3.1 to Form S-1). 3.1(b) -- Certificate of Amendment of Restated Certificate of Incorporation (Exhibit 4.1(b) to Form S-8 Registration Statement No. 33-52201, filed February 8, 1994). 3.1(c) -- Certificate of Amendment of Restated Certificate of Incorporation (Exhibit 4.1(c) to Form S-8 Registration Statement No. 33-58103, filed March 15, 1995). 3.1(d) -- Certificate of Amendment of Restated Certificate of Incorporation, dated June 11, 1996 (Exhibit 3(d) to Form S-3 Registration Statement No. 333-09919, filed August 9, 1996). 3.1(e) -- Certificate of Amendment of Restated Certificate of Incorporation, dated May 7, 1997 (Exhibit 3(e) to Form S-3 Registration Statement No. 333-44785, filed January 23, 1998). 3.1(f) -- Certificate of Ownership and Merger, dated August 26, 1999 (Exhibit 3.1(f) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 3.1(g) -- Certificate of Designations of Series E Junior Participating Preferred Stock, dated February 14, 2000 (Exhibit 2 to Form 8-A Registration Statement, filed February 18, 2000). 3.1(h) -- Certificate of Designation, Preferences and Rights of Fixed Rate Cumulative Perpetual Senior Preferred Stock, Series B, dated July 19, 2000 (Exhibit 3.1(h) to EOG's Registration Statement on Form S-3 Registration Statement No. 333-46858, filed September 28, 2000). 3.1(i) -- Certificate of Designation, Preferences and Rights of the Flexible Money Market Cumulative Preferred Stock, Series D, dated July 25, 2000 (Exhibit 3.1(i) to EOG's Registration Statement on Form S-3 Registration Statement No. 333-46858, filed September 28, 2000). 3.1(j) -- Certificate of Elimination of the Fixed Rate Cumulative Perpetual Senior Preferred Stock, Series A, dated September 15, 2000 (Exhibit 3.1(j) to EOG's Registration Statement on Form S-3 Registration Statement No. 333-46858, filed September 28, 2000). 3.1(k) -- Certificate of Elimination of the Flexible Money Market Cumulative Preferred Stock, Series C, dated September 15, 2000 (Exhibit 3.1(k) to EOG's Registration Statement on Form S-3 Registration Statement No. 333- 46858, filed September 28, 2000). 3.2 -- By-laws, dated August 23, 1989, as amended and restated effective as of May 8, 2001. (Exhibit 3.1 to EOG's Quarterly Report on Form 10-Q for the three months ended March 31, 2001). 4.1(a) -- Specimen of Certificate evidencing the Common Stock (Exhibit 3.3 to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 4.1(b) -- Specimen of Certificate Evidencing Fixed Rate Cumulative Perpetual Senior Preferred Stock, Series B (Exhibit 4.3(g) to EOG's Registration Statement on Form S- 4 Registration Statement No. 333-36056, filed June 7, 2000). 4.1(c) -- Specimen of Certificate Evidencing Flexible Money Market Cumulative Preferred Stock, Series D (Exhibit 4.3(g) to EOG's Registration Statement on Form S-4 Registration Statement No. 333-36416, filed June 12, 2000). 27 Exhibit Number Description - ------- ------------- 4.2 -- Rights Agreement, dated as of February 14, 2000, between EOG and First Chicago Trust Company of New York, which includes the form of Rights Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C (Exhibit 1 to EOG's Registration Statement on Form 8-A, filed February 18, 2000). 4.3 -- Form of Rights Certificate (Exhibit 3 to EOG's Registration Statement on Form 8-A, filed February 18, 2000). 4.4 -- Indenture dated as of September 1, 1991, between EOG and Chase Bank of Texas National Association (formerly, Texas Commerce Bank National Association) (Exhibit 4(a) to EOG's Registration Statement on Form S-3 Registration Statement No. 33-42640, filed September 6, 1991). 4.5 -- Indenture dated as of _________, 2000, between EOG and The Bank of New York (Exhibit 4.6 to EOG's Registration Statement on Form S-3 Registration Statement No. 333-46858, filed September 28, 2000). 4.6 -- Amendment, dated as of December 13, 2001, to the Rights Agreement, dated as of February 14, 2000, between EOG and First Chicago Trust Company of New York, as rights agent (Exhibit 2 to Amendment No. 1 to EOG's Registration Statement on Form 8-A/A filed December 14, 2001). 4.7 -- Letter dated December 13, 2001, from First Chicago Trust Company of New York to EOG resigning as rights agent effective January 12, 2002 (Exhibit 3 to Amendment No. 2 to EOG's Registration Statement on Form 8-A/A filed February 7, 2002). 4.8 -- Amendment, dated as of December 20, 2001, to the Rights Agreement, dated as of February 14, 2000, between EOG and First Chicago Trust Company of New York, as rights agent (Exhibit 4 to Amendment No. 2 to EOG's Registration Statement on Form 8-A/A filed February 7, 2002). 4.9 -- Letter dated December 20, 2001, from EOG Resources, Inc. to EquiServe Trust Company, N.A. appointing EquiServe Trust Company, N.A. as successor rights agent (Exhibit 5 to Amendment No. 2 to EOG's Registration Statement on Form 8-A/A filed February 7, 2002). 10.1(a) -- Amended and Restated 1994 Stock Plan (Exhibit 4.3 to Form S-8 Registration Statement No. 33-58103, filed March 15, 1995). 10.1(b) -- Amendment to Amended and Restated 1994 Stock Plan, dated effective as of December 12, 1995 (Exhibit 4.3(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1995). 10.1(c) -- Amendment to Amended and Restated 1994 Stock Plan, dated effective as of December 10, 1996 (Exhibit 4.3(a) to Form S-8 Registration Statement No. 333-20841, filed January 31, 1997). 10.1(d) -- Third Amendment to Amended and Restated 1994 Stock Plan, dated effective as of December 9, 1997 (Exhibit 4.3(d) to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.1(e) -- Fourth Amendment to Amended and Restated 1994 Stock Plan, dated effective as of May 5, 1998 (Exhibit 4.3(e) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.1(f) -- Fifth Amendment to Amended and Restated 1994 Stock Plan, dated effective as of December 8, 1998 (Exhibit 4.3(f) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). *10.1(g) -- Sixth Amendment to Amended and Restated 1994 Stock Plan, dated effective as of May 8, 2001. 28 Exhibit Number Description - ------- ------------- 10.2(a) -- Stock Restriction and Registration Agreement dated as of August 23, 1989 (Exhibit 10.2 to Form S-1). 10.2(b) -- Amendment to Stock Restriction and Registration Agreement, dated December 9, 1997, between EOG and Enron Corp. (Exhibit 10.2(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.3 -- Tax Allocation Agreement, entered into effective as of the Deconsolidation Date, between Enron Corp., EOG, and the subsidiaries of EOG listed therein as additional parties (Exhibit 10.3 to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.4(a) -- Share Exchange Agreement, dated as of July 19, 1999, between Enron Corp. and EOG (Exhibit 2 to Form S-3 Registration Statement No. 333-83533, filed July 23, 1999). 10.4(b) -- Letter Amendment, dated July 30, 1999, to Share Exchange Agreement, between Enron Corp. and EOG (Exhibit 2.2 to EOG's Current Report on Form 8-K, filed August 31, 1999). 10.4(c) -- Letter Amendment, dated August 10, 1999, to Share Exchange Agreement, between Enron Corp. and EOG (Exhibit 2.3 to EOG's Current Report on Form 8-K, filed August 31, 1999). 10.4(d) -- Consent Agreement between EOG, Enron Corp., Enron Finance Partners, LLC, Enron Intermediate Holdings, LLC, Enron Asset Holdings, LLC and Aeneas, LLC, dated November 28, 2000. 10.5(a) -- 1993 Nonemployee Directors Stock Option Plan (Exhibit 10.14 to EOG's Annual Report on Form 10-K for the year ended December 31, 1992). 10.5(b) -- First Amendment to 1993 Nonemployee Directors Stock Option Plan (Exhibit 10.14(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1996). *10.5(c) -- Second Amendment to 1993 Nonemployee Directors Stock Option Plan, dated effective as of May 8, 2001. 10.6 -- ISDA Master Agreement, dated as of November 1, 1993, between EOG and Enron Risk Management Services Corp., and Confirmation Nos. 1268.0, 1286.0, 1291.0, 1292.0, 1304.0, 1305.0, 1321.0, 1335.0, 1338.0, 1370.0, 1471.0, 1485.0, 1486.0, 1494.0, 1495.0, 1509.0, 1514.0, 1533.01, 1569.0, 1986.0, 2217.0, 2227.0, 2278.0, 2299.0, 2372.0, 2647.0 (Exhibit 10.18 to EOG's Annual Report on Form 10-K for the year ended December 31, 1993). 10.7(a) -- 1992 Stock Plan (As Amended and Restated Effective June 28, 1999) (Exhibit A to EOG's Proxy Statement, dated June 4, 1999, with respect to EOG's Annual Meeting of Shareholders). *10.7(b) -- First Amendment to 1992 Stock Plan (As Amended and Restated Effective June 28, 1999) dated effective as of May 8, 2001. 10.8 -- Equity Participation and Business Opportunity Agreement, dated December 9, 1997, between EOG and Enron Corp. (Exhibit 10 to Form S-3 Registration Statement No. 333-44785, filed January 23, 1998). 10.9(a) -- 1996 Deferral Plan (Exhibit 10.63(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.9(b) -- First Amendment to 1996 Deferral Plan, dated effective as of December 9, 1997 (Exhibit 10.63(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.9(c) -- Second Amendment to 1996 Deferral Plan, dated effective as of December 8, 1998 (Exhibit 10.63(c) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 29 Exhibit Number Description - ------- ------------- 10.9(d) -- 1996 Deferral Plan, as amended and restated effective May 8, 2001 (Exhibit 4.4 to Form S-8 Registration Statement No. 333-84014, filed March 8, 2002). 10.10(a) -- Executive Employment Agreement between EOG and Mark G. Papa, effective as of November 1, 1997 (Exhibit 10.64 to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.10(b) -- First Amendment to Executive Employment Agreement between EOG and Mark G. Papa, effective as of February 1, 1999 (Exhibit 10.64(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.10(c) -- Second Amendment to Executive Agreement between EOG and Mark G. Papa, effective as of June 28, 1999 (Exhibit 10.64(c) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.10(d) --Third Amendment to Executive Employment Agreement between EOG and Mark G. Papa, entered into on June 20, 2001, and made effective as of June 1, 2001. *10.10(e) --Change of Control Agreement between EOG and Mark G. Papa, effective as of June 20, 2001. 10.11(a) -- Executive Employment Agreement between EOG and Edmund P. Segner, III, effective as of September 1, 1998 (Exhibit 10.65(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.11(b) -- First Amendment to Executive Employment Agreement between EOG and Edmund P. Segner, III, effective as of February 1, 1999 (Exhibit 10.65(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.11(c) -- Second Amendment to Executive Employment Agreement between EOG and Edmund P. Segner, III, effective as of June 28, 1999 (Exhibit 10.65(c) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.11(d) -- Third Amendment to Executive Employment Agreement between EOG and Edmund P. Segner, III, entered into on June 22, 2001, and made effective as of June 1, 2001. *10.11(e) -- Change of Control Agreement between EOG and Edmund P. Segner, III, effective as of June 22, 2001. 10.12(a) -- Executive Employment Agreement between EOG and Barry Hunsaker, Jr., effective as of September 1, 1998 (Exhibit 10.66(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 10.12(b) -- First Amendment to Executive Employment Agreement between EOG and Barry Hunsaker, Jr., effective as of December 21, 1998 (Exhibit 10.66(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 10.12(c) -- Second Amendment to Executive Employment Agreement between EOG and Barry Hunsaker, Jr., effective as of February 1, 1999 (Exhibit 10.66(c) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.12(d) -- Third Amendment to Executive Employment Agreement between EOG and Barry Hunsaker, Jr., entered into on June 29, 2001, and made effective as of June 1, 2001. *10.12(e) -- Change of Control Agreement between EOG and Barry Hunsaker, Jr., effective as of June 29, 2001. 10.13(a) -- Executive Employment Agreement between EOG and Loren M. Leiker, effective as of March 1, 1998 (Exhibit 10.67(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 30 Exhibit Number Description - ------- ------------- 10.13(b) -- First Amendment to Executive Employment Agreement between EOG and Loren M. Leiker, effective as of February 1, 1999 (Exhibit 10.67(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.13(c) -- Second Amendment to Executive Employment Agreement between EOG and Loren M. Leiker, entered into on July 1, 2001, and made effective as of June 1, 2001. *10.13(d) -- Change of Control Agreement between EOG and Loren M. Leiker, effective as of July 1, 2001. 10.14(a) -- Executive Employment Agreement between EOG and Gary L. Thomas, effective as of September 1, 1998 (Exhibit 10.68(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 10.14(b) -- First Amendment to Executive Employment Agreement between EOG and Gary L. Thomas, effective as of February 1, 1999 (Exhibit 10.68(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.14(c) -- Second Amendment to Executive Employment Agreement between EOG and Gary L. Thomas, entered into on July 1, 2001, and made effective as of June 1, 2001. *10.14(d) -- Change of Control Agreement between EOG and Gary L. Thomas, effective as of July 1, 2001. *10.15 -- Change of Control Severance Plan, (as Amended and Restated Effective May 8, 2001). 10.16 -- Employee Stock Purchase Plan (Exhibit 4.4 to Form S-8 Registration Statement No. 333-62256, filed June 4, 2001). 10.17 -- Savings Plan (Exhibit 4.4 to Form S-8 Registration Statement No. 333-63184, filed June 15, 2001. 10.18 -- Executive Officer Annual Bonus Plan (Exhibit C to EOG's Proxy Statement, dated March 30, 2001, with respect to EOG's Annual Meeting of Shareholders). *12 -- Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends. 16.1 -- Letter regarding change in certifying accountant (Exhibit 16.1 to EOG's Current Report on Form 8-K, filed March 1, 2002). *21 -- List of subsidiaries. *23.1 -- Consent of DeGolyer and MacNaughton. 23.2 -- Opinion of DeGolyer and MacNaughton dated January 25, 2002 (Exhibit 23.2 to EOG's Current Report on Form 8-K, filed on February 28, 2002). *23.3 -- Consent of Arthur Andersen LLP. *24 -- Powers of Attorney. *99 -- Current Report on Form 8-K, filed on February 28, 2002. EX-20 3 exhibitindex.txt INDEX OF EXHIBITS EOG RESOURCES, INC. AND SUBSIDIARIES EXHIBITS TO FORM 10-K For the Fiscal Year Ended December 31, 2001 EOG RESOURCES, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit Number Description - ------- ------------- 3.1(a) -- Restated Certificate of Incorporation (Exhibit 3.1 to Form S-1). 3.1(b) -- Certificate of Amendment of Restated Certificate of Incorporation (Exhibit 4.1(b) to Form S-8 Registration Statement No. 33-52201, filed February 8, 1994). 3.1(c) -- Certificate of Amendment of Restated Certificate of Incorporation (Exhibit 4.1(c) to Form S-8 Registration Statement No. 33-58103, filed March 15, 1995). 3.1(d) -- Certificate of Amendment of Restated Certificate of Incorporation, dated June 11, 1996 (Exhibit 3(d) to Form S-3 Registration Statement No. 333-09919, filed August 9, 1996). 3.1(e) -- Certificate of Amendment of Restated Certificate of Incorporation, dated May 7, 1997 (Exhibit 3(e) to Form S-3 Registration Statement No. 333-44785, filed January 23, 1998). 3.1(f) -- Certificate of Ownership and Merger, dated August 26, 1999 (Exhibit 3.1(f) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 3.1(g) -- Certificate of Designations of Series E Junior Participating Preferred Stock, dated February 14, 2000 (Exhibit 2 to Form 8-A Registration Statement, filed February 18, 2000). 3.1(h) -- Certificate of Designation, Preferences and Rights of Fixed Rate Cumulative Perpetual Senior Preferred Stock, Series B, dated July 19, 2000 (Exhibit 3.1(h) to EOG's Registration Statement on Form S-3 Registration Statement No. 333-46858, filed September 28, 2000). 3.1(i) -- Certificate of Designation, Preferences and Rights of the Flexible Money Market Cumulative Preferred Stock, Series D, dated July 25, 2000 (Exhibit 3.1(i) to EOG's Registration Statement on Form S-3 Registration Statement No. 333-46858, filed September 28, 2000). 3.1(j) -- Certificate of Elimination of the Fixed Rate Cumulative Perpetual Senior Preferred Stock, Series A, dated September 15, 2000 (Exhibit 3.1(j) to EOG's Registration Statement on Form S-3 Registration Statement No. 333-46858, filed September 28, 2000). 3.1(k) -- Certificate of Elimination of the Flexible Money Market Cumulative Preferred Stock, Series C, dated September 15, 2000 (Exhibit 3.1(k) to EOG's Registration Statement on Form S-3 Registration Statement No. 333-46858, filed September 28, 2000). 3.2 -- By-laws, dated August 23, 1989, as amended and restated effective as of May 8, 2001. (Exhibit 3.1 to EOG's Quarterly Report on Form 10-Q for the three months ended March 31, 2001). 4.1(a) -- Specimen of Certificate evidencing the Common Stock (Exhibit 3.3 to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 4.1(b) -- Specimen of Certificate Evidencing Fixed Rate Cumulative Perpetual Senior Preferred Stock, Series B (Exhibit 4.3(g) to EOG's Registration Statement on Form S-4 Registration Statement No. 333-36056, filed June 7, 2000). Exhibit Number Description - ------- ------------- 4.1(c) -- Specimen of Certificate Evidencing Flexible Money Market Cumulative Preferred Stock, Series D (Exhibit 4.3(g) to EOG's Registration Statement on Form S-4 Registration Statement No. 333-36416, filed June 12, 2000). 4.2 -- Rights Agreement, dated as of February 14, 2000, between EOG and First Chicago Trust Company of New York, which includes the form of Rights Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C (Exhibit 1 to EOG's Registration Statement on Form 8-A, filed February 18, 2000). 4.3 -- Form of Rights Certificate (Exhibit 3 to EOG's Registration Statement on Form 8-A, filed February 18, 2000). 4.4 -- Indenture dated as of September 1, 1991, between EOG and Chase Bank of Texas National Association (formerly, Texas Commerce Bank National Association) (Exhibit 4(a) to EOG's Registration Statement on Form S-3 Registration Statement No. 33-42640, filed September 6, 1991). 4.5 -- Indenture dated as of _________, 2000, between EOG and The Bank of New York (Exhibit 4.6 to EOG's Registration Statement on Form S-3 Registration Statement No. 333-46858, filed September 28, 2000). 4.6 -- Amendment, dated as of December 13, 2001, to the Rights Agreement, dated as of February 14, 2000, between EOG and First Chicago Trust Company of New York, as rights agent (Exhibit 2 to Amendment No. 1 to EOG's Registration Statement on Form 8-A/A filed December 14, 2001). 4.7 -- Letter dated December 13, 2001, from First Chicago Trust Company of New York to EOG resigning as rights agent effective January 12, 2002 (Exhibit 3 to Amendment No. 2 to EOG's Registration Statement on Form 8-A/A filed February 7, 2002). 4.8 -- Amendment, dated as of December 20, 2001, to the Rights Agreement, dated as of February 14, 2000, between EOG and First Chicago Trust Company of New York, as rights agent (Exhibit 4 to Amendment No. 2 to EOG's Registration Statement on Form 8-A/A filed February 7, 2002). 4.9 -- Letter dated December 20, 2001, from EOG Resources, Inc. to EquiServe Trust Company, N.A. appointing EquiServe Trust Company, N.A. as successor rights agent (Exhibit 5 to Amendment No. 2 to EOG's Registration Statement on Form 8- A/A filed February 7, 2002). 10.1(a) -- Amended and Restated 1994 Stock Plan (Exhibit 4.3 to Form S-8 Registration Statement No. 33-58103, filed March 15, 1995). 10.1(b) -- Amendment to Amended and Restated 1994 Stock Plan, dated effective as of December 12, 1995 (Exhibit 4.3(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1995). 10.1(c) -- Amendment to Amended and Restated 1994 Stock Plan, dated effective as of December 10, 1996 (Exhibit 4.3(a) to Form S-8 Registration Statement No. 333-20841, filed January 31, 1997). 10.1(d) -- Third Amendment to Amended and Restated 1994 Stock Plan, dated effective as of December 9, 1997 (Exhibit 4.3(d) to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.1(e) -- Fourth Amendment to Amended and Restated 1994 Stock Plan, dated effective as of May 5, 1998 (Exhibit 4.3(e) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.1(f) -- Fifth Amendment to Amended and Restated 1994 Stock Plan, dated effective as of December 8, 1998 (Exhibit 4.3(f) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). *10.1(g) -- Sixth Amendment to Amended and Restated 1994 Stock Plan, dated effective as of May 8, 2001. Exhibit Number Description - ------- ------------- 10.2(a) -- Stock Restriction and Registration Agreement dated as of August 23, 1989 (Exhibit 10.2 to Form S-1). 10.2(b) -- Amendment to Stock Restriction and Registration Agreement, dated December 9, 1997, between EOG and Enron Corp. (Exhibit 10.2(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.3 -- Tax Allocation Agreement, entered into effective as of the Deconsolidation Date, between Enron Corp., EOG, and the subsidiaries of EOG listed therein as additional parties (Exhibit 10.3 to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.4(a) -- Share Exchange Agreement, dated as of July 19, 1999, between Enron Corp. and EOG (Exhibit 2 to Form S-3 Registration Statement No. 333-83533, filed July 23, 1999). 10.4(b) -- Letter Amendment, dated July 30, 1999, to Share Exchange Agreement, between Enron Corp. and EOG (Exhibit 2.2 to EOG's Current Report on Form 8-K, filed August 31, 1999). 10.4(c) -- Letter Amendment, dated August 10, 1999, to Share Exchange Agreement, between Enron Corp. and EOG (Exhibit 2.3 to EOG's Current Report on Form 8-K, filed August 31, 1999). 10.4(d) -- Consent Agreement between EOG, Enron Corp., Enron Finance Partners, LLC, Enron Intermediate Holdings, LLC, Enron Asset Holdings, LLC and Aeneas, LLC, dated November 28, 2000. 10.5(a) -- 1993 Nonemployee Directors Stock Option Plan (Exhibit 10.14 to EOG's Annual Report on Form 10-K for the year ended December 31, 1992). 10.5(b) -- First Amendment to 1993 Nonemployee Directors Stock Option Plan (Exhibit 10.14(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1996). *10.5(c) -- Second Amendment to 1993 Nonemployee Directors Stock Option Plan, dated effective as of May 8, 2001. 10.6 -- ISDA Master Agreement, dated as of November 1, 1993, between EOG and Enron Risk Management Services Corp., and Confirmation Nos. 1268.0, 1286.0, 1291.0, 1292.0, 1304.0, 1305.0, 1321.0, 1335.0, 1338.0, 1370.0, 1471.0, 1485.0, 1486.0, 1494.0, 1495.0, 1509.0, 1514.0, 1533.01, 1569.0, 1986.0, 2217.0, 2227.0, 2278.0, 2299.0, 2372.0, 2647.0 (Exhibit 10.18 to EOG's Annual Report on Form 10-K for the year ended December 31, 1993). 10.7(a) -- 1992 Stock Plan (As Amended and Restated Effective June 28, 1999) (Exhibit A to EOG's Proxy Statement, dated June 4, 1999, with respect to EOG's Annual Meeting of Shareholders). *10.7(b) -- First Amendment to 1992 Stock Plan (As Amended and Restated Effective June 28, 1999), dated effective as of May 8, 2001. 10.8 -- Equity Participation and Business Opportunity Agreement, dated December 9, 1997, between EOG and Enron Corp. (Exhibit 10 to Form S-3 Registration Statement No. 333-44785, filed January 23, 1998). 10.9(a) -- 1996 Deferral Plan (Exhibit 10.63(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.9(b) -- First Amendment to 1996 Deferral Plan, dated effective as of December 9, 1997 (Exhibit 10.63(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.9(c) -- Second Amendment to 1996 Deferral Plan, dated effective as of December 8, 1998 (Exhibit 10.63(c) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). Exhibit Number Description - ------- ------------- 10.9(d) -- 1996 Deferral Plan, as amended and restated effective May 8, 2001 (Exhibit 4.4 to Form S-8 Registration Statement No. 333-84014, filed March 8, 2002). 10.10(a) -- Executive Employment Agreement between EOG and Mark G. Papa, effective as of November 1, 1997 (Exhibit 10.64 to EOG's Annual Report on Form 10-K for the year ended December 31, 1997). 10.10(b) -- First Amendment to Executive Employment Agreement between EOG and Mark G. Papa, effective as of February 1, 1999 (Exhibit 10.64(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.10(c) -- Second Amendment to Executive Agreement between EOG and Mark G. Papa, effective as of June 28, 1999 (Exhibit 10.64(c) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.10(d) --Third Amendment to Executive Employment Agreement between EOG and Mark G. Papa, entered into on June 20, 2001, and made effective as of June 1, 2001. *10.10(e) --Change of Control Agreement between EOG and Mark G. Papa, effective as of June 20, 2001. 10.11(a) -- Executive Employment Agreement between EOG and Edmund P. Segner, III, effective as of September 1, 1998 (Exhibit 10.65(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.11(b) -- First Amendment to Executive Employment Agreement between EOG and Edmund P. Segner, III, effective as of February 1, 1999 (Exhibit 10.65(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1998). 10.11(c) -- Second Amendment to Executive Employment Agreement between EOG and Edmund P. Segner, III, effective as of June 28, 1999 (Exhibit 10.65(c) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.11(d) -- Third Amendment to Executive Employment Agreement between EOG and Edmund P. Segner, III, entered into on June 22, 2001, and made effective as of June 1, 2001. *10.11(e) -- Change of Control Agreement between EOG and Edmund P. Segner, III, effective as of June 22, 2001. 10.12(a) -- Executive Employment Agreement between EOG and Barry Hunsaker, Jr., effective as of September 1, 1998 (Exhibit 10.66(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 10.12(b) -- First Amendment to Executive Employment Agreement between EOG and Barry Hunsaker, Jr., effective as of December 21, 1998 (Exhibit 10.66(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 10.12(c) -- Second Amendment to Executive Employment Agreement between EOG and Barry Hunsaker, Jr., effective as of February 1, 1999 (Exhibit 10.66(c) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.12(d) -- Third Amendment to Executive Employment Agreement between EOG and Barry Hunsaker, Jr., entered into on June 29, 2001, and made effective as of June 1, 2001. *10.12(e) -- Change of Control Agreement between EOG and Barry Hunsaker, Jr., effective as of June 29, 2001. 10.13(a) -- Executive Employment Agreement between EOG and Loren M. Leiker, effective as of March 1, 1998 (Exhibit 10.67(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). Exhibit Number Description - ------- ------------- 10.13(b) -- First Amendment to Executive Employment Agreement between EOG and Loren M. Leiker, effective as of February 1, 1999 (Exhibit 10.67(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.13(c) -- Second Amendment to Executive Employment Agreement between EOG and Loren M. Leiker, entered into on July 1, 2001, and made effective as of June 1, 2001. *10.13(d) -- Change of Control Agreement between EOG and Loren M. Leiker, effective as of July 1, 2001. 10.14(a) -- Executive Employment Agreement between EOG and Gary L. Thomas, effective as of September 1, 1998 (Exhibit 10.68(a) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). 10.14(b) -- First Amendment to Executive Employment Agreement between EOG and Gary L. Thomas, effective as of February 1, 1999 (Exhibit 10.68(b) to EOG's Annual Report on Form 10-K for the year ended December 31, 1999). *10.14(c) -- Second Amendment to Executive Employment Agreement between EOG and Gary L. Thomas, entered into on July 1, 2001, and made effective as of June 1, 2001. *10.14(d) -- Change of Control Agreement between EOG and Gary L. Thomas, effective as of July 1, 2001. *10.15 -- Change of Control Severance Plan, (as Amended and Restated Effective May 8, 2001). 10.16 -- Employee Stock Purchase Plan (Exhibit 4.4 to Form S-8 Registration Statement No. 333-62256, filed June 4, 2001). 10.17 -- Savings Plan (Exhibit 4.4 to Form S-8 Registration Statement No. 333-63184, filed June 15, 2001. 10.18 -- Executive Officer Annual Bonus Plan (Exhibit C to EOG's Proxy Statement, dated March 30, 2001, with respect to EOG's Annual Meeting of Shareholders). *12 -- Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends. 16.1 -- Letter regarding change in certifying accountant (Exhibit 16.1 to EOG's Current Report on Form 8-K, filed March 1, 2002). *21 -- List of subsidiaries. *23.1 -- Consent of DeGolyer and MacNaughton. 23.2 -- Opinion of DeGolyer and MacNaughton dated January 25, 2002 (Exhibit 23.2 to EOG's Current Report on Form 8-K, filed on February 28, 2002). *23.3 -- Consent of Arthur Andersen LLP. *24 -- Powers of Attorney. *99 -- Current Report on Form 8-K, filed on February 28, 2002. EX-10 4 exhibit10_1g.txt AMENDED 1994 STOCK PLAN Exhibit 10.1(g) SIXTH AMENDMENT TO AMENDED AND RESTATED EOG RESOURCES, INC. 1994 STOCK PLAN WHEREAS, EOG Resources, Inc. (the "Company") has heretofore adopted and maintains the Amended and Restated EOG Resources, Inc. 1994 Stock Plan, as amended by amendments dated effective as of December 12, 1995, December 10, 1996, December 9, 1997, May 5, 1998, and December 8, 1998 (hereinafter collectively referred to as the "Plan"); and WHEREAS, the Company desires to amend the Plan; NOW, THEREFORE, the Plan is amended as follows: 1. Section 5.4 (iii) is hereby deleted in its entirety and the following is substituted therefore: "(iii) Limits on Transfer of Awards. No Award (other than Released Securities) and no right under any such Award shall be assignable, alienable, saleable or transferable by a Participant other than: (a) by will or by the laws of descent and distribution; (b) pursuant to a "domestic relations order" as defined in Section 414 of the Code or Section 206 of the Employee Retirement Income Security Act of 1974, as amended; (c) by transfer by an eligible Participant, subject to such rules as the Committee may adopt to preserve the purposes of the Plan (including limiting such transfer to Participants who are directors or senior executives), to: (1) a member of his or her Immediate Family, (2) a trust solely for the benefit of the Participant and his or her Immediate Family; or (3) a partnership or limited liability company whose only partners or shareholders are the Participant and his or her Immediate Family members, (d) by designation, in a manner established by the Committee, of a beneficiary or beneficiaries to exercise the rights of the Participant and to receive any property distributable with respect to any Award upon the death of the Participant. Each transferee described in (b) and (c) above is hereafter referred to an a "Permitted Transferee," provided that the Committee is notified in writing of the terms and conditions of any transfer intended to be described in (b) or (c) and the Committee determines that the transfer complies with the requirements of the Plan and the applicable 2 Award Agreement. Any purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance that does not qualify under (a), (b), (c) or (d) shall be void and unenforceable against the Company. "Immediate Family" means, with respect to a particular Participant, the Participant's spouse, children or grandchildren (including adopted and stepchildren and grandchildren). The terms and provisions of an Award Agreement shall be binding upon the beneficiaries, executors and administrators of the Participant and on the Permitted Transferees of the Participant (including the beneficiaries, executors and administrators of the Permitted Transferees), except that Permitted Transferees shall not reassign any Award other than by will or by the laws of descent and distribution. An Award shall be exercised only by the Participant (or his or her attorney in fact or guardian) (including, in the case of a transferred Award, by a Permitted Transferee), or, in the case of the Participant's death, by the Participant's executor or administrator (including, in the case of a transferred Award, by the executor or administrator of the Permitted Transferee), and all exercises of an Award shall be accompanied by sufficient payment, as determined by the Company, to meet its withholding tax obligations on such exercise or by other arrangements approved in advance by the Committee to provide for such payment." 2. Section 5.4 (vi) is hereby deleted in its entirety. 3. Section 6.2 is hereby deleted in its entirety and the following is substituted therefore: "6.2 Adjustments of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. A. If a Change of Control occurs which is not approved, recommended or supported by a majority of the Board of Directors of the Company in actions taken prior to, and with respect to, such transaction, with respect to outstanding grants of Restricted Stock made under Section 5.3, each recipient thereof shall have a fully vested right in all Restricted Stock granted to the recipient and then outstanding, and with respect to outstanding grants of Options and Stock Appreciation Rights made under Section 5.1 or Section 5.2, respectively, all such outstanding Options and Stock Appreciation Rights, irrespective of whether they are then exercisable, may, at the option of the grantee, be surrendered to the Company by each grantee thereof and such Options and Stock Appreciation Rights shall thereupon be canceled by the Company, and the grantee shall receive a cash payment by the Company in an amount equal to the number of Shares subject to the Options and/or Stock Appreciation Rights held by such grantee multiplied by the difference between (x) and (y) where (y) equals, in the case of Options, the purchase price per Share covered by the Option or, in the case of Stock Appreciation Rights, the grant price of the Stock Appreciation Right, and (x) equals (1) the per share price offered to stockholders of the Company in any such merger, consolidation, sale of assets, or dissolution transaction, (2) the per share price offered to stockholders of the Company in any tender offer or exchange offer whereby any such change of Beneficial 3 Ownership or Directors takes place, (3)the Fair Market Value of a Share on the date determined by the Committee (as constituted prior to any change described in clause (iv) or (v)) to be the date of cancellation and surrender of such Options and/or Stock Appreciation Rights if any such change of Beneficial Ownership or Directors occurs other than pursuant to a tender or exchange offer, or (4) the Fair Market Value of a Share on the Date determined by the Committee to be the date of cancellation and surrender of such Options and/or Stock Appreciation Rights if any event described in clause (vi) above has occurred, whichever is appropriate. In the event that the consideration offered to stockholders of the Company in any transaction described in this Section 6.2A. consists of anything other than cash, the Committee (as constituted prior to such transaction) shall determine the fair cash equivalent of the portion of the consideration offered which is other than cash. B. Except as otherwise expressly provided herein, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor, or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares subject to Restricted Stock, Stock Appreciation Rights or Options theretofore granted or the purchase price or grant price per share, if applicable. C. All outstanding grants shall vest upon the date (a) a press release is issued announcing a pending shareholder vote or other transaction which, if approved or consummated, would constitute a Change of Control, or (b) a tender offer or exchange is publicly announced or commenced which, if consummated, would constitute a Change of Control. D. Any adjustment provided for in Section 3.2 or Section 6.2 whall be subject to any required stockholder action." 4. The following new definition (v) is added to the end of Section 10 of the Plan: "(v) "Change of Control" means: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then- outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this clause (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by 4 the Company or any Affiliated Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with subclauses (A), (B) and (C) of clause (3) of this definition; (2) Individuals who, as of May 8, 2001, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (3) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the assets or stock of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entitles that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then- outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or (4) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company." 5 AS AMENDED HEREBY, the Plan is specifically ratified and reaffirmed. Dated effective as of May 8, 2001. ATTEST: EOG RESOURCES, INC. By: /s/VICKIE L. GRAHAM By: /s/PATRICIA EDWARDS ---------------------- ---------------------- EX-10 5 exhibit10_5c.txt 1993 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN Exhibit 10.5 (c) SECOND AMENDMENT TO EOG RESOURCES, INC. 1993 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN WHEREAS, EOG Resources, Inc. (the "Company") has heretofore adopted and maintains the EOG Resources, Inc. 1993 Nonemployee Directors Stock Option Plan, as amended effective as of February 13, 1997 (the "Plan"); WHEREAS, the Company desires to amend the Plan; NOW, THEREFORE, the Plan is amended as follows: 1. Section VII is hereby deleted in its entirety and the following is substituted therefore: "VII. Recapitalization or Reorganization (a) In the event that the Board shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, shares split, reverse shares split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company (or other similar corporate transaction or event) affects the Shares such that an adjustment is determined by the Board to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Board may, subject to Subparagraph (b) below, in such manner as it may deem equitable, adjust any or all of (a) the number and type of Shares (or other securities or property) which thereafter may be made the subject of Options, (b) the number and type of Shares (or other securities or property) subject to outstanding Options, and (c) the purchase price with respect to any Option, or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Option; provided that the number of Shares subject to any Option shall always be a whole number. (b) If, and whenever, prior to the expiration of an outstanding Option, the Company shall effect a subdivision or consolidation of Shares or the payment of a shares dividend on Shares without receipt of consideration by the Company, the number of Shares with respect to which such Option may thereafter be vested or exercised (i) in the event of an increase in the number of outstanding Shares shall be proportionately increased, and the purchase price per Share shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding Shares shall be proportionately reduced, and the purchase price per Share shall be proportionately increased. (c) If a Change of Control occurs which is not approved, recommended or supported by a majority of the Board in actions taken prior to, and with respect to, such transaction, all outstanding Options, irrespective of whether they are then exercisable, may, at the option of the grantee, be surrendered (at such time as may be necessary to comply with Rule 16b-3) to the Company by each grantee, and the grantee shall receive a 2 cash payment by the Company in an amount equal to the number of Shares subject to the Options held by such grantee multiplied by the difference between (x) and (y) where (y) equals the purchase price per Share covered by the Option and (x) equals (1) the per share price offered to stockholders of the Company in any such merger, consolidation, sale of assets, or dissolution transaction, (2) the per share price offered to stockholders of the Company in any tender offer or exchange offer whereby any such change of Beneficial Ownership or directors of the Company takes place, (3) the Fair Market Value of a Share on the date determined by the Board (as constituted prior to any change described in clause (iv) or (v)) to be the date of cancellation and surrender of such Options if any such change of Beneficial Ownership or directors of the Company occurs other than pursuant to a tender or exchange offer, or (4) the Fair Market Value of a Share on the date determined by the Board to be the date of cancellation and surrender of such Options if any event described in clause (vi) above has occurred, whichever is appropriate. In the event that the consideration offered to stockholders of the Company in any transaction described in this Subparagraph VII(c) consists of anything other than cash, the Board (as constituted prior to such transaction) shall determine the fair cash equivalent of the portion of the consideration offered which is other than cash. (d) All outstanding grants shall vest upon the date (a) a press release is issued announcing a pending shareholder vote or other transaction which, if approved or consummated, would constitute a Change of Control, or (b) a tender offer or exchange is publicly announced or commenced which, if consummated, would constitute a Change of Control. (e) Any adjustment provided for in Subparagraphs (a), (b) or (c) above shall be subject to any required stockholder action. (f) Except as otherwise expressly provided herein, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares subject to Options theretofore granted or the purchase price per share thereunder." 2. Section X (i) is hereby deleted in its entirety and the following is substituted therefore: "(i) Limits on Transfer of Options. No Option and no right under any such Option shall be assignable, alienable, saleable or transferable by a Nonemployee Director other than: (1) by will or by the laws of descent and distribution; (2) pursuant to a "domestic relations order" as defined in Section 414 of the Code 3 or Section 206 of the Employee Retirement Income Security Act of 1974, as amended; (3) by transfer by a Nonemployee Director, subject to such rules as the Company may adopt to preserve the purposes of the Plan, to: (i) a member of his or her Immediate Family, (ii) a trust solely for the benefit of the Nonemployee Director and his or her Immediate Family; or (iii) a partnership or limited liability company whose only partners or shareholders are the Nonemployee Director and his or her Immediate Family members, (4) by designation, in a manner established by the Company, of a beneficiary or beneficiaries to exercise the rights of the Nonemployee Director and to receive any property distributable with respect to any Option upon the death of the Nonemployee Director. Each transferee described in (b) and (c) above is hereafter referred to an a "Permitted Transferee," provided that the Company is notified in writing of the terms and conditions of any transfer intended to be described in (b) or (c) and the Company determines that the transfer complies with the requirements of the Plan and the applicable Option agreement. Any purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance that does not qualify under (a), (b), (c) or (d) shall be void and unenforceable against the Company. "Immediate Family" means, with respect to a particular Nonemployee Director, the Nonemployee Director's spouse, children or grandchildren (including adopted and stepchildren and grandchildren). The terms and provisions of an Option agreement shall be binding upon the beneficiaries, executors and administrators of the Nonemployee Director and on the Permitted Transferees of the Nonemployee Director (including the beneficiaries, executors and administrators of the Permitted Transferees), except that Permitted Transferees shall not reassign any Option other than by will or by the laws of descent and distribution. An Option shall be exercised only by the Nonemployee Director (or his or her attorney in fact or guardian) (including, in the case of a transferred Option, by a Permitted Transferee), or, in the case of the Nonemployee Director's death, by the Nonemployee Director's executor or administrator (including, in the case of a transferred Option, by the executor or administrator of the Permitted Transferee)." 3. The following new paragraph (j) is added to the end of Section X of the Plan: "(g) Deferral of Gains. Each Nonemployee Director may, in accordance with all procedures and limitations established by the Company, elect to defer cash, Shares, other securities, other awards, other property, and other amounts payable with respect to an Option under the Plan." 4 4. The following new definition (j) is added to the end of Section XI of the Plan: "(j) "Change of Control" means: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d- 3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this clause (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with subclauses (A), (B) and (C) of clause (3) of this definition; (2) Individuals who, as of May 8, 2001, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (3) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the assets or stock of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entitles that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan 5 (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then- outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or (4) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company." AS AMENDED HEREBY, the Plan is specifically ratified and reaffirmed. Dated effective as of May 8, 2001. ATTEST: EOG RESOURCES, INC. By: /s/VICKIE L. GRAHAM By: /s/PATRICIA EDWARDS --------------------- ---------------------- EX-10 6 exhibit10_7b.txt AMENDED 1992 STOCK PLAN Exhibit 10.7(b) FIRST AMENDMENT TO EOG RESOURCES, INC. 1992 STOCK PLAN (As Amended and Restated Effective June 28, 1999) WHEREAS, EOG Resources, Inc. (the "Company") has heretofore adopted and maintains the EOG Resources, Inc. 1992 Stock Plan, as amended and restated effective June 28, 1999 (the "Plan"); and WHEREAS, the Company desires to amend the Plan; NOW, THEREFORE, the Plan is amended as follows: 1. Section 6.2 is hereby deleted in its entirety and the following is substituted therefore: "6.2 Adjustments of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. A. If a Change of Control occurs which is not approved, recommended or supported by a majority of the Board of Directors of the Company in actions taken prior to, and with respect to, such transaction, then with respect to outstanding grants of Restricted Stock made under Section 5.3, each recipient thereof shall have a fully vested right in all Restricted Stock granted to the recipient and then outstanding, and with respect to outstanding grants of Options and Stock Appreciation Rights made under Section 5.1 or Section 5.2, respectively, all such outstanding Options and Stock Appreciation Rights, irrespective of whether they are then exercisable, may, at the option of the grantee, be surrendered (at such time as may be necessary to comply with Rule 16b-3) to the Company by each grantee thereof and such Options and Stock Appreciation Rights shall thereupon be canceled by the Company, and the grantee shall receive a cash payment by the Company in an amount equal to the number of Shares subject to the Options and/or Stock Appreciation Rights held by such grantee multiplied by the difference between (x) and (y) where (y) equals, in the case of Options, the purchase price per Share covered by the Option or, in the case of Stock Appreciation Rights, the grant price of the Stock Appreciation Rights, and (x) equals (1) the per share price offered to stockholders of the Company in any such merger, consolidation, sale of assets or dissolution transaction, (2) the per share price offered to stockholders of the Company in any tender offer or exchange offer whereby any such change of Beneficial Ownership or Directors takes place, or (3) the Fair Market Value of a Share on the date determined by the Committee (as constituted prior to any change described in clause (iv) or (v)) to be the date of cancellation and surrender of such Options and/or Stock Appreciation Rights if any such change of Beneficial Ownership or Directors occurs other than pursuant to a tender or exchange offer, whichever is appropriate. In the event that the consideration offered to stockholders of the Company in any transaction described in this Section 6.2.A. consists of anything other than cash, the Committee (as constituted prior to such 2 transaction) shall determine the fair cash equivalent of the portion of the consideration offered which is other than cash. B. Except as otherwise expressly provided herein, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor, or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares subject to Restricted Stock, Stock Appreciation Rights or Options therefore granted or the purchase price or grant price per share, if applicable. C. All outstanding Awards shall vest upon the date (a) a press release is issued announcing a pending shareholder vote or other transaction which, if approved or consummated, would constitute a Change of Control, or (b) a tender offer or exchange is publicly announced or commenced which, if consummated, would constitute a Change of Control. D. Any adjustment provided for in Section 3.2 or Section 6.2 shall be subject to any required stockholder action." 2. The following new definition (v) is added to the end of Section 10 of the Plan: "(v) "Change of Control" means: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then- outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this clause (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with subclauses (A), (B) and (C) of clause (3) of this definition; (2) Individuals who, as of May 8, 2001, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs 3 as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (3) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the assets or stock of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entitles that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then- outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or (4) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company." AS AMENDED HEREBY, the Plan is specifically ratified and reaffirmed. Dated effective as of May 8, 2001. ATTEST: EOG RESOURCES, INC. By: /s/VICKIE L. GRAHAM By: /s/PATRICIA EDWARDS --------------------- --------------------- EX-10 7 exhibit10_10d.txt THIRD AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT Exhibit 10.10(d) THIRD AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT This Agreement, entered into on this 20th of June, 2001, and made effective as of June 1, 2001, by and between EOG Resources, Inc., f.k.a. Enron Oil & Gas Company ("Employer"), and Mark G. Papa ("Employee") is an amendment to that certain Employment Agreement dated effective as of November 1, 1997 (as heretofore amended, the "Employment Agreement"). WHEREAS, the parties desire to amend the Employment Agreement as provided herein; NOW, THEREFORE, in consideration thereof and of the mutual covenants contained herein, the parties agree as follows: 1. Exhibit A to the Employment Agreement is hereby deleted in its entirety and a new Exhibit A, in the form attached hereto as Exhibit A and effective as of June 1, 2001, is substituted therefor. 2. Section 1.2 is hereby deleted in its entirety and the following is substituted therefor: " 1.2 Employee initially shall be employed in the position set forth on Exhibit A. Employee agrees to serve in the assigned position and to perform diligently and to the best of Employee's abilities the duties and services appertaining to such position as determined by Employer, as well as such additional or different duties and services appropriate to such position which Employee from time to time may be reasonably directed to perform by Employer. Employee shall at all times comply with and be subject to such policies and procedures as Employer may establish from time to time." 3. Section 1.3 is hereby revised to remove reference to Enron. 4. Article 1, Section 1.6 is hereby revised to change references to "Employer's Chairman" to "Employer's Board of Directors". 5. Section 2.1 is hereby deleted in its entirety and the following is substituted therefor: " 2.1 Employee's annual base salary during the Term shall be not less than the amount set forth under the heading "Annual Base Salary" on Exhibit A, subject to increase at the sole discretion of the Employer, which shall be paid in accordance with Employer's standard payroll practice. Any calculation to be made under this Agreement with respect to Employee's Annual Base Salary shall be made using the then current Annual Base Salary in effect at the time of the event for which such calculation is made." 2 6. Section 2.3 is hereby revised to remove reference to Enron. 7. Section 3.1 is hereby deleted in its entirety and the following is substituted therefor: " 3.1 Notwithstanding any other provisions of this Agreement, Employer shall have the right to terminate Employee's employment under this Agreement at any time prior to the expiration of the Term for any of the following reasons: (i) For "cause" upon the determination by the Employer's Board of Directors that "cause" exists for the termination of the employment relationship. As used in this Section 3.1(i), the term "cause" shall mean [a] Employee's gross negligence or willful misconduct in the performance of the duties and services required of Employee pursuant to this Agreement; [b] Employee's final conviction of a felony involving moral turpitude; [c] Employee's willful refusal without proper legal reason to perform the duties and responsibilities required of Employee under this Agreement which remains uncorrected for thirty (30) days following written notice to Employee by Employer of such breach; [d] Employee's involvement in a conflict of interest as referenced in Section 1.6 for which Employer makes a determination to terminate the employment of Employee which remains uncorrected for thirty (30) days following written notice to Employee by Employer of such breach; [e] Employee's willful engagement in conduct that Employee knows or should know is materially injurious to Employer; [f] Employee's material breach of any material provision of this Agreement or corporate code or policy which remains uncorrected for thirty (30) days following written notice to Employee by Employer of such breach; or [g] Employee's violation of the Foreign Corrupt Practices Act or other applicable United States law as proscribed by Section 8.1. It is expressly acknowledged and agreed that the decision as to whether "cause" exists for termination of the employment relationship by Employer is delegated to Employer's Board of Directors for determination. If Employee disagrees with the decision reached by Employer's Board of Directors, the dispute will be limited to whether Employer's Board of Directors reached its decision in good faith; (ii) for any other reason whatsoever in the sole discretion of the Board of Directors of Employer; 3 (iii) upon Employee's death; or (iv) upon Employee's becoming disabled so as to entitle Employee to benefits under Employer's long-term disability plan or, if Employee is not eligible to participate in such plan, then Employee is permanently and totally unable to perform Employee's duties for Employer as a result of any medically determinable physical or mental impairment as supported by a written medical opinion to the foregoing effect by a physician selected by Employer. The termination of Employee's employment by Employer prior to the expiration of the Term shall constitute a "Termination for Cause" if made pursuant to Section 3.1(i); the effect of such termination is specified in Section 3.4. The termination of Employee's employment by Employer prior to the expiration of the Term shall constitute an "Involuntary Termination" if made pursuant to Section 3.1(ii); the effect of such termination is specified in Section 3.5. The effect of the employment relationship being terminated pursuant to Section 3.1(iii) as a result of Employee's death is specified in Section 3.6. The effect of the employment relationship being terminated pursuant to Section 3.1(iv) as a result of the Employee becoming incapacitated is specified in Section 3.7." 8. The phrase "except Section 7.5" is hereby deleted from Section 3.2. 9. Section 3.5 is hereby deleted in its entirety and the following is substituted therefor: " 3.5 Upon an Involuntary Termination of the employment relationship by either Employer or Employee prior to the expiration of the Term, Employee shall be entitled, in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), to receive a severance benefit under this Agreement equal to (a) the greater of the amount that Employee would have received under this Agreement from the date of termination through the end of the Term of this Agreement if Employee had continued to be employed during such period, computed assuming that Employee received the Annual Base Salary specified on Exhibit A and an annual bonus equal to the bonus target specified on Exhibit A for each year during such period (in each case prorated for any partial year) or two times the sum of the Employee's Annual Base Salary and the annual bonus target specified on Exhibit A; plus (b) the value of unvested stock options granted under Employer's 1992 Stock Plan based on the difference between the average closing price of Employer's stock on the ten (10) trading days prior to the date of 4 termination and the grant price. Employee shall not be under any duty or obligation to seek or accept other employment following Involuntary Termination and the amounts due Employee hereunder shall not be reduced or suspended if Employee accepts subsequent employment. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer and Employer's sole and exclusive liability to Employee under this Agreement, in contract, tort, or otherwise, for any Involuntary Termination of the employment relationship. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer for any sums for Involuntary Termination other than those sums specified in this Section 3.5. If Employee breaches this covenant, Employer shall be entitled to recover from Employee all sums expended by Employer (including costs and attorneys fees) in connection with such suit, claim, demand or cause of action." 10. Section 3.8 is hereby revised to remove reference to Enron. 11. Section 3.10 is hereby deleted in its entirety and the following is substituted therefor: " 3.10 Upon termination of the employment relationship between Employee and Employer for any reason, Employee shall be entitled to receive compensation and benefits earned and accrued by Employee during his/her employment as are specifically provided in any applicable employee compensation and/or benefit plan document and any grant or award agreement thereunder." 12. Section 4.1 is hereby deleted in its entirety and the following is substituted therefor: " 4.1 After the expiration of the Term specified on Exhibit "A," this Agreement, and Employee's employment hereunder, shall automatically renew for successive periods of one (1) year each, unless either Employer or Employee provides not less than one hundred twenty (120) days' prior written notice of intent not to renew. In the event this Agreement is not renewed pursuant to such notice, and Employee remains employed by Employer beyond the expiration of the Term of this Agreement, including any renewals, Employee's employment shall convert to a month-to- month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause. Upon such termination of the employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termination, but 5 Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination." 13. Article 5 is hereby revised to remove references to Enron, including removing Enron as a third party beneficiary of Employee's obligations under Section 5.2. 14. Section 6.1 is hereby revised to remove references to Enron and to delete the following sentence: "However, upon an Involuntary Termination as defined in the Company's Change of Control Severance Plan, which entitles Employee to severance benefits under said Plan, these non- competition obligations shall expire immediately and have no further force and effect." 15. Section 7.1 is hereby deleted in its entirety and the following is substituted therefor: " 7.1 For purposes of this Agreement the terms "affiliates" or "affiliated" means an entity who directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with Employer." 16. Section 7.2, notices and all other communications to Employer should be to: EOG Resources, Inc. 333 Clay Street, Suite 4200 Houston, Texas 77002 Attention: Vice President, Human Resources, Administration & Corporate Secretary 17. Article 8 is hereby deleted in its entirety and the following is substituted therefor: "ARTICLE 8: UNITED STATES FOREIGN CORRUPT PRACTICES ACT AND OTHER LAWS: 8.1 Employee shall at all times comply with United States laws applicable to Employee's actions on behalf of Employer, including specifically, without limitation, the United States Foreign Corrupt Practices Act, generally codified in 15 USC 78 ("FCPA"), as the FCPA may hereafter be amended, and/or its successor statutes. If Employee receives deferred adjudication for, pleads guilty to or nolo contendere or admits civil or criminal liability under the FCPA or other applicable United States law, or if a court finds that Employee has personal civil or criminal liability under the FCPA or other applicable United States law, 6 or if a court finds that Employee committed an action resulting in Employer or any of its affiliates having civil or criminal liability or responsibility under the FCPA or other applicable United States law with knowledge of the activities giving rise to such liability or knowledge of facts from which Employee should have reasonably inferred the activities giving rise to liability had occurred or were likely to occur, such action or finding shall constitute "cause" for termination under this Agreement unless Employer's Board of Directors determines that the actions found to be in violation of the FCPA or other applicable United States law were taken in good faith and in compliance with all applicable policies of Employer." 18. Contemporaneously with the execution of this Agreement, the parties have executed a Change of Control Agreement dated June 20, 2001 (the "Change of Control Agreement"). If during the term of the Change of Control Agreement, a Change of Control (as that term is defined in the Change of Control Agreement) occurs or is deemed to have occurred under such agreement, then for the period of time from the occurrence of the Change of Control through the second anniversary of the Change of Control (the "Applicable Period"), the following provisions will apply: (a) The following shall be substituted in lieu of Section 3.1(i) of the Employment Agreement during the Applicable Period: (i) if, under the Change of Control Agreement, dated June 20, 2001, between Employee and Employer (as amended, the "Change of Control Agreement"), an Event of Termination for Cause (as that term is defined in the Change of Control Agreement) shall have occurred; (b) The following shall be substituted in lieu of Section 3.1(iv) of the Employment Agreement during the Applicable Period: (iv) if, under the Change of Control Agreement, Employee's Disability (as that term is defined in the Change of Control Agreement) shall have occurred. (c) If the termination of Employee's employment occurs for any reason during the Applicable Period, then (i) the provisions of Section 7 of the Change of Control Agreement shall apply in lieu of the provisions of Sections 3.3 through 3.7 of the Employment Agreement, (ii) the provisions of Article 6 of the Employment Agreement shall not apply to Employee, and (iii) the provisions of Section 12 of the Change of Control Agreement shall apply in lieu of the provisions of Section 7.5 of the Employment Agreement. 7 This Agreement is the Third Amendment to the Employment Agreement, and the parties agree that all other terms, conditions and stipulations contained in the Employment Agreement, and any amendments thereto, shall remain in full force and effect and without any change or modification, except as provided herein. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written. EOG RESOURCES, INC. By: /s/PATRICIA EDWARDS ---------------------------------- Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary This 20th day of June, 2001 MARK G. PAPA /s/MARK G. PAPA --------------------------------------- This 20th day of June, 2001 8 EXHIBIT "A" TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN EOG RESOURCES, INC. AND MARK G. PAPA (Amended as of June 1, 2001) Employee Name: Mark G. Papa Term: June 1, 2001 through May 31, 2005 Renewal: After May 31, 2005, Agreement will automatically be renewed annually for a one-year term unless either Employee or Employer provides a 120-day notice of intent not to renew. Position: Chairman of the Board and Chief Executive Officer Location: Houston, Texas Annual Base Six Hundred Fifty Thousand Dollars Salary: ($650,000) per year Bonus: Employee shall be eligible to participate in the EOG Resources, Inc. Executive Officer Annual Bonus Plan, at a target of 100% of Annual Base Salary. Such bonus may be paid in a combination of cash, stock options, and/or phantom stock units, as determined by the Compensation Committee of Employer's Board of Directors. Long-term Employee shall be eligible to receive Incentives: grants of stock options, consistent with similarly situated executives, as determined from time to time by the Compensation Committee of Employer's Board of Directors. Signing Grant: Employee shall be granted 60,000 shares of Restricted Stock under the terms of the EOG Resources, Inc. 1992 Stock Plan, as amended, with standard termination provisions, and vesting on May 8, 2006. EOG RESOURCES, INC. By: /s/PATRICIA EDWARDS --------------------------- Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary This 20th day of June, 2001 MARK G. PAPA /s/MARK G. PAPA ------------------------------- This 20th day of June, 2001 EX-10 8 exhibit10_10e.txt CHANGE OF CONTROL AGREEMENT Exhibit 10.10(e) CHANGE OF CONTROL AGREEMENT This Agreement between EOG Resources, Inc., a Delaware corporation (the "Company"), and Mark G. Papa (the "Employee") is effective as of this 20th day of June, 2001 (the "Effective Date"). Certain capitalized terms used herein are defined in Section 20. WITNESSETH: Whereas, the Company considers it to be in the best interests of its stockholders to encourage the continued employment of certain key employees of the Company notwithstanding the possibility, threat or occurrence of a Change of Control of the Company; and Whereas, the Employee is a key employee of the Company; and Whereas, the Company believes that the possibility of the occurrence of a Change of Control of the Company may result in the termination by the Employee of the Employee's employment by the Company or in the distraction of the Employee from the performance of Employee's duties to the Company, in either case to the detriment of the Company and its stockholders; and Whereas, the Company recognizes that the Employee could suffer adverse financial and professional consequences if a Change of Control of the Company were to occur; and Whereas, the Company wishes to enter into this Agreement to protect the Employee if a Change of Control of the Company occurs, thereby encouraging the Employee to remain in the employ of the Company and not to be distracted from the performance of Employee's duties to the Company by the possibility of a Change of Control of the Company; Now, Therefore, the parties agree as follows: SECTION 1. OTHER EMPLOYMENT ARRANGEMENTS. (a) This Agreement does not affect the Employee's existing or future employment arrangements with the Company unless a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement. The Employee's employment with the Company shall continue to be governed by the Employee's existing or future employment agreements with the Company, if any, or, in the absence of any employment agreement, shall continue to be at the will of the Company, except that if a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement and the Employee's employment with the Company is terminated (whether by the Employee or the Company or automatically as provided in Section 3) after the occurrence of that Change of Control of the Company, then the Employee shall be entitled to receive certain benefits as provided in this Agreement. (b) Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in any plan, program, policy or practice of or provided by the Company or any of its Affiliates and for which the Employee may qualify, nor shall anything herein limit or otherwise affect such rights as the Employee may have under any contract or agreement with the 2 Company or any of its Affiliates. Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan, program, policy or practice of or provided by, or any contract or agreement with, the Company or any of its Affiliates at or subsequent to the date of termination of the Employee's employment with the Company shall be payable or otherwise provided in accordance with such plan, program, policy or practice or contract or agreement except as explicitly modified by this Agreement. SECTION 2. CHANGE OF CONTROL OF THE COMPANY. A "Change of Control of the Company" shall mean the occurrence of any of the following events: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (an "Exchange Act Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this clause (a), the following acquisitions shall not constitute a Change of Control of the Company: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with subclauses (i), (ii) and (iii) of clause (c) of this Section 2; (b) Individuals who, as of May 8, 2001, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to May 8, 2001, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an Exchange Act Person other than the Board of Directors; (c) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the assets or stock of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the 3 Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Exchange Act Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board of Directors providing for such Business Combination; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. Notwithstanding anything contained in this Agreement to the contrary, if (i) the Employee's employment with the Company is terminated, or (ii) an event occurs which, had it occurred after a Change of Control of the Company, would with proper notice from Employee constitute an Event of Termination for Good Reason, and if it is reasonably demonstrated by the Employee that such action (A) was taken at the request of a third party that has taken steps reasonably calculated to effect a Change of Control of the Company or (B) otherwise arose in connection with or anticipation of a Change of Control of the Company, then for all purposes of this Agreement, such Change of Control of the Company shall be deemed to have occurred on the date immediately prior to the date of such termination or event. SECTION 3. TERM OF THIS AGREEMENT. The term of this Agreement shall begin on the Effective Date and shall expire on the first to occur of: (a) the Employee's death, the Employee's Disability or the Employee's Retirement, which events shall also be deemed automatically to terminate the Employee's employment by the Company; or (b) the termination by the Employee or the Company of the Employee's employment by the Company. The expiration of the term of this Agreement shall not terminate this Agreement itself or affect the right of the Employee or the Employee's legal representatives to enforce the payment of any amount or other benefit to which the Employee was entitled before the expiration of the term of this Agreement or to which the Employee became entitled as a result of the event that caused the term of this Agreement to expire. SECTION 4 EVENT OF TERMINATION FOR CAUSE. 4 (a) An "Event of Termination for Cause" shall mean the Employee's (i) conviction of a felony involving moral turpitude (which, through lapse of time or otherwise, is not subject to appeal), (ii) willful refusal without proper legal cause to perform employee's duties and responsibilities which remains uncorrected for thirty (30) days following written notice to the Employee by the Company of such event, (iii) willfully engaging in conduct which the Employee has, or reasonably should have, reason to know is materially injurious to the Company, or (iv) other extreme personal conduct such as, but not limited to, deliberate infliction of bodily injury to another employee while on duty, gross negligent lack of regard for safety rules and customs, or engaging in business activities directly in conflict with the Company's business. (b) For purposes of this Section 4, no act, or failure to act, on the part of the Employee shall be considered "willful" unless it is done, or omitted to be done, by the Employee in bad faith or without reasonable belief that the Employee's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board of Directors or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of the Company. Any business activity that has been approved by the Chairman of the Board of the Company (or if the Employee is the Chairman of the Board of the Company, that has been approved by a resolution duly adopted by the Board of Directors) shall be conclusively presumed not to be a business activity that is in direct conflict with the Company's business. (c) The cessation of employment of the Employee as a result of the alleged occurrence of an event referred to in clause (ii) or (iii) of the definition of "Event of Termination for Cause" shall not be deemed to be as a result of an Event of Termination for Cause unless and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors (excluding the Employee, if the Employee is a member of the Board of Directors) at a meeting of the Board of Directors called and held for such purpose (after reasonable notice is provided to the Employee and the Employee is given an opportunity, together with counsel for the Employee, to be heard before the Board of Directors), finding that, in the good faith opinion of the Board of Directors, the Employee is guilty of the conduct described in clause (ii) or (iii) of such definition and specifying the particulars thereof in detail. Any determination of the Board of Directors under this clause (c) shall not be binding on the Employee, shall not be conclusive as to whether an Event of Termination for Cause has occurred, and shall not affect Employee's right to contest whether an Event of Termination for Cause has occurred. SECTION 5. EVENT OF TERMINATION FOR GOOD REASON. An "Event of Termination for Good Reason" shall mean, after a Change of Control of the Company, the occurrence of any of the following events, provided Employee serves termination by written notice in connection with or based upon and within 90 days of the occurrence of such event: 5 (a) a significant reduction in the Employee's authority and/or responsibilities (whether or not occurring solely as a result of the Company's ceasing to be a publicly traded entity); or (b) a reduction in Employee's Annual Base Salary, a reduction in Employee's annual bonus when compared to the bonus received for the prior year, or the failure to continue the Employee's full participation in any employee benefit plan or program (unless replaced by a substantially comparable plan or program) in which Employee is eligible to participate prior to the notification (other than as a result of the normal expiration of such plan or program), in each case other than as a part of a general program to reduce compensation or benefits on a proportional basis relative to all other employees of the Company; or (c) a relocation of the Employee's primary place of work to a location more than 50 miles away from the Employee's primary place of work at the time of the notice (provided, however, this clause (c) shall no longer apply to an employee after he has accepted any such relocation after a Change of Control of the Company has occurred and the above referenced 90 day period has passed). For the avoidance of doubt, any action referred to in clause (a), (b) or (c) above shall constitute an Event of Termination for Good Reason under the foregoing definition regardless of whether the Company is permitted to take such action under any employment contract with the Employee. SECTION 6. NOTICE OF TERMINATION. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, any termination by the Employee or the Company of the Employee's employment by the Company, or any determination of the Employee's Disability, that occurs within two years of such Change of Control shall be communicated by notice to the other party that shall indicate the specific paragraph of Section 7 pursuant to which the Employee is to receive benefits as a result of the termination. If the notice states that the Employee's employment by the Company has been automatically terminated as a result of the Employee's Disability, the notice shall specifically describe the basis for the determination of the Employee's Disability and shall state the date of the determination of the Employee's Disability, which date shall be not more than ten days before the date such notice is given. If the notice is from the Company and states that the Employee's employment by the Company is terminated by the Company as a result of the occurrence of an Event of Termination for Cause, the notice shall specifically describe the action or inaction of the Employee that the Company believes constitutes an Event of Termination for Cause, and in the case of a termination under clause (ii) or (iii) of the definition of Event of Termination for Cause, shall include the resolution of the Board of Directors referred to in Section 4(c). If the notice is from the Employee and states that the Employee's employment by the Company is terminated by the Employee as a result of the occurrence of an Event of Termination for Good Reason, the notice shall specifically describe the action or inaction of the Company that the Employee believes constitutes an Event of Termination for Good Reason. Each notice given pursuant to this Section 6 (other than a notice stating that the Employee's employment by the Company has been automatically terminated as a result of the Employee's Disability) shall state a date, which shall be not fewer than 30 days nor 6 more than 60 days after the date such notice is given, on which the termination of the Employee's employment by the Company is effective. The date so stated in accordance with this Section 6 shall be the "Termination Date". If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, any subsequent purported termination by the Company of the Employee's employment by the Company, or any subsequent purported determination by the Company of the Employee's Disability, within two years of such Change of Control shall be ineffective unless that termination or determination shall have been communicated by the Company to the Employee by notice that meets the requirements of the foregoing provisions of this Section 6 and the provisions of Section 9. SECTION 7. BENEFITS PAYABLE ON CHANGE OF CONTROL AND TERMINATION. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, and the Employee's employment by the Company is terminated (whether by the Employee or the Company or automatically as provided in Section 3) within two years after the occurrence of that Change of Control of the Company, the Employee shall be entitled to the following benefits: (a) If the Employee's employment by the Company is terminated by the Company as a result of the occurrence of an Event of Termination for Cause, or by the Employee before the occurrence of an Event of Termination for Good Reason, then the Company shall pay to the Employee the Base Salary accrued through the Termination Date but not previously paid to the Employee, and the Employee shall be entitled to any other amounts or benefits provided under any plan, policy, practice, program, contract or arrangement of or with the Company, which shall be governed by the terms thereof (except as explicitly modified by this Agreement). (b) If the Employee's employment by the Company is automatically terminated as a result of the Employee's death, the Employee's Disability or the Employee's Retirement, then the Company shall pay to the Employee the Base Salary accrued through the date of the occurrence of that event but not previously paid to the Employee, and the Employee shall be entitled to any other amounts or benefits provided under any plan, policy, practice, program, contract or arrangement of or with the Company, which shall be governed by the terms thereof (except as explicitly modified by this Agreement). (c) If the Employee's employment by the Company is terminated (x) by the Company, other than as a result of the occurrence of an Event of Termination for Cause, or (y) by the Employee after the occurrence of an Event of Termination for Good Reason, or (z) by the Employee for any reason during the thirty (30) day period beginning six (6) months after a Change of Control of the Company, then the Employee shall be entitled to the following: (i) the Company shall pay to the Employee the Base Salary and compensation for earned but unused vacation time accrued through the Termination Date but not previously paid to the Employee; (ii) the Company shall pay to the Employee, as a lump sum, an amount equal to the total of the following amounts: 7 (A) 2.99 times the amount of the then current Annual Base Salary; plus (B) two (2) times the amount of the Employee's most recent target annual bonus; plus (C) the amount of the Money Purchase Pension Plan contributions that would have been made by the Company on behalf of the Employee if the Employee had continued to be employed by the Company at the Employee's then current Annual Base Salary for three years following the Termination Date; and plus (D) the amount that would have been paid on behalf of the Employee as matching amounts to the Company's Savings Plan if the Employee had continued to be employed by the Company at the Employee's then current Annual Base Salary for three years following the Termination Dateand had continued to contribute to the Company's Savings Plan during such three year period at the Employee's then current contribution level. (iii) the Company shall arrange for the Employee's uninterrupted participation for three (3) years after the Termination Date in the Company's major medical/dental insurance plan, which participation shall cease upon Employee's eligibility for participation in a major medical/dental insurance plan of another employer; (iv) the Company shall cause the Employee to receive three (3) years age and service credit for eligibility for the Company's retiree medical insurance coverage; and (v) the Company shall provide out placement services at a cost not to exceed $50,000.00. Each payment required to be made to the Employee pursuant to the foregoing provisions of this Section 7 shall be made by check drawn on an account of the Company at a bank located in the United States of America (unless the Employee has elected to have salary payments deposited directly by the Company to a bank account maintained by the Employee, in which event the Company shall make a direct deposit of the payment to that account), and shall be paid (x) if the Employee's employment by the Company was terminated as a result of the Employee's death, the Employee's Disability or the Employee's Retirement, not more than 30 days immediately following the date of the occurrence of that event, and (y) if the Employee's employment by the Company was terminated for any other reason, not more than ten days immediately following the Termination Date. SECTION 8. SUCCESSORS. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, (a) the Company shall not, directly or indirectly, consolidate with, merge into or sell or otherwise transfer its assets as an entirety or substantially as an entirety to, any person, or permit any person to consolidate with or merge into the Company, unless immediately after such 8 consolidation, merger, sale or transfer, the Successor shall have assumed in writing the Company's obligations under this Agreement; and (b) not fewer than ten days before the consummation of any consolidation of the Company with, merger by the Company into, or sale or other transfer by the Company of its assets as an entirety or substantially as an entirety to, any person, the Company shall give the Employee notice of that proposed transaction. SECTION 9. NOTICE. Notices required or permitted to be given by either party pursuant to this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the other party or when deposited with the United States Postal Service as certified or registered mail with postage prepaid and addressed: (a) if to the Employee, at the Employee's address last shown on the Company's records, and (b) if to the Company, at 333 Clay Street, Suite 4200, Houston, Texas 77002, directed to the attention of the Company's Chairman of the Board, or, in either case, to such other address as the party to whom such notice is to be given shall have specified by notice given to the other party. SECTION 10. WITHHOLDING TAXES. The Company may withhold from all payments to be paid to the Employee pursuant to this Agreement all taxes that, by applicable federal or state law, the Company is required to so withhold. SECTION 11. U.S. EXCISE TAX INDEMNIFICATION. (a) In the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, the Company's Change of Control Severance Plan or otherwise, but determined without regard to any additional payments required under this Section 11) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the United States Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. 9 (b) Subject to the provisions of Section 8.3, all determinations required to be made under this Section 11, including whether and when a Gross-Up Payment is required and the amount of such Gross- Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a public accounting firm chosen by the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Employee if requested by either the Company or the Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to clause (c) of this Section 11 and the Employee thereafter is required to make a payment of any additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee. (c) If the Company elects to contest a claim by the Internal Revenue Service that Excise Tax is due from the Employee, the Employee shall cooperate fully with the Company in order to effectively contest such claim, including, but not limited to providing information reasonably requested by the Company relating to such claim, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and permitting the Company to participate in any proceedings relating to such claim. The Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after- tax basis, for any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (d) If the Company directs the Employee to pay a claim by the Internal Revenue Service and sue for a refund, the Company shall advance the amount of such payment to the Employee on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance. If, after the receipt by the Employee of an amount advanced by the Company pursuant to this clause (d), the Employee becomes entitled to receive, and receives, any refund with respect to such claim, the Employee shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to this clause (d), a determination is made that the Employee is not entitled to any refund with respect to such claim, then such advance shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. SECTION 12. EXPENSES OF ENFORCEMENT. The Company agrees to pay as incurred (within ten days following the Company's receipt of an invoice from the Employee), to the full extent permitted by law, all legal fees and 10 expenses that the Employee may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Employee or others of the validity, interpretation or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Employee about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended. SECTION 13. EMPLOYMENT BY WHOLLY OWNED ENTITIES. If, at or after the Effective Date, the Employee is or becomes an employee of one or more corporations, partnerships, limited liability companies or other entities that are, directly or indirectly, wholly owned by the Company, references in this Agreement to the Employee's employment by the Company shall include the Employee's employment by any such wholly owned entity. SECTION 14. NO OBLIGATION TO MITIGATE; NO RIGHTS OF OFFSET. (a) The Employee shall not be required to mitigate the amount of any payment or other benefit required to be paid to the Employee pursuant to this Agreement, whether by seeking other employment or otherwise, nor shall the amount of any such payment or other benefit be reduced on account of any compensation earned or benefits received by the Employee as a result of employment by another person. (b) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Employee or others. SECTION 15. AMENDMENT AND WAIVER. No provision of this Agreement may be amended or waived (whether by act or course of conduct or omission or otherwise) unless that amendment or waiver is by written instrument signed by the parties hereto. No waiver by either party of any breach of this Agreement shall be deemed a waiver of any other or subsequent breach. SECTION 16. GOVERNING LAW. The validity, interpretation, construction and enforceability of this Agreement shall be governed by the laws of the State of Texas. SECTION 17. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. SECTION 18. COUNTERPARTS. 11 This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute the same instrument. SECTION 19. ASSIGNMENT. This Agreement shall inure to the benefit of and be enforceable by the Employee's legal representative. The Company may not assign any of its obligations under this Agreement unless (i) such assignment is to a Successor and (ii) the requirements of Section 8 are fulfilled. SECTION 20. MISCELLANEOUS. (a) As used in this Agreement, the following terms and phrases have the indicated meanings: (i) "Affiliate" and "Affiliates" mean, when used with respect to any entity, individual, or other person, any other entity, individual, or other person which, directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with such entity, individual or person. "Affiliated Company" means any entity that is an Affiliate of the Company. (ii) "Annual Base Salary" means, at any point in time, the regular rate of wages payable to the Employee, expressed on an annualized basis, including any base salary that has been earned but deferred. (iii) "Board of Directors" means the Board of Directors of the Company. (iv) "Change of Control of the Company" has the meaning assigned to that phrase in Section 2. (v) "Company" has the meaning assigned to that term in the preamble to this Agreement. The term "Company" shall also include any Successor, whether the liability of such Successor under this Agreement is established by contract or occurs by operation of law. (vi) "Effective Date" has the meaning assigned to that term in the preamble to this Agreement. (vii) "Employee" has the meaning assigned to such term in the preamble to this Agreement. (viii) "Employee's Disability" means: (A) if no Change of Control of the Company shall have occurred before the date of determination, the physical or mental disability of the Employee determined in accordance with the disability policy of the Company at the time in effect and generally applicable to its salaried employees; and (B) if a Change of Control of the Company shall have occurred before the date of determination, the physical or mental disability of the Employee determined in 12 accordance with the disability policy of the Company in effect immediately before the occurrence of the first Change of Control of the Company and generally applicable to its salaried employees. . (ix) "Employee's Retirement" means (x) if no Change of Control of the Company shall have occurred before the date of the Employee's proposed retirement, the retirement of the Employee in accordance with the retirement policy of the Company at the time in effect and generally applicable to its salaried employees, and (y) if a Change of Control of the Company shall have occurred before the date of the Employee's proposed retirement, the retirement of the Employee from the employ of the Company in accordance with the retirement policy of the Company in effect immediately before the occurrence of the first Change of Control of the Company and generally applicable to its salaried employees. (x) "Event of Termination for Good Reason" has the meaning assigned to that phrase in Section 5. (xi) "Event of Termination for Cause" has the meaning assigned to that phrase in Section 4. (xii) "Expiration Date" has the meaning assigned to that term in Section 3. (xiii) "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited partnership, limited liability company, trust, unincorporated organization, government, or agency or political subdivision of any government. (xiv) "Successor" means a person with or into which the Company shall have been merged or consolidated or to which the Company shall have transferred its assets as an entirety or substantially as an entirety. (xv) "Termination Date" has the meaning assigned to that term in Section 6. (xvi) "This Agreement" means this Change of Control Agreement as it may be amended from time to time. (b) In the event of the enactment of any successor provision to any statute or rule cited in this Agreement, references in this Agreement to such statute or rule shall be to such successor provision. (c) The headings of Sections of this Agreement shall not control the meaning or interpretation of this Agreement. (d) References in this Agreement to any Section are to the corresponding Section of this Agreement unless the context otherwise indicates. 13 In Witness Whereof, the Company and the Employee have executed this Agreement as of the Effective Date. EOG RESOURCES, INC. By /s/PATRICIA EDWARDS --------------------------------- Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary MARK G. PAPA /s/MARK G. PAPA ----------------------------------- EX-10 9 exhibit10_11d.txt THIRD AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT Exhibit 10.11(d) THIRD AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT This Agreement, entered into on this 22nd of June, 2001, and made effective as of June 1, 2001, by and between EOG Resources, Inc., f.k.a. Enron Oil & Gas Company ("Employer"), and Edmund P. Segner, III ("Employee") is an amendment to that certain Employment Agreement dated effective as of September 1, 1998 (as heretofore amended, the "Employment Agreement"). WHEREAS, the parties desire to amend the Employment Agreement as provided herein; NOW, THEREFORE, in consideration thereof and of the mutual covenants contained herein, the parties agree as follows: 1. Exhibit A to the Employment Agreement is hereby deleted in its entirety and a new Exhibit A, in the form attached hereto as Exhibit A and effective as of June 1, 2001, is substituted therefor. 2. Section 1.3 is hereby revised to remove reference to Enron. 3. Section 1.7 is hereby deleted in its entirety. 4. Section 1.6 is hereby revised to change references to "Employer's President" to "Employer's Chairman". 5. Section 2.1 is hereby deleted in its entirety and the following is substituted therefor: " 2.1 Employee's annual base salary during the Term shall be not less than the amount set forth under the heading "Annual Base Salary" on Exhibit A, subject to increase at the sole discretion of the Employer, which shall be paid in accordance with Employer's standard payroll practice. Any calculation to be made under this Agreement with respect to Employee's Annual Base Salary shall be made using the then current Annual Base Salary in effect at the time of the event for which such calculation is made." 6. Section 2.3 is hereby revised to remove reference to Enron. 7. Section 3.1(i) is hereby revised to remove reference to Enron. 8. Section 3.1(iv) is hereby revised to change the reference to "Enron's long-term disability plan" to "Employer's long-term disability plan". 9. The phrase "except Section 8.6" is hereby deleted from Section 3.2. 10. Article 3, Section 3.5 is hereby deleted in its entirety and the following is substituted therefor: 2 " 3.5 Upon an Involuntary Termination of the employment relationship by either Employer or Employee prior to the expiration of the Term, Employee shall be entitled, in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), to receive a severance benefit under this Agreement equal to (a) the greater of the amount that Employee would have received under this Agreement from the date of termination through the end of the Term of this Agreement if Employee had continued to be employed during such period, computed assuming that Employee received the Annual Base Salary specified on Exhibit A and an annual bonus equal to the bonus target specified on Exhibit A for each year during such period (in each case prorated for any partial year), or two times the sum of the Employee's Annual Base Salary and the annual bonus target specified on Exhibit A; plus (b) the value of unvested stock options granted under Employer's 1992 Stock Plan based on the difference between the average closing price of Employer's stock on the ten (10) trading days prior to the date of termination and the grant price. Employee shall not be under any duty or obligation to seek or accept other employment following Involuntary Termination and the amounts due Employee hereunder shall not be reduced or suspended if Employee accepts subsequent employment. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer and Employer's sole and exclusive liability to Employee under this Agreement, in contract, tort, or otherwise, for any Involuntary Termination of the employment relationship. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer for any sums for Involuntary Termination other than those sums specified in this Section 3.5. If Employee breaches this covenant, Employer shall be entitled to recover from Employee all sums expended by Employer (including costs and attorneys fees) in connection with such suit, claim, demand or cause of action." 11. Section 3.8 is hereby revised to remove reference to Enron. 12. Section 4.1 is hereby deleted in its entirety and the following is substituted therefor: " 4.1 After the expiration of the Term specified on Exhibit "A," this Agreement, and Employee's employment hereunder, shall automatically renew for successive periods of one (1) year each, unless either Employer or Employee provides not less than one hundred twenty (120) days' prior written notice of intent not to renew. In the event this Agreement is not renewed pursuant to such notice, and Employee remains employed by Employer beyond the expiration of the Term of this Agreement, including any renewals, Employee's employment shall convert to a month-to-month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause. Upon such termination of the employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall 3 not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination." 13. Section 5.1 is hereby revised to remove references to Enron, including replacing the reference to "any Enron entity" to "any Employer entity". 14. Article 6 is hereby revised to remove references to Enron, including removing Enron and its affiliates as third party beneficiaries of Employee's obligations under Section 6.2. 15. Section 7.1 is hereby deleted in its entirety and the following is substituted therefor: " 7.1 As part of the consideration for the compensation and benefits to be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and in order to protect Employer's interests in the confidential information of Employer and the business relationships developed by Employee with the clients and potential clients of Employer, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 7. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer is conducting any business as of the date of termination of the employment relationship or has during the previous twelve months conducted any business: (i) engage in any business competitive with the business conducted by Employer; (ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with the business conducted by Employer; (iii) induce any employee of Employer to terminate his or her employment with Employer, or hire or assist in the hiring of any such employee by person, association, or entity not affiliated with Employer. These non-competition obligations shall extend until the earlier of (a) expiration of the Term or (b) one year after termination of the employment relationship. Further, if Employer ceases to be publicly traded, Employee may exercise his right to voluntarily resign under Section 3.2(ii). If Employee exercises such right, these non-competition obligations shall expire immediately and have no further force and effect, and the Employer shall have no further obligations to Employee under this Agreement." 16. Article 8 is hereby revised to remove references to Enron. 17. Section 8.3, notices and all other communications to Employer should be to: 4 EOG Resources, Inc. 333 Clay Street, Suite 4200 Houston, Texas 77002 Attention: Vice President, Human Resources, Administration & Corporate Secretary 18. Article 9 is hereby deleted in its entirety. 19. Contemporaneously with the execution of this Agreement, the parties have executed a Change of Control Agreement dated June 22, 2001 (the "Change of Control Agreement"). If during the term of the Change of Control Agreement, a Change of Control (as that term is defined in the Change of Control Agreement) occurs or is deemed to have occurred under such agreement, then for the period of time from the occurrence of the Change of Control through the second anniversary of the Change of Control (the "Applicable Period"), the following provisions will apply: (a) The following shall be substituted in lieu of Section 3.1(i) of the Employment Agreement during the Applicable Period: (i) if, under the Change of Control Agreement, dated June 22, 2001, between Employee and Employer (as amended, the "Change of Control Agreement"), an Event of Termination for Cause (as that term is defined in the Change of Control Agreement) shall have occurred; (b) The following shall be substituted in lieu of Section 3.1(iv) of the Employment Agreement during the Applicable Period: (iv) if, under the Change of Control Agreement, Employee's Disability (as that term is defined in the Change of Control Agreement) shall have occurred. (c) If the termination of Employee's employment occurs for any reason during the Applicable Period, then (i) the provisions of Section 7 of the Change of Control Agreement shall apply in lieu of the provisions of Sections 3.3 through 3.7 of the Employment Agreement, (ii) the provisions of Article 7 of the Employment Agreement shall not apply to Employee, and (iii) the provisions of Section 12 of the Change of Control Agreement shall apply in lieu of the provisions of Section 8.6 of the Employment Agreement. This Agreement is the Third Amendment to the Employment Agreement, and the parties agree that all other terms, conditions and stipulations contained in the Employment Agreement, and any amendments thereto, shall remain in full force and effect and without any change or modification, except as provided herein. 5 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written. EOG RESOURCES, INC. By: /s/ PATRICIA EDWARDS ----------------------------- Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary This 22nd day of June, 2001 EDMUND P. SEGNER, III /s/ EDMUND P. SEGNER, III --------------------------------- This 22nd day of June, 2001 6 EXHIBIT "A" TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN EOG RESOURCES, INC. AND EDMUND P. SEGNER, III (Amended as of June 1, 2001) Employee Name: Edmund P. Segner, III Term: June 1, 2001 through May 31, 2005 Renewal: After May 31, 2005, Agreement will automatically be renewed annually for a one-year term unless either Employee or Employer provides a 120-day notice of intent not to renew. Position: President and Chief of Staff Location: Houston, Texas Reporting Relationship: Reports to Mark G. Papa, Chairman and Chief Executive Officer Annual Base Salary: Four Hundred Forty-five Thousand Dollars ($445,000) per year Bonus: Employee shall be eligible to participate in the EOG Resources, Inc. Executive Officer Annual Bonus Plan, at a target of 100% of Annual Base Salary. Such bonus may be paid in a combination of cash, stock options, and/or phantom stock units, as determined by the Compensation Committee of Employer's Board of Directors. Long-term Incentives: Employee shall be eligible to receive grants of stock options, consistent with similarly situated executives, as determined from time to time by the Compensation Committee of Employer's Board of Directors Stock Option Grant: Employee received a grant of 175,000 stock options, effective September 8, 1998, vesting 20% on the Grant Date and 20% on each of the first four anniversaries of the Grant Date, as evidenced by an Award Agreement. Signing Grant: Employee shall be granted 30,000 shares of Restricted Stock under the terms of the EOG Resources, Inc. 1992 Stock Plan, as amended, with standard termination provisions, and vesting on May 8, 2006. EOG RESOURCES, INC. By: /s/PATRICIA EDWARDS ------------------------ Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary This 22nd day of June, 2001 EDMUND P. SEGNER, III /s/EDMUND P. SEGNER, III --------------------------- This 22nd day of June, 2001 EX-10 10 exhibit10_11e.txt CHANGE OF CONTROL AGREEMENT Exhibit 10.11(e) CHANGE OF CONTROL AGREEMENT This Agreement between EOG Resources, Inc., a Delaware corporation (the "Company"), and Edmund P. Segner, III (the "Employee") is effective as of this 22nd day of June, 2001 (the "Effective Date"). Certain capitalized terms used herein are defined in Section 20. WITNESSETH: Whereas, the Company considers it to be in the best interests of its stockholders to encourage the continued employment of certain key employees of the Company notwithstanding the possibility, threat or occurrence of a Change of Control of the Company; and Whereas, the Employee is a key employee of the Company; and Whereas, the Company believes that the possibility of the occurrence of a Change of Control of the Company may result in the termination by the Employee of the Employee's employment by the Company or in the distraction of the Employee from the performance of Employee's duties to the Company, in either case to the detriment of the Company and its stockholders; and Whereas, the Company recognizes that the Employee could suffer adverse financial and professional consequences if a Change of Control of the Company were to occur; and Whereas, the Company wishes to enter into this Agreement to protect the Employee if a Change of Control of the Company occurs, thereby encouraging the Employee to remain in the employ of the Company and not to be distracted from the performance of Employee's duties to the Company by the possibility of a Change of Control of the Company; Now, Therefore, the parties agree as follows: SECTION 1. OTHER EMPLOYMENT ARRANGEMENTS. (a) This Agreement does not affect the Employee's existing or future employment arrangements with the Company unless a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement. The Employee's employment with the Company shall continue to be governed by the Employee's existing or future employment agreements with the Company, if any, or, in the absence of any employment agreement, shall continue to be at the will of the Company, except that if a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement and the Employee's employment with the Company is terminated (whether by the Employee or the Company or automatically as provided in Section 3) after the occurrence of that Change of Control of the Company, then the Employee shall be entitled to receive certain benefits as provided in this Agreement. (b) Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in any plan, program, policy or practice of or provided by the Company or any of its Affiliates and for which the Employee may qualify, nor shall anything herein limit or 2 otherwise affect such rights as the Employee may have under any contract or agreement with the Company or any of its Affiliates. Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan, program, policy or practice of or provided by, or any contract or agreement with, the Company or any of its Affiliates at or subsequent to the date of termination of the Employee's employment with the Company shall be payable or otherwise provided in accordance with such plan, program, policy or practice or contract or agreement except as explicitly modified by this Agreement. SECTION 2. CHANGE OF CONTROL OF THE COMPANY. A "Change of Control of the Company" shall mean the occurrence of any of the following events: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (an "Exchange Act Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this clause (a), the following acquisitions shall not constitute a Change of Control of the Company: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with subclauses (i), (ii) and (iii) of clause (c) of this Section 2; (b) Individuals who, as of May 8, 2001, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to May 8, 2001, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an Exchange Act Person other than the Board of Directors; (c) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the assets or stock of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination 3 (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Exchange Act Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board of Directors providing for such Business Combination; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. Notwithstanding anything contained in this Agreement to the contrary, if (i) the Employee's employment with the Company is terminated, or (ii) an event occurs which, had it occurred after a Change of Control of the Company, would with proper notice from Employee constitute an Event of Termination for Good Reason, and if it is reasonably demonstrated by the Employee that such action (A) was taken at the request of a third party that has taken steps reasonably calculated to effect a Change of Control of the Company or (B) otherwise arose in connection with or anticipation of a Change of Control of the Company, then for all purposes of this Agreement, such Change of Control of the Company shall be deemed to have occurred on the date immediately prior to the date of such termination or event. SECTION 3. TERM OF THIS AGREEMENT. The term of this Agreement shall begin on the Effective Date and shall expire on the first to occur of: (a) the Employee's death, the Employee's Disability or the Employee's Retirement, which events shall also be deemed automatically to terminate the Employee's employment by the Company; or (b) the termination by the Employee or the Company of the Employee's employment by the Company. The expiration of the term of this Agreement shall not terminate this Agreement itself or affect the right of the Employee or the Employee's legal representatives to enforce the payment of any amount or other benefit to which the Employee was entitled before the expiration of the term of this Agreement or to which the Employee became entitled as a result of the event that caused the term of this Agreement to expire. 4 SECTION 4 EVENT OF TERMINATION FOR CAUSE. (a) An "Event of Termination for Cause" shall mean the Employee's (i) conviction of a felony involving moral turpitude (which, through lapse of time or otherwise, is not subject to appeal), (ii) willful refusal without proper legal cause to perform employee's duties and responsibilities which remains uncorrected for thirty (30) days following written notice to the Employee by the Company of such event, (iii) willfully engaging in conduct which the Employee has, or reasonably should have, reason to know is materially injurious to the Company, or (iv) other extreme personal conduct such as, but not limited to, deliberate infliction of bodily injury to another employee while on duty, gross negligent lack of regard for safety rules and customs, or engaging in business activities directly in conflict with the Company's business. (b) For purposes of this Section 4, no act, or failure to act, on the part of the Employee shall be considered "willful" unless it is done, or omitted to be done, by the Employee in bad faith or without reasonable belief that the Employee's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board of Directors or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of the Company. Any business activity that has been approved by the Chairman of the Board of the Company (or if the Employee is the Chairman of the Board of the Company, that has been approved by a resolution duly adopted by the Board of Directors) shall be conclusively presumed not to be a business activity that is in direct conflict with the Company's business. (c) The cessation of employment of the Employee as a result of the alleged occurrence of an event referred to in clause (ii) or (iii) of the definition of "Event of Termination for Cause" shall not be deemed to be as a result of an Event of Termination for Cause unless and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors (excluding the Employee, if the Employee is a member of the Board of Directors) at a meeting of the Board of Directors called and held for such purpose (after reasonable notice is provided to the Employee and the Employee is given an opportunity, together with counsel for the Employee, to be heard before the Board of Directors), finding that, in the good faith opinion of the Board of Directors, the Employee is guilty of the conduct described in clause (ii) or (iii) of such definition and specifying the particulars thereof in detail. Any determination of the Board of Directors under this clause (c) shall not be binding on the Employee, shall not be conclusive as to whether an Event of Termination for Cause has occurred, and shall not affect Employee's right to contest whether an Event of Termination for Cause has occurred. SECTION 5. EVENT OF TERMINATION FOR GOOD REASON. An "Event of Termination for Good Reason" shall mean, after a Change of Control of the Company, the occurrence of any of the following events, provided Employee serves termination by written notice in connection with or based upon and within 90 days of the occurrence of such event: 5 (a) a significant reduction in the Employee's authority and/or responsibilities (whether or not occurring solely as a result of the Company's ceasing to be a publicly traded entity); or (b) a reduction in Employee's Annual Base Salary, a reduction in Employee's annual bonus when compared to the bonus received for the prior year, or the failure to continue the Employee's full participation in any employee benefit plan or program (unless replaced by a substantially comparable plan or program) in which Employee is eligible to participate prior to the notification (other than as a result of the normal expiration of such plan or program), in each case other than as a part of a general program to reduce compensation or benefits on a proportional basis relative to all other employees of the Company; or (c) a relocation of the Employee's primary place of work to a location more than 50 miles away from the Employee's primary place of work at the time of the notice (provided, however, this clause (c) shall no longer apply to an employee after he has accepted any such relocation after a Change of Control of the Company has occurred and the above referenced 90 day period has passed). For the avoidance of doubt, any action referred to in clause (a), (b) or (c) above shall constitute an Event of Termination for Good Reason under the foregoing definition regardless of whether the Company is permitted to take such action under any employment contract with the Employee. SECTION 6. NOTICE OF TERMINATION. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, any termination by the Employee or the Company of the Employee's employment by the Company, or any determination of the Employee's Disability, that occurs within two years of such Change of Control shall be communicated by notice to the other party that shall indicate the specific paragraph of Section 7 pursuant to which the Employee is to receive benefits as a result of the termination. If the notice states that the Employee's employment by the Company has been automatically terminated as a result of the Employee's Disability, the notice shall specifically describe the basis for the determination of the Employee's Disability and shall state the date of the determination of the Employee's Disability, which date shall be not more than ten days before the date such notice is given. If the notice is from the Company and states that the Employee's employment by the Company is terminated by the Company as a result of the occurrence of an Event of Termination for Cause, the notice shall specifically describe the action or inaction of the Employee that the Company believes constitutes an Event of Termination for Cause, and in the case of a termination under clause (ii) or (iii) of the definition of Event of Termination for Cause, shall include the resolution of the Board of Directors referred to in Section 4(c). If the notice is from the Employee and states that the Employee's employment by the Company is terminated by the Employee as a result of the occurrence of an Event of Termination for Good Reason, the notice shall specifically describe the action or inaction of the Company that the Employee believes constitutes an Event of Termination for Good Reason. Each notice given pursuant to this Section 6 (other than a notice stating that the Employee's employment by the Company has been automatically terminated as a result of the Employee's Disability) shall state a date, which shall be not fewer than 30 days nor 6 more than 60 days after the date such notice is given, on which the termination of the Employee's employment by the Company is effective. The date so stated in accordance with this Section 6 shall be the "Termination Date". If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, any subsequent purported termination by the Company of the Employee's employment by the Company, or any subsequent purported determination by the Company of the Employee's Disability, within two years of such Change of Control shall be ineffective unless that termination or determination shall have been communicated by the Company to the Employee by notice that meets the requirements of the foregoing provisions of this Section 6 and the provisions of Section 9. SECTION 7. BENEFITS PAYABLE ON CHANGE OF CONTROL AND TERMINATION. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, and the Employee's employment by the Company is terminated (whether by the Employee or the Company or automatically as provided in Section 3) within two years after the occurrence of that Change of Control of the Company, the Employee shall be entitled to the following benefits: (a) If the Employee's employment by the Company is terminated by the Company as a result of the occurrence of an Event of Termination for Cause, or by the Employee before the occurrence of an Event of Termination for Good Reason, then the Company shall pay to the Employee the Base Salary accrued through the Termination Date but not previously paid to the Employee, and the Employee shall be entitled to any other amounts or benefits provided under any plan, policy, practice, program, contract or arrangement of or with the Company, which shall be governed by the terms thereof (except as explicitly modified by this Agreement). (b) If the Employee's employment by the Company is automatically terminated as a result of the Employee's death, the Employee's Disability or the Employee's Retirement, then the Company shall pay to the Employee the Base Salary accrued through the date of the occurrence of that event but not previously paid to the Employee, and the Employee shall be entitled to any other amounts or benefits provided under any plan, policy, practice, program, contract or arrangement of or with the Company, which shall be governed by the terms thereof (except as explicitly modified by this Agreement). (c) If the Employee's employment by the Company is terminated (x) by the Company, other than as a result of the occurrence of an Event of Termination for Cause, or (y) by the Employee after the occurrence of an Event of Termination for Good Reason, or (z) by the Employee for any reason during the thirty (30) day period beginning six (6) months after a Change of Control of the Company, then the Employee shall be entitled to the following: (i) the Company shall pay to the Employee the Base Salary and compensation for earned but unused vacation time accrued through the Termination Date but not previously paid to the Employee; (ii) the Company shall pay to the Employee, as a lump sum, an amount equal to the total of the following amounts: 7 (A) 2.99 times the amount of the then current Annual Base Salary; plus (B) two (2) times the amount of the Employee's most recent target annual bonus; plus (C) the amount of the Money Purchase Pension Plan contributions that would have been made by the Company on behalf of the Employee if the Employee had continued to be employed by the Company at the Employee's then current Annual Base Salary for three years following the Termination Date; and plus (D) the amount that would have been paid on behalf of the Employee as matching amounts to the Company's Savings Plan if the Employee had continued to be employed by the Company at the Employee's then current Annual Base Salary for three years following the Termination Dateand had continued to contribute to the Company's Savings Plan during such three year period at the Employee's then current contribution level. (iii) the Company shall arrange for the Employee's uninterrupted participation for three (3) years after the Termination Date in the Company's major medical/dental insurance plan, which participation shall cease upon Employee's eligibility for participation in a major medical/dental insurance plan of another employer; (iv) the Company shall cause the Employee to receive three (3) years age and service credit for eligibility for the Company's retiree medical insurance coverage; and (v) the Company shall provide out placement services at a cost not to exceed $50,000.00. Each payment required to be made to the Employee pursuant to the foregoing provisions of this Section 7 shall be made by check drawn on an account of the Company at a bank located in the United States of America (unless the Employee has elected to have salary payments deposited directly by the Company to a bank account maintained by the Employee, in which event the Company shall make a direct deposit of the payment to that account), and shall be paid (x) if the Employee's employment by the Company was terminated as a result of the Employee's death, the Employee's Disability or the Employee's Retirement, not more than 30 days immediately following the date of the occurrence of that event, and (y) if the Employee's employment by the Company was terminated for any other reason, not more than ten days immediately following the Termination Date. SECTION 8. SUCCESSORS. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, (a) the Company shall not, directly or indirectly, consolidate with, merge into or sell or otherwise transfer its assets as an entirety or substantially as an entirety to, any person, or permit any person to consolidate with or merge into the Company, unless immediately after such 8 consolidation, merger, sale or transfer, the Successor shall have assumed in writing the Company's obligations under this Agreement; and (b) not fewer than ten days before the consummation of any consolidation of the Company with, merger by the Company into, or sale or other transfer by the Company of its assets as an entirety or substantially as an entirety to, any person, the Company shall give the Employee notice of that proposed transaction. SECTION 9. NOTICE. Notices required or permitted to be given by either party pursuant to this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the other party or when deposited with the United States Postal Service as certified or registered mail with postage prepaid and addressed: (a) if to the Employee, at the Employee's address last shown on the Company's records, and (b) if to the Company, at 333 Clay Street, Suite 4200, Houston, Texas 77002, directed to the attention of the Company's Chairman of the Board, or, in either case, to such other address as the party to whom such notice is to be given shall have specified by notice given to the other party. SECTION 10. WITHHOLDING TAXES. The Company may withhold from all payments to be paid to the Employee pursuant to this Agreement all taxes that, by applicable federal or state law, the Company is required to so withhold. SECTION 11. U.S. EXCISE TAX INDEMNIFICATION. (a) In the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, the Company's Change of Control Severance Plan or otherwise, but determined without regard to any additional payments required under this Section 11) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the United States Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. 9 (b) Subject to the provisions of Section 8.3, all determinations required to be made under this Section 11, including whether and when a Gross-Up Payment is required and the amount of such Gross- Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a public accounting firm chosen by the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Employee if requested by either the Company or the Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to clause (c) of this Section 11 and the Employee thereafter is required to make a payment of any additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee. (c) If the Company elects to contest a claim by the Internal Revenue Service that Excise Tax is due from the Employee, the Employee shall cooperate fully with the Company in order to effectively contest such claim, including, but not limited to providing information reasonably requested by the Company relating to such claim, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and permitting the Company to participate in any proceedings relating to such claim. The Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after- tax basis, for any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (d) If the Company directs the Employee to pay a claim by the Internal Revenue Service and sue for a refund, the Company shall advance the amount of such payment to the Employee on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance. If, after the receipt by the Employee of an amount advanced by the Company pursuant to this clause (d), the Employee becomes entitled to receive, and receives, any refund with respect to such claim, the Employee shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to this clause (d), a determination is made that the Employee is not entitled to any refund with respect to such claim, then such advance shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. SECTION 12. EXPENSES OF ENFORCEMENT. The Company agrees to pay as incurred (within ten days following the Company's receipt of an invoice from the Employee), to the full extent permitted by law, all legal fees and 10 expenses that the Employee may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Employee or others of the validity, interpretation or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Employee about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended. SECTION 13. EMPLOYMENT BY WHOLLY OWNED ENTITIES. If, at or after the Effective Date, the Employee is or becomes an employee of one or more corporations, partnerships, limited liability companies or other entities that are, directly or indirectly, wholly owned by the Company, references in this Agreement to the Employee's employment by the Company shall include the Employee's employment by any such wholly owned entity. SECTION 14. NO OBLIGATION TO MITIGATE; NO RIGHTS OF OFFSET. (a) The Employee shall not be required to mitigate the amount of any payment or other benefit required to be paid to the Employee pursuant to this Agreement, whether by seeking other employment or otherwise, nor shall the amount of any such payment or other benefit be reduced on account of any compensation earned or benefits received by the Employee as a result of employment by another person. (b) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Employee or others. SECTION 15. AMENDMENT AND WAIVER. No provision of this Agreement may be amended or waived (whether by act or course of conduct or omission or otherwise) unless that amendment or waiver is by written instrument signed by the parties hereto. No waiver by either party of any breach of this Agreement shall be deemed a waiver of any other or subsequent breach. SECTION 16. GOVERNING LAW. The validity, interpretation, construction and enforceability of this Agreement shall be governed by the laws of the State of Texas. SECTION 17. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. SECTION 18. COUNTERPARTS. 11 This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute the same instrument. SECTION 19. ASSIGNMENT. This Agreement shall inure to the benefit of and be enforceable by the Employee's legal representative. The Company may not assign any of its obligations under this Agreement unless (i) such assignment is to a Successor and (ii) the requirements of Section 8 are fulfilled. SECTION 20. MISCELLANEOUS. (a) As used in this Agreement, the following terms and phrases have the indicated meanings: (i) "Affiliate" and "Affiliates" mean, when used with respect to any entity, individual, or other person, any other entity, individual, or other person which, directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with such entity, individual or person. "Affiliated Company" means any entity that is an Affiliate of the Company. (ii) "Annual Base Salary" means, at any point in time, the regular rate of wages payable to the Employee, expressed on an annualized basis, including any base salary that has been earned but deferred. (iii) "Board of Directors" means the Board of Directors of the Company. (iv) "Change of Control of the Company" has the meaning assigned to that phrase in Section 2. (v) "Company" has the meaning assigned to that term in the preamble to this Agreement. The term "Company" shall also include any Successor, whether the liability of such Successor under this Agreement is established by contract or occurs by operation of law. (vi) "Effective Date" has the meaning assigned to that term in the preamble to this Agreement. (vii) "Employee" has the meaning assigned to such term in the preamble to this Agreement. (viii) "Employee's Disability" means: (A) if no Change of Control of the Company shall have occurred before the date of determination, the physical or mental disability of the Employee determined in accordance with the disability policy of the Company at the time in effect and generally applicable to its salaried employees; and (B) if a Change of Control of the Company shall have occurred before the date of determination, the physical or mental disability of the Employee determined in 12 accordance with the disability policy of the Company in effect immediately before the occurrence of the first Change of Control of the Company and generally applicable to its salaried employees. . (ix) "Employee's Retirement" means (x) if no Change of Control of the Company shall have occurred before the date of the Employee's proposed retirement, the retirement of the Employee in accordance with the retirement policy of the Company at the time in effect and generally applicable to its salaried employees, and (y) if a Change of Control of the Company shall have occurred before the date of the Employee's proposed retirement, the retirement of the Employee from the employ of the Company in accordance with the retirement policy of the Company in effect immediately before the occurrence of the first Change of Control of the Company and generally applicable to its salaried employees. (x) "Event of Termination for Good Reason" has the meaning assigned to that phrase in Section 5. (xi) "Event of Termination for Cause" has the meaning assigned to that phrase in Section 4. (xii) "Expiration Date" has the meaning assigned to that term in Section 3. (xiii) "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited partnership, limited liability company, trust, unincorporated organization, government, or agency or political subdivision of any government. (xiv) "Successor" means a person with or into which the Company shall have been merged or consolidated or to which the Company shall have transferred its assets as an entirety or substantially as an entirety. (xv) "Termination Date" has the meaning assigned to that term in Section 6. (xvi) "This Agreement" means this Change of Control Agreement as it may be amended from time to time. (b) In the event of the enactment of any successor provision to any statute or rule cited in this Agreement, references in this Agreement to such statute or rule shall be to such successor provision. (c) The headings of Sections of this Agreement shall not control the meaning or interpretation of this Agreement. (d) References in this Agreement to any Section are to the corresponding Section of this Agreement unless the context otherwise indicates. 13 In Witness Whereof, the Company and the Employee have executed this Agreement as of the Effective Date. EOG RESOURCES, INC. By /s/ PATRICIA EDWARDS -------------------------------- Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary EDMUND P. SEGNER, III /s/ EDMUND P. SEGNER, III ------------------------------------ EX-10 11 exhibit10_12d.txt THIRD AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT Exhibit 10.12(d) THIRD AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT This Agreement, entered into on this 29th of June, 2001, and made effective as of June 1, 2001, by and between EOG Resources, Inc., f.k.a. Enron Oil & Gas Company, ("Employer") and Barry Hunsaker, Jr. ("Employee") is an amendment to that certain Employment Agreement dated effective as of September 1, 1998 (as heretofore amended, the "Employment Agreement"). WHEREAS, the parties desire to amend the Employment Agreement as provided herein; NOW, THEREFORE, in consideration thereof and of the mutual covenants contained herein, the parties agree as follows: 1. Exhibit A to the Employment Agreement is hereby deleted in its entirety and a new Exhibit A, in the form attached hereto as Exhibit A and effective as of June 1, 2001, is substituted therefor. 2. Section 1.3 is hereby revised to remove reference to Enron. 3. Section 1.6 is hereby revised to change references to "Employer's President" to "Employer's Chairman". 4. Section 1.7 is hereby deleted in its entirety. 5. Section 2.1 is hereby deleted in its entirety and the following is substituted therefor: " 2.1 Employee's annual base salary during the Term shall be not less than the amount set forth under the heading "Annual Base Salary" on Exhibit A, subject to increase at the sole discretion of the Employer, but consistent with increases provided to other similarly situated executives of Employer, which shall be paid in accordance with Employer's standard payroll practice. Any calculation to be made under this Agreement with respect to Employee's Annual Base Salary shall be made using the then current Annual Base Salary in effect at the time of the event for which such calculation is made." 6. Section 2.3 is hereby revised to remove reference to Enron. 7. Section 3.1(i) is hereby revised to remove reference to Enron. 8. Section 3.1(iv) is hereby revised to change the reference to "Enron's long-term disability plan" to "Employer's long-term disability plan". 2 9. The phrase "except Section 8.6" is hereby deleted from Section 3.2. 10. Section 3.5 is hereby deleted in its entirety and the following is substituted therefor: " 3.5 Upon an Involuntary Termination of the employment relationship by either Employer or Employee prior to the expiration of the Term, Employee shall be entitled, in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), to receive a severance benefit under this Agreement equal to the greater of a) the amount that Employee would have received under this Agreement from the date of termination through the end of the Term of this Agreement if Employee had continued to be employed during such period, computed assuming that Employee received the Annual Base Salary specified on Exhibit A and an annual bonus equal to the bonus target specified on Exhibit A for each year during such period (in each case prorated for any partial year), or b) the sum of the Employee's Annual Base Salary and the annual bonus target specified on Exhibit A. Further, in the event of Involuntary Termination, if Employee's eligibility for COBRA coverage expires, Employer shall provide to Employee the cost difference between COBRA coverage and a personal medical/dental policy paid by Employee for the six (6) months following the COBRA coverage or until Employee's gainful employment, whichever comes first. Employee shall not be under any duty or obligation to seek or accept other employment following Involuntary Termination and the amounts due Employee hereunder shall not be reduced or suspended if Employee accepts subsequent employment. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer and Employer's sole and exclusive liability to Employee under this Agreement, in contract, tort, or otherwise, for any Involuntary Termination of the employment relationship. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer for any sums for Involuntary Termination other than those sums specified in this Section 3.5. If Employee breaches this covenant, Employer shall be entitled to recover from Employee all sums expended by Employer (including costs and attorneys fees) in connection with such suit, claim, demand or cause of action." 11. Section 3.8 is hereby revised to remove reference to Enron. 12. Section 4.1 is hereby deleted in its entirety and the following is substituted therefor: " 4.1 After the expiration of the Term specified on Exhibit "A," this Agreement, and Employee's employment hereunder, shall automatically renew for successive periods of one (1) year each, unless either Employer or Employee provides not less than one hundred twenty (120) days' prior 3 written notice of intent not to renew. In the event this Agreement is not renewed pursuant to such notice, and Employee remains employed by Employer beyond the expiration of the Term of this Agreement, including any renewals, Employee's employment shall convert to a month-to-month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause. Upon such termination of the employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination." 13. Section 5.1 is hereby revised to remove references to Enron, including replacing the reference to "any Enron entity" to "any Employer entity". 14. Article 6 is hereby revised to remove references to Enron, including removing Enron and its affiliates as third party beneficiaries of Employee's obligations under Section 6.2. 15. Section 7.1 is hereby deleted in its entirety and the following is substituted therefor: " 7.1 As part of the consideration for the compensation and benefits to be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and in order to protect Employer's interests in the confidential information of Employer and the business relationships developed by Employee with the clients and potential clients of Employer, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 7. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer is conducting any business as of the date of termination of the employment relationship or has during the previous twelve months conducted any business: (i) engage in any business competitive with the business conducted by Employer; (ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with the business conducted by Employer; 4 (iii) induce any employee of Employer to terminate his or her employment with Employer, or hire or assist in the hiring of any such employee by person, association, or entity not affiliated with Employer. These non-competition obligations shall extend until the earlier of (a) expiration of the Term or (b) one year after termination of the employment relationship. For purposes of this Section, it is specifically understood that Employee may return to private legal practice, without breaching the provisions of this Section." 16. Article 8 is hereby revised to remove references to Enron. 17. Under Section 8.3, notices and all other communications to Employer should be to: EOG Resources, Inc. 333 Clay Street, Suite 4200 Houston, Texas 77002 Attention: Vice President, Human Resources, Administration & Corporate Secretary 18. Article 9 is hereby deleted in its entirety. 19. Contemporaneously with the execution of this Agreement, the parties have executed a Change of Control Agreement dated June 29, 2001 (the "Change of Control Agreement"). If during the term of the Change of Control Agreement, a Change of Control (as that term is defined in the Change of Control Agreement) occurs or is deemed to have occurred under such agreement, then for the period of time from the occurrence of the Change of Control through the second anniversary of the Change of Control (the "Applicable Period"), the following provisions will apply: (a) The following shall be substituted in lieu of Section 3.1(i) of the Employment Agreement during the Applicable Period: (i) if, under the Change of Control Agreement, dated June 29, 2001, between Employee and Employer (as amended, the "Change of Control Agreement"), an Event of Termination for Cause (as that term is defined in the Change of Control Agreement) shall have occurred; (b) The following shall be substituted in lieu of Section 3.1(iv) of the Employment Agreement during the Applicable Period: 5 (iv) if, under the Change of Control Agreement, Employee's Disability (as that term is defined in the Change of Control Agreement) shall have occurred. (c) If the termination of Employee's employment occurs for any reason during the Applicable Period, then (i) the provisions of Section 7 of the Change of Control Agreement shall apply in lieu of the provisions of Sections 3.3 through 3.7 of the Employment Agreement, (ii) the provisions of Article 6 of the Employment Agreement shall not apply to Employee, and (iii) the provisions of Section 12 of the Change of Control Agreement shall apply in lieu of the provisions of Section 7.5 of the Employment Agreement. This Agreement is the Third Amendment to the Employment Agreement, and the parties agree that all other terms, conditions and stipulations contained in the Employment Agreement, and any amendments thereto, shall remain in full force and effect and without any change or modification, except as provided herein. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written. EOG RESOURCES, INC. By: /s/ PATRICIA EDWARDS -------------------------- Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary This 29th day of June, 2001 BARRY HUNSAKER, JR. /s/ BARRY HUNSAKER, JR. ------------------------------ This 29th day of June, 2001 6 EXHIBIT "A" TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN EOG RESOURCES, INC. AND BARRY HUNSAKER, JR. (Amended as of June 1, 2001) Employee Name: Barry Hunsaker, Jr. Term: June 1, 2001 through May 31, 2005 Renewal: After May 31, 2005, Agreement will automatically be renewed annually for a one-year term unless either Employee or Employer provides a 120-day notice of intent not to renew. Position: Senior Vice President and General Counsel Location: Houston, Texas Reporting Relationship: Reports jointly to Mark G. Papa, Chairman and Chief Executive Officer and Edmund P. Segner, III, President and Chief of Staff Annual Base Salary: Two Hundred Seventy-six Thousand Dollars ($276,000) per year Bonus: Employee shall be eligible to participate in the EOG Resources, Inc. Executive Officer Annual Bonus Plan, at a target of 60% of Annual Base Salary. Such bonus may be paid in a combination of cash, stock options, and/or phantom stock units, as determined by the Compensation Committee of Employer's Board of Directors. Long-term Incentives: Employee shall be eligible to receive grants of stock options, consistent with similarly situated executives, as determined from time to time by the Compensation Committee of Employer's Board of Directors. Stock Option Grant: Employee received a grant of 75,000 stock options, effective September 8, 1998, vesting 20% on the Grant Date and 20% on each of the first four anniversaries of the Grant Date, as evidenced by an Award Agreement. Signing Grant: Employee shall be granted 15,000 shares of Restricted Stock under the terms of the EOG Resources, Inc. 1992 Stock Plan, as amended, with standard termination provisions, and vesting on May 8, 2006. EOG RESOURCES, INC. By: /s/ PATRICIA EDWARDS ----------------------------- Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary This 29th day of June, 2001 BARRY HUNSAKER, JR. /s/BARRY HUNSAKER, JR. ---------------------------------- This 29th day of June, 2001 EX-10 12 exhibit10_12e.txt CHANGE OF CONTROL AGREEMENT Exhibit 10.12(e) CHANGE OF CONTROL AGREEMENT This Agreement between EOG Resources, Inc., a Delaware corporation (the "Company"), and Barry Hunsaker, Jr. (the "Employee") is effective as of this 29th day of June, 2001 (the "Effective Date"). Certain capitalized terms used herein are defined in Section 20. WITNESSETH: Whereas, the Company considers it to be in the best interests of its stockholders to encourage the continued employment of certain key employees of the Company notwithstanding the possibility, threat or occurrence of a Change of Control of the Company; and Whereas, the Employee is a key employee of the Company; and Whereas, the Company believes that the possibility of the occurrence of a Change of Control of the Company may result in the termination by the Employee of the Employee's employment by the Company or in the distraction of the Employee from the performance of Employee's duties to the Company, in either case to the detriment of the Company and its stockholders; and Whereas, the Company recognizes that the Employee could suffer adverse financial and professional consequences if a Change of Control of the Company were to occur; and Whereas, the Company wishes to enter into this Agreement to protect the Employee if a Change of Control of the Company occurs, thereby encouraging the Employee to remain in the employ of the Company and not to be distracted from the performance of Employee's duties to the Company by the possibility of a Change of Control of the Company; Now, Therefore, the parties agree as follows: SECTION 1. OTHER EMPLOYMENT ARRANGEMENTS. (a) This Agreement does not affect the Employee's existing or future employment arrangements with the Company unless a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement. The Employee's employment with the Company shall continue to be governed by the Employee's existing or future employment agreements with the Company, if any, or, in the absence of any employment agreement, shall continue to be at the will of the Company, except that if a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement and the Employee's employment with the Company is terminated (whether by the Employee or the Company or automatically as provided in Section 3) after the occurrence of that Change of Control of the Company, then the Employee shall be entitled to receive certain benefits as provided in this Agreement. (b) Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in any plan, program, policy or practice of or provided by the Company or any of its Affiliates and for which the Employee may qualify, nor shall anything herein limit or otherwise affect such rights as the Employee may have under any contract or agreement with the 2 Company or any of its Affiliates. Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan, program, policy or practice of or provided by, or any contract or agreement with, the Company or any of its Affiliates at or subsequent to the date of termination of the Employee's employment with the Company shall be payable or otherwise provided in accordance with such plan, program, policy or practice or contract or agreement except as explicitly modified by this Agreement. SECTION 2. CHANGE OF CONTROL OF THE COMPANY. A "Change of Control of the Company" shall mean the occurrence of any of the following events: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (an "Exchange Act Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this clause (a), the following acquisitions shall not constitute a Change of Control of the Company: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with subclauses (i), (ii) and (iii) of clause (c) of this Section 2; (b) Individuals who, as of May 8, 2001, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to May 8, 2001, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an Exchange Act Person other than the Board of Directors; (c) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the assets or stock of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the 3 Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Exchange Act Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board of Directors providing for such Business Combination; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. Notwithstanding anything contained in this Agreement to the contrary, if (i) the Employee's employment with the Company is terminated, or (ii) an event occurs which, had it occurred after a Change of Control of the Company, would with proper notice from Employee constitute an Event of Termination for Good Reason, and if it is reasonably demonstrated by the Employee that such action (A) was taken at the request of a third party that has taken steps reasonably calculated to effect a Change of Control of the Company or (B) otherwise arose in connection with or anticipation of a Change of Control of the Company, then for all purposes of this Agreement, such Change of Control of the Company shall be deemed to have occurred on the date immediately prior to the date of such termination or event. SECTION 3. TERM OF THIS AGREEMENT. The term of this Agreement shall begin on the Effective Date and shall expire on the first to occur of: (a) the Employee's death, the Employee's Disability or the Employee's Retirement, which events shall also be deemed automatically to terminate the Employee's employment by the Company; or (b) the termination by the Employee or the Company of the Employee's employment by the Company. The expiration of the term of this Agreement shall not terminate this Agreement itself or affect the right of the Employee or the Employee's legal representatives to enforce the payment of any amount or other benefit to which the Employee was entitled before the expiration of the term of this Agreement or to which the Employee became entitled as a result of the event that caused the term of this Agreement to expire. SECTION 4 EVENT OF TERMINATION FOR CAUSE. 4 (a) An "Event of Termination for Cause" shall mean the Employee's (i) conviction of a felony involving moral turpitude (which, through lapse of time or otherwise, is not subject to appeal), (ii) willful refusal without proper legal cause to perform employee's duties and responsibilities which remains uncorrected for thirty (30) days following written notice to the Employee by the Company of such event, (iii) willfully engaging in conduct which the Employee has, or reasonably should have, reason to know is materially injurious to the Company, or (iv) other extreme personal conduct such as, but not limited to, deliberate infliction of bodily injury to another employee while on duty, gross negligent lack of regard for safety rules and customs, or engaging in business activities directly in conflict with the Company's business. (b) For purposes of this Section 4, no act, or failure to act, on the part of the Employee shall be considered "willful" unless it is done, or omitted to be done, by the Employee in bad faith or without reasonable belief that the Employee's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board of Directors or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of the Company. Any business activity that has been approved by the Chairman of the Board of the Company (or if the Employee is the Chairman of the Board of the Company, that has been approved by a resolution duly adopted by the Board of Directors) shall be conclusively presumed not to be a business activity that is in direct conflict with the Company's business. (c) The cessation of employment of the Employee as a result of the alleged occurrence of an event referred to in clause (ii) or (iii) of the definition of "Event of Termination for Cause" shall not be deemed to be as a result of an Event of Termination for Cause unless and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors (excluding the Employee, if the Employee is a member of the Board of Directors) at a meeting of the Board of Directors called and held for such purpose (after reasonable notice is provided to the Employee and the Employee is given an opportunity, together with counsel for the Employee, to be heard before the Board of Directors), finding that, in the good faith opinion of the Board of Directors, the Employee is guilty of the conduct described in clause (ii) or (iii) of such definition and specifying the particulars thereof in detail. Any determination of the Board of Directors under this clause (c) shall not be binding on the Employee, shall not be conclusive as to whether an Event of Termination for Cause has occurred, and shall not affect Employee's right to contest whether an Event of Termination for Cause has occurred. SECTION 5. EVENT OF TERMINATION FOR GOOD REASON. An "Event of Termination for Good Reason" shall mean, after a Change of Control of the Company, the occurrence of any of the following events, provided Employee serves termination by written notice in connection with or based upon and within 90 days of the occurrence of such event: 5 (a) a significant reduction in the Employee's authority and/or responsibilities (whether or not occurring solely as a result of the Company's ceasing to be a publicly traded entity); or (b) a reduction in Employee's Annual Base Salary, a reduction in Employee's annual bonus when compared to the bonus received for the prior year, or the failure to continue the Employee's full participation in any employee benefit plan or program (unless replaced by a substantially comparable plan or program) in which Employee is eligible to participate prior to the notification (other than as a result of the normal expiration of such plan or program), in each case other than as a part of a general program to reduce compensation or benefits on a proportional basis relative to all other employees of the Company; or (c) a relocation of the Employee's primary place of work to a location more than 50 miles away from the Employee's primary place of work at the time of the notice (provided, however, this clause (c) shall no longer apply to an employee after he has accepted any such relocation after a Change of Control of the Company has occurred and the above referenced 90 day period has passed). For the avoidance of doubt, any action referred to in clause (a), (b) or (c) above shall constitute an Event of Termination for Good Reason under the foregoing definition regardless of whether the Company is permitted to take such action under any employment contract with the Employee. SECTION 6. NOTICE OF TERMINATION. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, any termination by the Employee or the Company of the Employee's employment by the Company, or any determination of the Employee's Disability, that occurs within two years of such Change of Control shall be communicated by notice to the other party that shall indicate the specific paragraph of Section 7 pursuant to which the Employee is to receive benefits as a result of the termination. If the notice states that the Employee's employment by the Company has been automatically terminated as a result of the Employee's Disability, the notice shall specifically describe the basis for the determination of the Employee's Disability and shall state the date of the determination of the Employee's Disability, which date shall be not more than ten days before the date such notice is given. If the notice is from the Company and states that the Employee's employment by the Company is terminated by the Company as a result of the occurrence of an Event of Termination for Cause, the notice shall specifically describe the action or inaction of the Employee that the Company believes constitutes an Event of Termination for Cause, and in the case of a termination under clause (ii) or (iii) of the definition of Event of Termination for Cause, shall include the resolution of the Board of Directors referred to in Section 4(c). If the notice is from the Employee and states that the Employee's employment by the Company is terminated by the Employee as a result of the occurrence of an Event of Termination for Good Reason, the notice shall specifically describe the action or inaction of the Company that the Employee believes constitutes an Event of Termination for Good Reason. Each notice given pursuant to this Section 6 (other than a notice stating that the Employee's employment by the Company has been automatically terminated as a result of the Employee's Disability) shall state a date, which shall be not fewer than 30 days nor 6 more than 60 days after the date such notice is given, on which the termination of the Employee's employment by the Company is effective. The date so stated in accordance with this Section 6 shall be the "Termination Date". If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, any subsequent purported termination by the Company of the Employee's employment by the Company, or any subsequent purported determination by the Company of the Employee's Disability, within two years of such Change of Control shall be ineffective unless that termination or determination shall have been communicated by the Company to the Employee by notice that meets the requirements of the foregoing provisions of this Section 6 and the provisions of Section 9. SECTION 7. BENEFITS PAYABLE ON CHANGE OF CONTROL AND TERMINATION. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, and the Employee's employment by the Company is terminated (whether by the Employee or the Company or automatically as provided in Section 3) within two years after the occurrence of that Change of Control of the Company, the Employee shall be entitled to the following benefits: (a) If the Employee's employment by the Company is terminated by the Company as a result of the occurrence of an Event of Termination for Cause, or by the Employee before the occurrence of an Event of Termination for Good Reason, then the Company shall pay to the Employee the Base Salary accrued through the Termination Date but not previously paid to the Employee, and the Employee shall be entitled to any other amounts or benefits provided under any plan, policy, practice, program, contract or arrangement of or with the Company, which shall be governed by the terms thereof (except as explicitly modified by this Agreement). (b) If the Employee's employment by the Company is automatically terminated as a result of the Employee's death, the Employee's Disability or the Employee's Retirement, then the Company shall pay to the Employee the Base Salary accrued through the date of the occurrence of that event but not previously paid to the Employee, and the Employee shall be entitled to any other amounts or benefits provided under any plan, policy, practice, program, contract or arrangement of or with the Company, which shall be governed by the terms thereof (except as explicitly modified by this Agreement). (c) If the Employee's employment by the Company is terminated (x) by the Company, other than as a result of the occurrence of an Event of Termination for Cause, or (y) by the Employee after the occurrence of an Event of Termination for Good Reason, or (z) by the Employee for any reason during the thirty (30) day period beginning six (6) months after a Change of Control of the Company, then the Employee shall be entitled to the following: (i) the Company shall pay to the Employee the Base Salary and compensation for earned but unused vacation time accrued through the Termination Date but not previously paid to the Employee; (ii) the Company shall pay to the Employee, as a lump sum, an amount equal to the total of the following amounts: 7 (A) 2.99 times the amount of the then current Annual Base Salary; plus (B) two (2) times the amount of the Employee's most recent target annual bonus; plus (C) the amount of the Money Purchase Pension Plan contributions that would have been made by the Company on behalf of the Employee if the Employee had continued to be employed by the Company at the Employee's then current Annual Base Salary for three years following the Termination Date; and plus (D) the amount that would have been paid on behalf of the Employee as matching amounts to the Company's Savings Plan if the Employee had continued to be employed by the Company at the Employee's then current Annual Base Salary for three years following the Termination Dateand had continued to contribute to the Company's Savings Plan during such three year period at the Employee's then current contribution level. (iii) the Company shall arrange for the Employee's uninterrupted participation for three (3) years after the Termination Date in the Company's major medical/dental insurance plan, which participation shall cease upon Employee's eligibility for participation in a major medical/dental insurance plan of another employer; (iv) the Company shall cause the Employee to receive three (3) years age and service credit for eligibility for the Company's retiree medical insurance coverage; and (v) the Company shall provide out placement services at a cost not to exceed $50,000.00. Each payment required to be made to the Employee pursuant to the foregoing provisions of this Section 7 shall be made by check drawn on an account of the Company at a bank located in the United States of America (unless the Employee has elected to have salary payments deposited directly by the Company to a bank account maintained by the Employee, in which event the Company shall make a direct deposit of the payment to that account), and shall be paid (x) if the Employee's employment by the Company was terminated as a result of the Employee's death, the Employee's Disability or the Employee's Retirement, not more than 30 days immediately following the date of the occurrence of that event, and (y) if the Employee's employment by the Company was terminated for any other reason, not more than ten days immediately following the Termination Date. SECTION 8. SUCCESSORS. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, (a) the Company shall not, directly or indirectly, consolidate with, merge into or sell or otherwise transfer its assets as an entirety or substantially as an entirety to, any person, or permit any person to consolidate with or merge into the Company, unless immediately after such 8 consolidation, merger, sale or transfer, the Successor shall have assumed in writing the Company's obligations under this Agreement; and (b) not fewer than ten days before the consummation of any consolidation of the Company with, merger by the Company into, or sale or other transfer by the Company of its assets as an entirety or substantially as an entirety to, any person, the Company shall give the Employee notice of that proposed transaction. SECTION 9. NOTICE. Notices required or permitted to be given by either party pursuant to this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the other party or when deposited with the United States Postal Service as certified or registered mail with postage prepaid and addressed: (a) if to the Employee, at the Employee's address last shown on the Company's records, and (b) if to the Company, at 333 Clay Street, Suite 4200, Houston, Texas 77002, directed to the attention of the Company's Chairman of the Board, or, in either case, to such other address as the party to whom such notice is to be given shall have specified by notice given to the other party. SECTION 10. WITHHOLDING TAXES. The Company may withhold from all payments to be paid to the Employee pursuant to this Agreement all taxes that, by applicable federal or state law, the Company is required to so withhold. SECTION 11. U.S. EXCISE TAX INDEMNIFICATION. (a) In the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, the Company's Change of Control Severance Plan or otherwise, but determined without regard to any additional payments required under this Section 11) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the United States Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. 9 (b) Subject to the provisions of Section 8.3, all determinations required to be made under this Section 11, including whether and when a Gross-Up Payment is required and the amount of such Gross- Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a public accounting firm chosen by the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Employee if requested by either the Company or the Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to clause (c) of this Section 11 and the Employee thereafter is required to make a payment of any additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee. (c) If the Company elects to contest a claim by the Internal Revenue Service that Excise Tax is due from the Employee, the Employee shall cooperate fully with the Company in order to effectively contest such claim, including, but not limited to providing information reasonably requested by the Company relating to such claim, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and permitting the Company to participate in any proceedings relating to such claim. The Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after- tax basis, for any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (d) If the Company directs the Employee to pay a claim by the Internal Revenue Service and sue for a refund, the Company shall advance the amount of such payment to the Employee on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance. If, after the receipt by the Employee of an amount advanced by the Company pursuant to this clause (d), the Employee becomes entitled to receive, and receives, any refund with respect to such claim, the Employee shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to this clause (d), a determination is made that the Employee is not entitled to any refund with respect to such claim, then such advance shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. SECTION 12. EXPENSES OF ENFORCEMENT. The Company agrees to pay as incurred (within ten days following the Company's receipt of an invoice from the Employee), to the full extent permitted by law, all legal fees and 10 expenses that the Employee may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Employee or others of the validity, interpretation or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Employee about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended. SECTION 13. EMPLOYMENT BY WHOLLY OWNED ENTITIES. If, at or after the Effective Date, the Employee is or becomes an employee of one or more corporations, partnerships, limited liability companies or other entities that are, directly or indirectly, wholly owned by the Company, references in this Agreement to the Employee's employment by the Company shall include the Employee's employment by any such wholly owned entity. SECTION 14. NO OBLIGATION TO MITIGATE; NO RIGHTS OF OFFSET. (a) The Employee shall not be required to mitigate the amount of any payment or other benefit required to be paid to the Employee pursuant to this Agreement, whether by seeking other employment or otherwise, nor shall the amount of any such payment or other benefit be reduced on account of any compensation earned or benefits received by the Employee as a result of employment by another person. (b) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Employee or others. SECTION 15. AMENDMENT AND WAIVER. No provision of this Agreement may be amended or waived (whether by act or course of conduct or omission or otherwise) unless that amendment or waiver is by written instrument signed by the parties hereto. No waiver by either party of any breach of this Agreement shall be deemed a waiver of any other or subsequent breach. SECTION 16. GOVERNING LAW. The validity, interpretation, construction and enforceability of this Agreement shall be governed by the laws of the State of Texas. SECTION 17. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. SECTION 18. COUNTERPARTS. 11 This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute the same instrument. SECTION 19. ASSIGNMENT. This Agreement shall inure to the benefit of and be enforceable by the Employee's legal representative. The Company may not assign any of its obligations under this Agreement unless (i) such assignment is to a Successor and (ii) the requirements of Section 8 are fulfilled. SECTION 20. MISCELLANEOUS. (a) As used in this Agreement, the following terms and phrases have the indicated meanings: (i) "Affiliate" and "Affiliates" mean, when used with respect to any entity, individual, or other person, any other entity, individual, or other person which, directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with such entity, individual or person. "Affiliated Company" means any entity that is an Affiliate of the Company. (ii) "Annual Base Salary" means, at any point in time, the regular rate of wages payable to the Employee, expressed on an annualized basis, including any base salary that has been earned but deferred. (iii) "Board of Directors" means the Board of Directors of the Company. (iv) "Change of Control of the Company" has the meaning assigned to that phrase in Section 2. (v) "Company" has the meaning assigned to that term in the preamble to this Agreement. The term "Company" shall also include any Successor, whether the liability of such Successor under this Agreement is established by contract or occurs by operation of law. (vi) "Effective Date" has the meaning assigned to that term in the preamble to this Agreement. (vii) "Employee" has the meaning assigned to such term in the preamble to this Agreement. (viii) "Employee's Disability" means: (A) if no Change of Control of the Company shall have occurred before the date of determination, the physical or mental disability of the Employee determined in accordance with the disability policy of the Company at the time in effect and generally applicable to its salaried employees; and (B) if a Change of Control of the Company shall have occurred before the date of determination, the physical or mental disability of the Employee determined in 12 accordance with the disability policy of the Company in effect immediately before the occurrence of the first Change of Control of the Company and generally applicable to its salaried employees. . (ix) "Employee's Retirement" means (x) if no Change of Control of the Company shall have occurred before the date of the Employee's proposed retirement, the retirement of the Employee in accordance with the retirement policy of the Company at the time in effect and generally applicable to its salaried employees, and (y) if a Change of Control of the Company shall have occurred before the date of the Employee's proposed retirement, the retirement of the Employee from the employ of the Company in accordance with the retirement policy of the Company in effect immediately before the occurrence of the first Change of Control of the Company and generally applicable to its salaried employees. (x) "Event of Termination for Good Reason" has the meaning assigned to that phrase in Section 5. (xi) "Event of Termination for Cause" has the meaning assigned to that phrase in Section 4. (xii) "Expiration Date" has the meaning assigned to that term in Section 3. (xiii) "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited partnership, limited liability company, trust, unincorporated organization, government, or agency or political subdivision of any government. (xiv) "Successor" means a person with or into which the Company shall have been merged or consolidated or to which the Company shall have transferred its assets as an entirety or substantially as an entirety. (xv) "Termination Date" has the meaning assigned to that term in Section 6. (xvi) "This Agreement" means this Change of Control Agreement as it may be amended from time to time. (b) In the event of the enactment of any successor provision to any statute or rule cited in this Agreement, references in this Agreement to such statute or rule shall be to such successor provision. (c) The headings of Sections of this Agreement shall not control the meaning or interpretation of this Agreement. (d) References in this Agreement to any Section are to the corresponding Section of this Agreement unless the context otherwise indicates. 13 In Witness Whereof, the Company and the Employee have executed this Agreement as of the Effective Date. EOG RESOURCES, INC. By /s/ PATRICIA EDWARDS ------------------------------- Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary BARRY HUNSAKER, JR. /s/ BARRY HUNSAKER, JR. --------------------------------- EX-10 13 exhibit10_13c.txt THIRD AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT Exhibit 10.13.(c) SECOND AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT This Agreement, entered into on this 1st of July, 2001, and made effective as of June 1, 2001, by and between EOG Resources, Inc., f.k.a. Enron Oil & Gas Company ("Employer"), and Loren M. Leiker ("Employee") is an amendment to that certain Employment Agreement dated effective as of March 1, 1998 (as heretofore amended, the "Employment Agreement"). WHEREAS, the parties desire to amend the Employment Agreement as provided herein; NOW, THEREFORE, in consideration thereof and of the mutual covenants contained herein, the parties agree as follows: 1. Exhibit A to the Employment Agreement is hereby deleted in its entirety and a new Exhibit A, in the form attached hereto as Exhibit A and effective as of June 1, 2001, is substituted therefor. 2. Section 1.3 is hereby revised to remove reference to Enron. 3. Section 1.6 is hereby revised to change references to "Employer's President" to "Employer's Chairman". 4. Section 2.1 is hereby deleted in its entirety and the following is substituted therefor: " 2.1 Employee's annual base salary during the Term shall be not less than the amount set forth under the heading "Annual Base Salary" on Exhibit A, subject to increase at the sole discretion of the Employer, which shall be paid in accordance with Employer's standard payroll practice. Any calculation to be made under this Agreement with respect to Employee's Annual Base Salary shall be made using the then current Annual Base Salary in effect at the time of the event for which such calculation is made." 5. Section 2.3 is hereby revised to remove reference to Enron. 6. Section 3.1(i) is hereby revised to remove reference to Enron. 7. Section 3.1(iv) is hereby revised to change the reference to "Enron's long-term disability plan" to "Employer's long-term disability plan". 8. The phrase "except Section 8.6" is hereby deleted from Section 3.2. 9. Section 3.5 is hereby deleted in its entirety and the following is substituted therefor: 2 " 3.5 Upon an Involuntary Termination of the employment relationship by either Employer or Employee prior to the expiration of the Term, Employee shall be entitled, in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), to receive a severance benefit under this Agreement equal to the greater of a) the amount that Employee would have received under this Agreement from the date of termination through the end of the Term of this Agreement if Employee had continued to be employed during such period, computed assuming that Employee received the Annual Base Salary specified on Exhibit A and an annual bonus equal to the bonus target specified on Exhibit A for each year during such period (in each case prorated for any partial year), or b) the sum of the Employee's Annual Base Salary and the annual bonus target specified on Exhibit A. Employee shall not be under any duty or obligation to seek or accept other employment following Involuntary Termination and the amounts due Employee hereunder shall not be reduced or suspended if Employee accepts subsequent employment. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer and Employer's sole and exclusive liability to Employee under this Agreement, in contract, tort, or otherwise, for any Involuntary Termination of the employment relationship. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer for any sums for Involuntary Termination other than those sums specified in this Section 3.5. If Employee breaches this covenant, Employer shall be entitled to recover from Employee all sums expended by Employer (including costs and attorneys fees) in connection with such suit, claim, demand or cause of action." 10. Section 3.8 is hereby revised to remove reference to Enron. 11. Article 4, Section 4.1 is hereby deleted in its entirety and the following is substituted therefor: " 4.1 After the expiration of the Term specified on Exhibit "A," this Agreement, and Employee's employment hereunder, shall automatically renew for successive periods of one (1) year each, unless either Employer or Employee provides not less than one hundred twenty (120) days' prior written notice of intent not to renew. In the event this Agreement is not renewed pursuant to such notice, and Employee remains employed by Employer beyond the expiration of the Term of this Agreement, including any renewals, Employee's employment shall convert to a month-to-month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause. Upon such termination of the employment relationship by either Employer or Employee for any reason whatsoever, all future compensation to which Employee is entitled and all 3 future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination." 12. Section 5.1 is hereby revised to remove references to Enron, including replacing the reference to "any Enron entity" to "any Employer entity". 13. Article 6 is hereby revised to remove references to Enron, including removing Enron and its affiliates as third party beneficiaries of Employee's obligations under Section 6.2. 14. Section 7.1 is hereby deleted in its entirety and the following is substituted therefor: " 7.1 As part of the consideration for the compensation and benefits to be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and in order to protect Employer's interests in the confidential information of Employer and the business relationships developed by Employee with the clients and potential clients of Employer, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 7. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any specific prospect where Employer is conducting any exploration business as of the date of termination of the employment relationship or has during the previous twelve months conducted any exploration business: (i) engage in any exploration business competitive with the exploration business conducted by Employer; (ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any exploration business competitive with the exploration business conducted by Employer; (iii) induce any employee of Employer to terminate his or her employment with Employer, or hire or assist in the hiring of any such employee by person, association, or entity not affiliated with Employer. These non-competition obligations shall extend until the earlier of (a) expiration of the Term or (b) one year after termination of the employment relationship. Further, Employee may exercise his right to voluntarily resign 4 under Section 3.2(ii) upon the occurrence of one of the events described below and these non-competition obligations shall expire immediately and have no further force and effect, and the Employer shall have no further obligations to Employee under this Agreement: 1. the Employer undergoes a reorganization or change in business circumstances such that Employee's duties and responsibilities are substantially reduced; or 2. the Employee is asked to relocate outside the Houston Metropolitan Area; or 3. Mark G. Papa ceases to be Chairman and Chief Executive Officer of Employer." 15. Article 8 is hereby revised to remove references to Enron. 16. Section 8.3, notices and all other communications to Employer should be to: EOG Resources, Inc. 333 Clay Street, Suite 4200 Houston, Texas 77002 Attention: Vice President, Human Resources, Administration & Corporate Secretary 17. Article 9 is hereby deleted in its entirety. 18. Contemporaneously with the execution of this Agreement, the parties have executed a Change of Control Agreement dated July 1, 2001 (the "Change of Control Agreement"). If during the term of the Change of Control Agreement, a Change of Control (as that term is defined in the Change of Control Agreement) occurs or is deemed to have occurred under such agreement, then for the period of time from the occurrence of the Change of Control through the second anniversary of the Change of Control (the "Applicable Period"), the following provisions will apply: (a) The following shall be substituted in lieu of Section 3.1(i) of the Employment Agreement during the Applicable Period: (i) if, under the Change of Control Agreement, dated July 1, 2001, between Employee and Employer (as amended, the "Change of Control Agreement"), an Event of Termination for Cause (as that term is defined in the Change of Control Agreement) shall have occurred; 5 (b) The following shall be substituted in lieu of Section 3.1(iv) of the Employment Agreement during the Applicable Period: (iv) if, under the Change of Control Agreement, Employee's Disability (as that term is defined in the Change of Control Agreement) shall have occurred. (c) If the termination of Employee's employment occurs for any reason during the Applicable Period, then (i) the provisions of Section 7 of the Change of Control Agreement shall apply in lieu of the provisions of Sections 3.3 through 3.7 of the Employment Agreement, (ii) the provisions of Article 7 of the Employment Agreement shall not apply to Employee, and (iii) the provisions of Section 12 of the Change of Control Agreement shall apply in lieu of the provisions of Section 8.6 of the Employment Agreement. This Agreement is the Second Amendment to the Employment Agreement, and the parties agree that all other terms, conditions and stipulations contained in the Employment Agreement, and any amendments thereto, shall remain in full force and effect and without any change or modification, except as provided herein. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written. EOG RESOURCES, INC. By: /s/ PATRICIA EDWARDS ------------------------- Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary This 1st day of July, 2001 LOREN M. LEIKER /s/ LOREN M. LEIKER ----------------------------- This 1st day of July, 2001 6 EXHIBIT "A" TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN EOG RESOURCES, INC. AND LOREN M. LEIKER (Amended as of June 1, 2001) Employee Name: Loren M. Leiker Term: June 1, 2001 through May 31, 2005 Renewal: After May 31, 2005, Agreement will automatically be renewed annually for a one- year term unless either Employee or Employer provides a 120-day notice of intent not to renew. Position: Executive Vice President, Exploration and Development Location: Houston, Texas Reporting Relationship: Reports to Mark G. Papa, Chairman and Chief Executive Officer Annual Base Salary: Two Hundred Eighty-five Thousand Dollars ($285,000) per year Bonus: Employee shall be eligible to participate in the EOG Resources, Inc. Executive Officer Annual Bonus Plan, at a target of 75% of Annual Base Salary. Such bonus may be paid in a combination of cash, stock options, and/or phantom stock units, as determined by the Compensation Committee of Employer's Board of Directors. Long-term Incentives: Employee shall be eligible to receive grants of stock options, consistent with similarly situated executives, as determined from time to time by the Compensation Committee of Employer's Board of Directors. Restricted Stock Grant: Employee received a grant of 10,000 shares of restricted stock, effective February 11, 1998, vesting 100% five (5) years from date of grant, as evidenced by an Award Agreement. Signing Grant: Employee shall be granted 30,000 shares of Restricted Stock under the terms of the EOG Resources, Inc. 1992 Stock Plan, as amended, with standard termination provisions, and vesting on May 8, 2006. EOG RESOURCES, INC. By: /s/ PATRICIA EDWARDS ---------------------------- Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary This 1st day of July, 2001 LOREN M. LEIKER /s/ LOREN M. LEIKER -------------------------------- This 1st day of July, 2001 EX-10 14 exhibit10_13d.txt CHANGE OF CONTROL AGREEMENT Exhibit 10.13(d) CHANGE OF CONTROL AGREEMENT This Agreement between EOG Resources, Inc., a Delaware corporation (the "Company"), and Loren M. Leiker (the "Employee") is effective as of this 1st day of July, 2001 (the "Effective Date"). Certain capitalized terms used herein are defined in Section 20. WITNESSETH: Whereas, the Company considers it to be in the best interests of its stockholders to encourage the continued employment of certain key employees of the Company notwithstanding the possibility, threat or occurrence of a Change of Control of the Company; and Whereas, the Employee is a key employee of the Company; and Whereas, the Company believes that the possibility of the occurrence of a Change of Control of the Company may result in the termination by the Employee of the Employee's employment by the Company or in the distraction of the Employee from the performance of Employee's duties to the Company, in either case to the detriment of the Company and its stockholders; and Whereas, the Company recognizes that the Employee could suffer adverse financial and professional consequences if a Change of Control of the Company were to occur; and Whereas, the Company wishes to enter into this Agreement to protect the Employee if a Change of Control of the Company occurs, thereby encouraging the Employee to remain in the employ of the Company and not to be distracted from the performance of Employee's duties to the Company by the possibility of a Change of Control of the Company; Now, Therefore, the parties agree as follows: SECTION 1. OTHER EMPLOYMENT ARRANGEMENTS. (a) This Agreement does not affect the Employee's existing or future employment arrangements with the Company unless a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement. The Employee's employment with the Company shall continue to be governed by the Employee's existing or future employment agreements with the Company, if any, or, in the absence of any employment agreement, shall continue to be at the will of the Company, except that if a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement and the Employee's employment with the Company is terminated (whether by the Employee or the Company or automatically as provided in Section 3) after the occurrence of that Change of Control of the Company, then the Employee shall be entitled to receive certain benefits as provided in this Agreement. (b) Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in any plan, program, policy or practice of or provided by the Company or any of its Affiliates and for which the Employee may qualify, nor shall anything herein limit or otherwise affect such rights as the Employee may have under any contract or agreement with the 2 Company or any of its Affiliates. Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan, program, policy or practice of or provided by, or any contract or agreement with, the Company or any of its Affiliates at or subsequent to the date of termination of the Employee's employment with the Company shall be payable or otherwise provided in accordance with such plan, program, policy or practice or contract or agreement except as explicitly modified by this Agreement. SECTION 2. CHANGE OF CONTROL OF THE COMPANY. A "Change of Control of the Company" shall mean the occurrence of any of the following events: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (an "Exchange Act Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this clause (a), the following acquisitions shall not constitute a Change of Control of the Company: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with subclauses (i), (ii) and (iii) of clause (c) of this Section 2; (b) Individuals who, as of May 8, 2001, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to May 8, 2001, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an Exchange Act Person other than the Board of Directors; (c) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the assets or stock of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the 3 Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Exchange Act Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board of Directors providing for such Business Combination; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. Notwithstanding anything contained in this Agreement to the contrary, if (i) the Employee's employment with the Company is terminated, or (ii) an event occurs which, had it occurred after a Change of Control of the Company, would with proper notice from Employee constitute an Event of Termination for Good Reason, and if it is reasonably demonstrated by the Employee that such action (A) was taken at the request of a third party that has taken steps reasonably calculated to effect a Change of Control of the Company or (B) otherwise arose in connection with or anticipation of a Change of Control of the Company, then for all purposes of this Agreement, such Change of Control of the Company shall be deemed to have occurred on the date immediately prior to the date of such termination or event. SECTION 3. TERM OF THIS AGREEMENT. The term of this Agreement shall begin on the Effective Date and shall expire on the first to occur of: (a) the Employee's death, the Employee's Disability or the Employee's Retirement, which events shall also be deemed automatically to terminate the Employee's employment by the Company; or (b) the termination by the Employee or the Company of the Employee's employment by the Company. The expiration of the term of this Agreement shall not terminate this Agreement itself or affect the right of the Employee or the Employee's legal representatives to enforce the payment of any amount or other benefit to which the Employee was entitled before the expiration of the term of this Agreement or to which the Employee became entitled as a result of the event that caused the term of this Agreement to expire. SECTION 4 EVENT OF TERMINATION FOR CAUSE. 4 (a) An "Event of Termination for Cause" shall mean the Employee's (i) conviction of a felony involving moral turpitude (which, through lapse of time or otherwise, is not subject to appeal), (ii) willful refusal without proper legal cause to perform employee's duties and responsibilities which remains uncorrected for thirty (30) days following written notice to the Employee by the Company of such event, (iii) willfully engaging in conduct which the Employee has, or reasonably should have, reason to know is materially injurious to the Company, or (iv) other extreme personal conduct such as, but not limited to, deliberate infliction of bodily injury to another employee while on duty, gross negligent lack of regard for safety rules and customs, or engaging in business activities directly in conflict with the Company's business. (b) For purposes of this Section 4, no act, or failure to act, on the part of the Employee shall be considered "willful" unless it is done, or omitted to be done, by the Employee in bad faith or without reasonable belief that the Employee's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board of Directors or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of the Company. Any business activity that has been approved by the Chairman of the Board of the Company (or if the Employee is the Chairman of the Board of the Company, that has been approved by a resolution duly adopted by the Board of Directors) shall be conclusively presumed not to be a business activity that is in direct conflict with the Company's business. (c) The cessation of employment of the Employee as a result of the alleged occurrence of an event referred to in clause (ii) or (iii) of the definition of "Event of Termination for Cause" shall not be deemed to be as a result of an Event of Termination for Cause unless and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors (excluding the Employee, if the Employee is a member of the Board of Directors) at a meeting of the Board of Directors called and held for such purpose (after reasonable notice is provided to the Employee and the Employee is given an opportunity, together with counsel for the Employee, to be heard before the Board of Directors), finding that, in the good faith opinion of the Board of Directors, the Employee is guilty of the conduct described in clause (ii) or (iii) of such definition and specifying the particulars thereof in detail. Any determination of the Board of Directors under this clause (c) shall not be binding on the Employee, shall not be conclusive as to whether an Event of Termination for Cause has occurred, and shall not affect Employee's right to contest whether an Event of Termination for Cause has occurred. SECTION 5. EVENT OF TERMINATION FOR GOOD REASON. An "Event of Termination for Good Reason" shall mean, after a Change of Control of the Company, the occurrence of any of the following events, provided Employee serves termination by written notice in connection with or based upon and within 90 days of the occurrence of such event: 5 (a) a significant reduction in the Employee's authority and/or responsibilities (whether or not occurring solely as a result of the Company's ceasing to be a publicly traded entity); or (b) a reduction in Employee's Annual Base Salary, a reduction in Employee's annual bonus when compared to the bonus received for the prior year, or the failure to continue the Employee's full participation in any employee benefit plan or program (unless replaced by a substantially comparable plan or program) in which Employee is eligible to participate prior to the notification (other than as a result of the normal expiration of such plan or program), in each case other than as a part of a general program to reduce compensation or benefits on a proportional basis relative to all other employees of the Company; or (c) a relocation of the Employee's primary place of work to a location more than 50 miles away from the Employee's primary place of work at the time of the notice (provided, however, this clause (c) shall no longer apply to an employee after he has accepted any such relocation after a Change of Control of the Company has occurred and the above referenced 90 day period has passed). For the avoidance of doubt, any action referred to in clause (a), (b) or (c) above shall constitute an Event of Termination for Good Reason under the foregoing definition regardless of whether the Company is permitted to take such action under any employment contract with the Employee. SECTION 6. NOTICE OF TERMINATION. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, any termination by the Employee or the Company of the Employee's employment by the Company, or any determination of the Employee's Disability, that occurs within two years of such Change of Control shall be communicated by notice to the other party that shall indicate the specific paragraph of Section 7 pursuant to which the Employee is to receive benefits as a result of the termination. If the notice states that the Employee's employment by the Company has been automatically terminated as a result of the Employee's Disability, the notice shall specifically describe the basis for the determination of the Employee's Disability and shall state the date of the determination of the Employee's Disability, which date shall be not more than ten days before the date such notice is given. If the notice is from the Company and states that the Employee's employment by the Company is terminated by the Company as a result of the occurrence of an Event of Termination for Cause, the notice shall specifically describe the action or inaction of the Employee that the Company believes constitutes an Event of Termination for Cause, and in the case of a termination under clause (ii) or (iii) of the definition of Event of Termination for Cause, shall include the resolution of the Board of Directors referred to in Section 4(c). If the notice is from the Employee and states that the Employee's employment by the Company is terminated by the Employee as a result of the occurrence of an Event of Termination for Good Reason, the notice shall specifically describe the action or inaction of the Company that the Employee believes constitutes an Event of Termination for Good Reason. Each notice given pursuant to this Section 6 (other than a notice stating that the Employee's employment by the Company has been automatically terminated as a result of the Employee's Disability) shall state a date, which shall be not fewer than 30 days nor 6 more than 60 days after the date such notice is given, on which the termination of the Employee's employment by the Company is effective. The date so stated in accordance with this Section 6 shall be the "Termination Date". If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, any subsequent purported termination by the Company of the Employee's employment by the Company, or any subsequent purported determination by the Company of the Employee's Disability, within two years of such Change of Control shall be ineffective unless that termination or determination shall have been communicated by the Company to the Employee by notice that meets the requirements of the foregoing provisions of this Section 6 and the provisions of Section 9. SECTION 7. BENEFITS PAYABLE ON CHANGE OF CONTROL AND TERMINATION. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, and the Employee's employment by the Company is terminated (whether by the Employee or the Company or automatically as provided in Section 3) within two years after the occurrence of that Change of Control of the Company, the Employee shall be entitled to the following benefits: (a) If the Employee's employment by the Company is terminated by the Company as a result of the occurrence of an Event of Termination for Cause, or by the Employee before the occurrence of an Event of Termination for Good Reason, then the Company shall pay to the Employee the Base Salary accrued through the Termination Date but not previously paid to the Employee, and the Employee shall be entitled to any other amounts or benefits provided under any plan, policy, practice, program, contract or arrangement of or with the Company, which shall be governed by the terms thereof (except as explicitly modified by this Agreement). (b) If the Employee's employment by the Company is automatically terminated as a result of the Employee's death, the Employee's Disability or the Employee's Retirement, then the Company shall pay to the Employee the Base Salary accrued through the date of the occurrence of that event but not previously paid to the Employee, and the Employee shall be entitled to any other amounts or benefits provided under any plan, policy, practice, program, contract or arrangement of or with the Company, which shall be governed by the terms thereof (except as explicitly modified by this Agreement). (c) If the Employee's employment by the Company is terminated (x) by the Company, other than as a result of the occurrence of an Event of Termination for Cause, or (y) by the Employee after the occurrence of an Event of Termination for Good Reason, or (z) by the Employee for any reason during the thirty (30) day period beginning six (6) months after a Change of Control of the Company, then the Employee shall be entitled to the following: (i) the Company shall pay to the Employee the Base Salary and compensation for earned but unused vacation time accrued through the Termination Date but not previously paid to the Employee; (ii) the Company shall pay to the Employee, as a lump sum, an amount equal to the total of the following amounts: 7 (A) 2.99 times the amount of the then current Annual Base Salary; plus (B) two (2) times the amount of the Employee's most recent target annual bonus; plus (C) the amount of the Money Purchase Pension Plan contributions that would have been made by the Company on behalf of the Employee if the Employee had continued to be employed by the Company at the Employee's then current Annual Base Salary for three years following the Termination Date; and plus (D) the amount that would have been paid on behalf of the Employee as matching amounts to the Company's Savings Plan if the Employee had continued to be employed by the Company at the Employee's then current Annual Base Salary for three years following the Termination Dateand had continued to contribute to the Company's Savings Plan during such three year period at the Employee's then current contribution level. (iii) the Company shall arrange for the Employee's uninterrupted participation for three (3) years after the Termination Date in the Company's major medical/dental insurance plan, which participation shall cease upon Employee's eligibility for participation in a major medical/dental insurance plan of another employer; (iv) the Company shall cause the Employee to receive three (3) years age and service credit for eligibility for the Company's retiree medical insurance coverage; and (v) the Company shall provide out placement services at a cost not to exceed $50,000.00. Each payment required to be made to the Employee pursuant to the foregoing provisions of this Section 7 shall be made by check drawn on an account of the Company at a bank located in the United States of America (unless the Employee has elected to have salary payments deposited directly by the Company to a bank account maintained by the Employee, in which event the Company shall make a direct deposit of the payment to that account), and shall be paid (x) if the Employee's employment by the Company was terminated as a result of the Employee's death, the Employee's Disability or the Employee's Retirement, not more than 30 days immediately following the date of the occurrence of that event, and (y) if the Employee's employment by the Company was terminated for any other reason, not more than ten days immediately following the Termination Date. SECTION 8. SUCCESSORS. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, (a) the Company shall not, directly or indirectly, consolidate with, merge into or sell or otherwise transfer its assets as an entirety or substantially as an entirety to, any person, or permit any person to consolidate with or merge into the Company, unless immediately after such 8 consolidation, merger, sale or transfer, the Successor shall have assumed in writing the Company's obligations under this Agreement; and (b) not fewer than ten days before the consummation of any consolidation of the Company with, merger by the Company into, or sale or other transfer by the Company of its assets as an entirety or substantially as an entirety to, any person, the Company shall give the Employee notice of that proposed transaction. SECTION 9. NOTICE. Notices required or permitted to be given by either party pursuant to this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the other party or when deposited with the United States Postal Service as certified or registered mail with postage prepaid and addressed: (a) if to the Employee, at the Employee's address last shown on the Company's records, and (b) if to the Company, at 333 Clay Street, Suite 4200, Houston, Texas 77002, directed to the attention of the Company's Chairman of the Board, or, in either case, to such other address as the party to whom such notice is to be given shall have specified by notice given to the other party. SECTION 10. WITHHOLDING TAXES. The Company may withhold from all payments to be paid to the Employee pursuant to this Agreement all taxes that, by applicable federal or state law, the Company is required to so withhold. SECTION 11. U.S. EXCISE TAX INDEMNIFICATION. (a) In the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, the Company's Change of Control Severance Plan or otherwise, but determined without regard to any additional payments required under this Section 11) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the United States Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. 9 (b) Subject to the provisions of Section 8.3, all determinations required to be made under this Section 11, including whether and when a Gross-Up Payment is required and the amount of such Gross- Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a public accounting firm chosen by the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Employee if requested by either the Company or the Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to clause (c) of this Section 11 and the Employee thereafter is required to make a payment of any additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee. (c) If the Company elects to contest a claim by the Internal Revenue Service that Excise Tax is due from the Employee, the Employee shall cooperate fully with the Company in order to effectively contest such claim, including, but not limited to providing information reasonably requested by the Company relating to such claim, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and permitting the Company to participate in any proceedings relating to such claim. The Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after- tax basis, for any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (d) If the Company directs the Employee to pay a claim by the Internal Revenue Service and sue for a refund, the Company shall advance the amount of such payment to the Employee on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance. If, after the receipt by the Employee of an amount advanced by the Company pursuant to this clause (d), the Employee becomes entitled to receive, and receives, any refund with respect to such claim, the Employee shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to this clause (d), a determination is made that the Employee is not entitled to any refund with respect to such claim, then such advance shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. SECTION 12. EXPENSES OF ENFORCEMENT. The Company agrees to pay as incurred (within ten days following the Company's receipt of an invoice from the Employee), to the full extent permitted by law, all legal fees and 10 expenses that the Employee may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Employee or others of the validity, interpretation or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Employee about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended. SECTION 13. EMPLOYMENT BY WHOLLY OWNED ENTITIES. If, at or after the Effective Date, the Employee is or becomes an employee of one or more corporations, partnerships, limited liability companies or other entities that are, directly or indirectly, wholly owned by the Company, references in this Agreement to the Employee's employment by the Company shall include the Employee's employment by any such wholly owned entity. SECTION 14. NO OBLIGATION TO MITIGATE; NO RIGHTS OF OFFSET. (a) The Employee shall not be required to mitigate the amount of any payment or other benefit required to be paid to the Employee pursuant to this Agreement, whether by seeking other employment or otherwise, nor shall the amount of any such payment or other benefit be reduced on account of any compensation earned or benefits received by the Employee as a result of employment by another person. (b) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Employee or others. SECTION 15. AMENDMENT AND WAIVER. No provision of this Agreement may be amended or waived (whether by act or course of conduct or omission or otherwise) unless that amendment or waiver is by written instrument signed by the parties hereto. No waiver by either party of any breach of this Agreement shall be deemed a waiver of any other or subsequent breach. SECTION 16. GOVERNING LAW. The validity, interpretation, construction and enforceability of this Agreement shall be governed by the laws of the State of Texas. SECTION 17. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. SECTION 18. COUNTERPARTS. 11 This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute the same instrument. SECTION 19. ASSIGNMENT. This Agreement shall inure to the benefit of and be enforceable by the Employee's legal representative. The Company may not assign any of its obligations under this Agreement unless (i) such assignment is to a Successor and (ii) the requirements of Section 8 are fulfilled. SECTION 20. MISCELLANEOUS. (a) As used in this Agreement, the following terms and phrases have the indicated meanings: (i) "Affiliate" and "Affiliates" mean, when used with respect to any entity, individual, or other person, any other entity, individual, or other person which, directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with such entity, individual or person. "Affiliated Company" means any entity that is an Affiliate of the Company. (ii) "Annual Base Salary" means, at any point in time, the regular rate of wages payable to the Employee, expressed on an annualized basis, including any base salary that has been earned but deferred. (iii) "Board of Directors" means the Board of Directors of the Company. (iv) "Change of Control of the Company" has the meaning assigned to that phrase in Section 2. (v) "Company" has the meaning assigned to that term in the preamble to this Agreement. The term "Company" shall also include any Successor, whether the liability of such Successor under this Agreement is established by contract or occurs by operation of law. (vi) "Effective Date" has the meaning assigned to that term in the preamble to this Agreement. (vii) "Employee" has the meaning assigned to such term in the preamble to this Agreement. (viii) "Employee's Disability" means: (A) if no Change of Control of the Company shall have occurred before the date of determination, the physical or mental disability of the Employee determined in accordance with the disability policy of the Company at the time in effect and generally applicable to its salaried employees; and (B) if a Change of Control of the Company shall have occurred before the date of determination, the physical or mental disability of the Employee determined in accordance with the disability policy of the Company in effect immediately before the occurrence of the first Change of Control of the Company and generally applicable to its salaried employees. . (ix) "Employee's Retirement" means (x) if no Change of Control of the Company shall have occurred before the date of the Employee's proposed retirement, the retirement of the Employee in accordance with the retirement policy of the Company at the time in effect and generally applicable to its salaried employees, and (y) if a Change of Control of the Company shall have occurred before the date of the Employee's proposed retirement, the retirement of the Employee from the employ of the Company in accordance with the retirement policy of the Company in effect immediately before the occurrence of the first Change of Control of the Company and generally applicable to its salaried employees. (x) "Event of Termination for Good Reason" has the meaning assigned to that phrase in Section 5. (xi) "Event of Termination for Cause" has the meaning assigned to that phrase in Section 4. (xii) "Expiration Date" has the meaning assigned to that term in Section 3. (xiii) "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited partnership, limited liability company, trust, unincorporated organization, government, or agency or political subdivision of any government. (xiv) "Successor" means a person with or into which the Company shall have been merged or consolidated or to which the Company shall have transferred its assets as an entirety or substantially as an entirety. (xv) "Termination Date" has the meaning assigned to that term in Section 6. (xvi) "This Agreement" means this Change of Control Agreement as it may be amended from time to time. (b) In the event of the enactment of any successor provision to any statute or rule cited in this Agreement, references in this Agreement to such statute or rule shall be to such successor provision. (c) The headings of Sections of this Agreement shall not control the meaning or interpretation of this Agreement. (d) References in this Agreement to any Section are to the corresponding Section of this Agreement unless the context otherwise indicates. 13 In Witness Whereof, the Company and the Employee have executed this Agreement as of the Effective Date. EOG RESOURCES, INC. By /s/ PATRICIA EDWARDS ---------------------------- Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary LOREN M. LEIKER /s/ LOREN M. LEIKER ---------------------------------- EX-10 15 exhibit10_14c.txt THIRD AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT Exhibit 10.14(c) SECOND AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT This Agreement, entered into on this 1st of July, 2001, and made effective as of June 1, 2001, by and between EOG Resources, Inc., f.k.a. Enron Oil & Gas Company ("Employer"), and Gary L. Thomas ("Employee") is an amendment to that certain Employment Agreement dated effective as of September 1, 1998 (as heretofore amended, the "Employment Agreement"). WHEREAS, the parties desire to amend the Employment Agreement as provided herein; NOW, THEREFORE, in consideration thereof and of the mutual covenants contained herein, the parties agree as follows: 1. Exhibit A to the Employment Agreement is hereby deleted in its entirety and a new Exhibit A, in the form attached hereto as Exhibit A and effective as of June 1, 2001, is substituted therefor. 2. Section 1.3 is hereby revised to remove reference to Enron. 3. Section 1.6 is hereby revised to change references to "Employer's President" to "Employer's Chairman". 4. Section 1.7 is hereby deleted in its entirety. 5. Section 2.1 is hereby deleted in its entirety and the following is substituted therefor: " 2.1 Employee's annual base salary during the Term shall be not less than the amount set forth under the heading "Annual Base Salary" on Exhibit A, subject to increase at the sole discretion of the Employer, which shall be paid in accordance with Employer's standard payroll practice. Any calculation to be made under this Agreement with respect to Employee's Annual Base Salary shall be made using the then current Annual Base Salary in effect at the time of the event for which such calculation is made." 6. Section 2.3 is hereby revised to remove reference to Enron. 7. Section 3.1(i) is hereby revised to remove reference to Enron. 8. Section 3.1(iv) is hereby revised to change the reference to "Enron's long-term disability plan" to "Employer's long-term disability plan". 9. The phrase "except Section 8.6" is hereby deleted from Section 3.2 2 10. Section 3.5 is hereby deleted in its entirety and the following is substituted therefor: " 3.5 Upon an Involuntary Termination of the employment relationship by either Employer or Employee prior to the expiration of the Term, Employee shall be entitled, in consideration of Employee's continuing obligations hereunder after such termination (including, without limitation, Employee's non-competition obligations), to receive a severance benefit under this Agreement equal to the greater of a) the amount that Employee would have received under this Agreement from the date of termination through the end of the Term of this Agreement if Employee had continued to be employed during such period, computed assuming that Employee received the Annual Base Salary specified on Exhibit A and an annual bonus equal to the bonus target specified on Exhibit A for each year during such period (in each case prorated for any partial year), or b) the sum of the Employee's Annual Base Salary and the annual bonus target specified on Exhibit A. Employee shall not be under any duty or obligation to seek or accept other employment following Involuntary Termination and the amounts due Employee hereunder shall not be reduced or suspended if Employee accepts subsequent employment. Employee's rights under this Section 3.5 are Employee's sole and exclusive rights against Employer and Employer's sole and exclusive liability to Employee under this Agreement, in contract, tort, or otherwise, for any Involuntary Termination of the employment relationship. Employee covenants not to sue or lodge any claim, demand or cause of action against Employer for any sums for Involuntary Termination other than those sums specified in this Section 3.5. If Employee breaches this covenant, Employer shall be entitled to recover from Employee all sums expended by Employer (including costs and attorneys fees) in connection with such suit, claim, demand or cause of action." 11. Section 3.8 is hereby revised to remove reference to Enron. 12. Section 4.1 is hereby deleted in its entirety and the following is substituted therefor: " 4.1 After the expiration of the Term specified on Exhibit "A," this Agreement, and Employee's employment hereunder, shall automatically renew for successive periods of one (1) year each, unless either Employer or Employee provides not less than one hundred twenty (120) days' prior written notice of intent not to renew. In the event this Agreement is not renewed pursuant to such notice, and Employee remains employed by Employer beyond the expiration of the Term of this Agreement, including any renewals, Employee's employment shall convert to a month-to-month relationship terminable at any time by either Employer or Employee for any reason whatsoever, with or without cause. Upon such termination of the employment relationship by either Employer or Employee for any reason 3 whatsoever, all future compensation to which Employee is entitled and all future benefits for which Employee is eligible shall cease and terminate. Employee shall be entitled to pro rata salary through the date of such termination, but Employee shall not be entitled to any individual bonuses or individual incentive compensation not yet paid at the date of such termination." 13. Section 5.1 is hereby revised to remove references to Enron, including replacing the reference to "any Enron entity" to "any Employer entity". 14. Article 6 is hereby revised to remove references to Enron, including removing Enron and its affiliates as third party beneficiaries of Employee's obligations under Section 6.2. 15. Section 7.1 is hereby deleted in its entirety and the following is substituted therefor: " 7.1 As part of the consideration for the compensation and benefits to be paid to Employee hereunder, in keeping with Employee's duties as a fiduciary and in order to protect Employer's interests in the confidential information of Employer and the business relationships developed by Employee with the clients and potential clients of Employer, and as an additional incentive for Employer to enter into this Agreement, Employer and Employee agree to the non-competition provisions of this Article 7. Employee agrees that during the period of Employee's non-competition obligations hereunder, Employee will not, directly or indirectly for Employee or for others, in any geographic area or market where Employer is conducting any business as of the date of termination of the employment relationship or has during the previous twelve months conducted any business: (i) engage in any business competitive with the business conducted by Employer; (ii) render advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, in any business competitive with the business conducted by Employer; (iii) induce any employee of Employer to terminate his or her employment with Employer, or hire or assist in the hiring of any such employee by person, association, or entity not affiliated with Employer. These non-competition obligations shall extend until the earlier of (a) expiration of the Term or (b) one year after termination of the employment 4 relationship. Further, if Mark G. Papa ceases to be Chairman and Chief Executive Officer of Employer, Employee may exercise his right to voluntarily resign under Section 3.2(ii) and these non-competition obligations shall expire immediately and have no further force and effect, and the Employer shall have no further obligations to Employee under this Agreement." 16. Article 8 is hereby revised to remove references to Enron. 17. Section 8.3, notices and all other communications to Employer should be to: EOG Resources, Inc. 333 Clay Street, Suite 4200 Houston, Texas 77002 Attention: Vice President, Human Resources, Administration & Corporate Secretary 18. Article 9 is hereby deleted in its entirety. 19. Contemporaneously with the execution of this Agreement, the parties have executed a Change of Control Agreement dated July 1, 2001 (the "Change of Control Agreement"). If during the term of the Change of Control Agreement, a Change of Control (as that term is defined in the Change of Control Agreement) occurs or is deemed to have occurred under such agreement, then for the period of time from the occurrence of the Change of Control through the second anniversary of the Change of Control (the "Applicable Period"), the following provisions will apply: (a) The following shall be substituted in lieu of Section 3.1(i) of the Employment Agreement during the Applicable Period: (i) if, under the Change of Control Agreement, dated July 1, 2001, between Employee and Employer (as amended, the "Change of Control Agreement"), an Event of Termination for Cause (as that term is defined in the Change of Control Agreement) shall have occurred; (b) The following shall be substituted in lieu of Section 3.1(iv) of the Employment Agreement during the Applicable Period: (iv) if, under the Change of Control Agreement, Employee's Disability (as that term is defined in the Change of Control Agreement) shall have occurred. (c) If the termination of Employee's employment occurs for any reason during the Applicable Period, then (i) the provisions of Section 7 of 5 the Change of Control Agreement shall apply in lieu of the provisions of Sections 3.3 through 3.7 of the Employment Agreement, (ii) the provisions of Article 7 of the Employment Agreement shall not apply to Employee, and (iii) the provisions of Section 12 of the Change of Control Agreement shall apply in lieu of the provisions of Section 8.6 of the Employment Agreement. This Agreement is the Second Amendment to the Employment Agreement, and the parties agree that all other terms, conditions and stipulations contained in the Employment Agreement, and any amendments thereto, shall remain in full force and effect and without any change or modification, except as provided herein. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written. EOG RESOURCES, INC. By: /s/ PATRICIA EDWARDS -------------------------- Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary This 1st day of July, 2001 GARY L. THOMAS /s/ GARY L. THOMAS ------------------------------- This 1st day of July, 2001 6 EXHIBIT "A" TO EXECUTIVE EMPLOYMENT AGREEMENT BETWEEN EOG RESOURCES, INC. AND GARY L. THOMAS (Amended as of June 1, 2001) Employee Name: Gary L. Thomas Term: June 1, 2001 through May 31, 2005 Renewal: After May 31, 2005, Agreement will automatically be renewed annually for a one- year term unless either Employee or Employer provides a 120-day notice of intent not to renew. Position: Executive Vice President, North America Operations Location: Houston, Texas Reporting Relationship: Reports to Mark G. Papa, Chairman and Chief Executive Officer Annual Base Salary: Two Hundred Eighty-five Thousand Dollars ($285,000) per year Bonus: Employee shall be eligible to participate in the EOG Resources, Inc. Executive Officer Annual Bonus Plan, at a target of 75% of Annual Base Salary. Such bonus may be paid in a combination of cash, stock options, and/or phantom stock units, as determined by the Compensation Committee of Employer's Board of Directors. Long-term Incentives: Employee shall be eligible to receive grants of stock options, consistent with similarly situated executives, as determined from time to time by the Compensation Committee of Employer's Board of Directors. Stock Option Grant: Employee received a grant of 125,000 stock options, effective September 8, 1998, vesting 20% on the Grant Date and 20% on each of the first four anniversaries of the Grant Date, as evidenced by an Award Agreement. Signing Grant: Employee shall be granted 30,000 shares of Restricted Stock under the terms of the EOG Resources, Inc. 1992 Stock Plan, as amended, with standard termination provisions, and vesting on May 8, 2006. EOG RESOURCES, INC. By: /s/ PATRICIA EDWARDS -------------------------- Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary This 1st day of July, 2001 GARY L. THOMAS /s/ GARY L. THOMAS ------------------------------- This 1st day of July, 2001 EX-10 16 exhibit10_14d.txt CHANGE OF CONTROL AGREEMENT Exhibit 10.14(d) CHANGE OF CONTROL AGREEMENT This Agreement between EOG Resources, Inc., a Delaware corporation (the "Company"), and Gary L. Thomas (the "Employee") is effective as of this 1st day of July, 2001 (the "Effective Date"). Certain capitalized terms used herein are defined in Section 20. WITNESSETH: Whereas, the Company considers it to be in the best interests of its stockholders to encourage the continued employment of certain key employees of the Company notwithstanding the possibility, threat or occurrence of a Change of Control of the Company; and Whereas, the Employee is a key employee of the Company; and Whereas, the Company believes that the possibility of the occurrence of a Change of Control of the Company may result in the termination by the Employee of the Employee's employment by the Company or in the distraction of the Employee from the performance of Employee's duties to the Company, in either case to the detriment of the Company and its stockholders; and Whereas, the Company recognizes that the Employee could suffer adverse financial and professional consequences if a Change of Control of the Company were to occur; and Whereas, the Company wishes to enter into this Agreement to protect the Employee if a Change of Control of the Company occurs, thereby encouraging the Employee to remain in the employ of the Company and not to be distracted from the performance of Employee's duties to the Company by the possibility of a Change of Control of the Company; Now, Therefore, the parties agree as follows: SECTION 1. OTHER EMPLOYMENT ARRANGEMENTS. (a) This Agreement does not affect the Employee's existing or future employment arrangements with the Company unless a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement. The Employee's employment with the Company shall continue to be governed by the Employee's existing or future employment agreements with the Company, if any, or, in the absence of any employment agreement, shall continue to be at the will of the Company, except that if a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement and the Employee's employment with the Company is terminated (whether by the Employee or the Company or automatically as provided in Section 3) after the occurrence of that Change of Control of the Company, then the Employee shall be entitled to receive certain benefits as provided in this Agreement. (b) Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in any plan, program, policy or practice of or provided by the Company or any of its Affiliates and for which the Employee may qualify, nor shall anything herein limit or otherwise affect such rights as the Employee may have under any contract or agreement with the 2 Company or any of its Affiliates. Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan, program, policy or practice of or provided by, or any contract or agreement with, the Company or any of its Affiliates at or subsequent to the date of termination of the Employee's employment with the Company shall be payable or otherwise provided in accordance with such plan, program, policy or practice or contract or agreement except as explicitly modified by this Agreement. SECTION 2. CHANGE OF CONTROL OF THE COMPANY. A "Change of Control of the Company" shall mean the occurrence of any of the following events: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (an "Exchange Act Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this clause (a), the following acquisitions shall not constitute a Change of Control of the Company: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with subclauses (i), (ii) and (iii) of clause (c) of this Section 2; (b) Individuals who, as of May 8, 2001, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to May 8, 2001, whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an Exchange Act Person other than the Board of Directors; (c) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the assets or stock of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the 3 Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no Exchange Act Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board of Directors providing for such Business Combination; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. Notwithstanding anything contained in this Agreement to the contrary, if (i) the Employee's employment with the Company is terminated, or (ii) an event occurs which, had it occurred after a Change of Control of the Company, would with proper notice from Employee constitute an Event of Termination for Good Reason, and if it is reasonably demonstrated by the Employee that such action (A) was taken at the request of a third party that has taken steps reasonably calculated to effect a Change of Control of the Company or (B) otherwise arose in connection with or anticipation of a Change of Control of the Company, then for all purposes of this Agreement, such Change of Control of the Company shall be deemed to have occurred on the date immediately prior to the date of such termination or event. SECTION 3. TERM OF THIS AGREEMENT. The term of this Agreement shall begin on the Effective Date and shall expire on the first to occur of: (a) the Employee's death, the Employee's Disability or the Employee's Retirement, which events shall also be deemed automatically to terminate the Employee's employment by the Company; or (b) the termination by the Employee or the Company of the Employee's employment by the Company. The expiration of the term of this Agreement shall not terminate this Agreement itself or affect the right of the Employee or the Employee's legal representatives to enforce the payment of any amount or other benefit to which the Employee was entitled before the expiration of the term of this Agreement or to which the Employee became entitled as a result of the event that caused the term of this Agreement to expire. SECTION 4 EVENT OF TERMINATION FOR CAUSE. 4 (a) An "Event of Termination for Cause" shall mean the Employee's (i) conviction of a felony involving moral turpitude (which, through lapse of time or otherwise, is not subject to appeal), (ii) willful refusal without proper legal cause to perform employee's duties and responsibilities which remains uncorrected for thirty (30) days following written notice to the Employee by the Company of such event, (iii) willfully engaging in conduct which the Employee has, or reasonably should have, reason to know is materially injurious to the Company, or (iv) other extreme personal conduct such as, but not limited to, deliberate infliction of bodily injury to another employee while on duty, gross negligent lack of regard for safety rules and customs, or engaging in business activities directly in conflict with the Company's business. (b) For purposes of this Section 4, no act, or failure to act, on the part of the Employee shall be considered "willful" unless it is done, or omitted to be done, by the Employee in bad faith or without reasonable belief that the Employee's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board of Directors or upon the instructions of the Chief Executive Officer of the Company or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of the Company. Any business activity that has been approved by the Chairman of the Board of the Company (or if the Employee is the Chairman of the Board of the Company, that has been approved by a resolution duly adopted by the Board of Directors) shall be conclusively presumed not to be a business activity that is in direct conflict with the Company's business. (c) The cessation of employment of the Employee as a result of the alleged occurrence of an event referred to in clause (ii) or (iii) of the definition of "Event of Termination for Cause" shall not be deemed to be as a result of an Event of Termination for Cause unless and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of Directors (excluding the Employee, if the Employee is a member of the Board of Directors) at a meeting of the Board of Directors called and held for such purpose (after reasonable notice is provided to the Employee and the Employee is given an opportunity, together with counsel for the Employee, to be heard before the Board of Directors), finding that, in the good faith opinion of the Board of Directors, the Employee is guilty of the conduct described in clause (ii) or (iii) of such definition and specifying the particulars thereof in detail. Any determination of the Board of Directors under this clause (c) shall not be binding on the Employee, shall not be conclusive as to whether an Event of Termination for Cause has occurred, and shall not affect Employee's right to contest whether an Event of Termination for Cause has occurred. SECTION 5. EVENT OF TERMINATION FOR GOOD REASON. An "Event of Termination for Good Reason" shall mean, after a Change of Control of the Company, the occurrence of any of the following events, provided Employee serves termination by written notice in connection with or based upon and within 90 days of the occurrence of such event: 5 (a) a significant reduction in the Employee's authority and/or responsibilities (whether or not occurring solely as a result of the Company's ceasing to be a publicly traded entity); or (b) a reduction in Employee's Annual Base Salary, a reduction in Employee's annual bonus when compared to the bonus received for the prior year, or the failure to continue the Employee's full participation in any employee benefit plan or program (unless replaced by a substantially comparable plan or program) in which Employee is eligible to participate prior to the notification (other than as a result of the normal expiration of such plan or program), in each case other than as a part of a general program to reduce compensation or benefits on a proportional basis relative to all other employees of the Company; or (c) a relocation of the Employee's primary place of work to a location more than 50 miles away from the Employee's primary place of work at the time of the notice (provided, however, this clause (c) shall no longer apply to an employee after he has accepted any such relocation after a Change of Control of the Company has occurred and the above referenced 90 day period has passed). For the avoidance of doubt, any action referred to in clause (a), (b) or (c) above shall constitute an Event of Termination for Good Reason under the foregoing definition regardless of whether the Company is permitted to take such action under any employment contract with the Employee. SECTION 6. NOTICE OF TERMINATION. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, any termination by the Employee or the Company of the Employee's employment by the Company, or any determination of the Employee's Disability, that occurs within two years of such Change of Control shall be communicated by notice to the other party that shall indicate the specific paragraph of Section 7 pursuant to which the Employee is to receive benefits as a result of the termination. If the notice states that the Employee's employment by the Company has been automatically terminated as a result of the Employee's Disability, the notice shall specifically describe the basis for the determination of the Employee's Disability and shall state the date of the determination of the Employee's Disability, which date shall be not more than ten days before the date such notice is given. If the notice is from the Company and states that the Employee's employment by the Company is terminated by the Company as a result of the occurrence of an Event of Termination for Cause, the notice shall specifically describe the action or inaction of the Employee that the Company believes constitutes an Event of Termination for Cause, and in the case of a termination under clause (ii) or (iii) of the definition of Event of Termination for Cause, shall include the resolution of the Board of Directors referred to in Section 4(c). If the notice is from the Employee and states that the Employee's employment by the Company is terminated by the Employee as a result of the occurrence of an Event of Termination for Good Reason, the notice shall specifically describe the action or inaction of the Company that the Employee believes constitutes an Event of Termination for Good Reason. Each notice given pursuant to this Section 6 (other than a notice stating that the Employee's employment by the Company has been automatically terminated as a result of the Employee's Disability) shall state a date, which shall be not fewer than 30 days nor 6 more than 60 days after the date such notice is given, on which the termination of the Employee's employment by the Company is effective. The date so stated in accordance with this Section 6 shall be the "Termination Date". If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, any subsequent purported termination by the Company of the Employee's employment by the Company, or any subsequent purported determination by the Company of the Employee's Disability, within two years of such Change of Control shall be ineffective unless that termination or determination shall have been communicated by the Company to the Employee by notice that meets the requirements of the foregoing provisions of this Section 6 and the provisions of Section 9. SECTION 7. BENEFITS PAYABLE ON CHANGE OF CONTROL AND TERMINATION. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, and the Employee's employment by the Company is terminated (whether by the Employee or the Company or automatically as provided in Section 3) within two years after the occurrence of that Change of Control of the Company, the Employee shall be entitled to the following benefits: (a) If the Employee's employment by the Company is terminated by the Company as a result of the occurrence of an Event of Termination for Cause, or by the Employee before the occurrence of an Event of Termination for Good Reason, then the Company shall pay to the Employee the Base Salary accrued through the Termination Date but not previously paid to the Employee, and the Employee shall be entitled to any other amounts or benefits provided under any plan, policy, practice, program, contract or arrangement of or with the Company, which shall be governed by the terms thereof (except as explicitly modified by this Agreement). (b) If the Employee's employment by the Company is automatically terminated as a result of the Employee's death, the Employee's Disability or the Employee's Retirement, then the Company shall pay to the Employee the Base Salary accrued through the date of the occurrence of that event but not previously paid to the Employee, and the Employee shall be entitled to any other amounts or benefits provided under any plan, policy, practice, program, contract or arrangement of or with the Company, which shall be governed by the terms thereof (except as explicitly modified by this Agreement). (c) If the Employee's employment by the Company is terminated (x) by the Company, other than as a result of the occurrence of an Event of Termination for Cause, or (y) by the Employee after the occurrence of an Event of Termination for Good Reason, or (z) by the Employee for any reason during the thirty (30) day period beginning six (6) months after a Change of Control of the Company, then the Employee shall be entitled to the following: (i) the Company shall pay to the Employee the Base Salary and compensation for earned but unused vacation time accrued through the Termination Date but not previously paid to the Employee; (ii) the Company shall pay to the Employee, as a lump sum, an amount equal to the total of the following amounts: 7 (A) 2.99 times the amount of the then current Annual Base Salary; plus (B) two (2) times the amount of the Employee's most recent target annual bonus; plus (C) the amount of the Money Purchase Pension Plan contributions that would have been made by the Company on behalf of the Employee if the Employee had continued to be employed by the Company at the Employee's then current Annual Base Salary for three years following the Termination Date; and plus (D) the amount that would have been paid on behalf of the Employee as matching amounts to the Company's Savings Plan if the Employee had continued to be employed by the Company at the Employee's then current Annual Base Salary for three years following the Termination Date and had continued to contribute to the Company's Savings Plan during such three year period at the Employee's then current contribution level. (iii) the Company shall arrange for the Employee's uninterrupted participation for three (3) years after the Termination Date in the Company's major medical/dental insurance plan, which participation shall cease upon Employee's eligibility for participation in a major medical/dental insurance plan of another employer; (iv) the Company shall cause the Employee to receive three (3) years age and service credit for eligibility for the Company's retiree medical insurance coverage; and (v) the Company shall provide out placement services at a cost not to exceed $50,000.00. Each payment required to be made to the Employee pursuant to the foregoing provisions of this Section 7 shall be made by check drawn on an account of the Company at a bank located in the United States of America (unless the Employee has elected to have salary payments deposited directly by the Company to a bank account maintained by the Employee, in which event the Company shall make a direct deposit of the payment to that account), and shall be paid (x) if the Employee's employment by the Company was terminated as a result of the Employee's death, the Employee's Disability or the Employee's Retirement, not more than 30 days immediately following the date of the occurrence of that event, and (y) if the Employee's employment by the Company was terminated for any other reason, not more than ten days immediately following the Termination Date. SECTION 8. SUCCESSORS. If a Change of Control of the Company shall have occurred before the expiration of the term of this Agreement, (a) the Company shall not, directly or indirectly, consolidate with, merge into or sell or otherwise transfer its assets as an entirety or substantially as an entirety to, any person, or permit any person to consolidate with or merge into the Company, unless immediately after such 8 consolidation, merger, sale or transfer, the Successor shall have assumed in writing the Company's obligations under this Agreement; and (b) not fewer than ten days before the consummation of any consolidation of the Company with, merger by the Company into, or sale or other transfer by the Company of its assets as an entirety or substantially as an entirety to, any person, the Company shall give the Employee notice of that proposed transaction. SECTION 9. NOTICE. Notices required or permitted to be given by either party pursuant to this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the other party or when deposited with the United States Postal Service as certified or registered mail with postage prepaid and addressed: (a) if to the Employee, at the Employee's address last shown on the Company's records, and (b) if to the Company, at 333 Clay Street, Suite 4200, Houston, Texas 77002, directed to the attention of the Company's Chairman of the Board, or, in either case, to such other address as the party to whom such notice is to be given shall have specified by notice given to the other party. SECTION 10. WITHHOLDING TAXES. The Company may withhold from all payments to be paid to the Employee pursuant to this Agreement all taxes that, by applicable federal or state law, the Company is required to so withhold. SECTION 11. U.S. EXCISE TAX INDEMNIFICATION. (a) In the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, the Company's Change of Control Severance Plan or otherwise, but determined without regard to any additional payments required under this Section 11) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the United States Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income and employment taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. 9 (b) Subject to the provisions of Section 8.3, all determinations required to be made under this Section 11, including whether and when a Gross-Up Payment is required and the amount of such Gross- Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by a public accounting firm chosen by the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Employee if requested by either the Company or the Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to clause (c) of this Section 11 and the Employee thereafter is required to make a payment of any additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee. (c) If the Company elects to contest a claim by the Internal Revenue Service that Excise Tax is due from the Employee, the Employee shall cooperate fully with the Company in order to effectively contest such claim, including, but not limited to providing information reasonably requested by the Company relating to such claim, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company and permitting the Company to participate in any proceedings relating to such claim. The Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after- tax basis, for any Excise Tax or other tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. (d) If the Company directs the Employee to pay a claim by the Internal Revenue Service and sue for a refund, the Company shall advance the amount of such payment to the Employee on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance. If, after the receipt by the Employee of an amount advanced by the Company pursuant to this clause (d), the Employee becomes entitled to receive, and receives, any refund with respect to such claim, the Employee shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to this clause (d), a determination is made that the Employee is not entitled to any refund with respect to such claim, then such advance shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. SECTION 12. EXPENSES OF ENFORCEMENT. The Company agrees to pay as incurred (within ten days following the Company's receipt of an invoice from the Employee), to the full extent permitted by law, all legal fees and 10 expenses that the Employee may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Employee or others of the validity, interpretation or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Employee about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended. SECTION 13. EMPLOYMENT BY WHOLLY OWNED ENTITIES. If, at or after the Effective Date, the Employee is or becomes an employee of one or more corporations, partnerships, limited liability companies or other entities that are, directly or indirectly, wholly owned by the Company, references in this Agreement to the Employee's employment by the Company shall include the Employee's employment by any such wholly owned entity. SECTION 14. NO OBLIGATION TO MITIGATE; NO RIGHTS OF OFFSET. (a) The Employee shall not be required to mitigate the amount of any payment or other benefit required to be paid to the Employee pursuant to this Agreement, whether by seeking other employment or otherwise, nor shall the amount of any such payment or other benefit be reduced on account of any compensation earned or benefits received by the Employee as a result of employment by another person. (b) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Employee or others. SECTION 15. AMENDMENT AND WAIVER. No provision of this Agreement may be amended or waived (whether by act or course of conduct or omission or otherwise) unless that amendment or waiver is by written instrument signed by the parties hereto. No waiver by either party of any breach of this Agreement shall be deemed a waiver of any other or subsequent breach. SECTION 16. GOVERNING LAW. The validity, interpretation, construction and enforceability of this Agreement shall be governed by the laws of the State of Texas. SECTION 17. VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. SECTION 18. COUNTERPARTS. 11 This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute the same instrument. SECTION 19. ASSIGNMENT. This Agreement shall inure to the benefit of and be enforceable by the Employee's legal representative. The Company may not assign any of its obligations under this Agreement unless (i) such assignment is to a Successor and (ii) the requirements of Section 8 are fulfilled. SECTION 20. MISCELLANEOUS. (a) As used in this Agreement, the following terms and phrases have the indicated meanings: (i) "Affiliate" and "Affiliates" mean, when used with respect to any entity, individual, or other person, any other entity, individual, or other person which, directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with such entity, individual or person. "Affiliated Company" means any entity that is an Affiliate of the Company. (ii) "Annual Base Salary" means, at any point in time, the regular rate of wages payable to the Employee, expressed on an annualized basis, including any base salary that has been earned but deferred. (iii) "Board of Directors" means the Board of Directors of the Company. (iv) "Change of Control of the Company" has the meaning assigned to that phrase in Section 2. (v) "Company" has the meaning assigned to that term in the preamble to this Agreement. The term "Company" shall also include any Successor, whether the liability of such Successor under this Agreement is established by contract or occurs by operation of law. (vi) "Effective Date" has the meaning assigned to that term in the preamble to this Agreement. (vii) "Employee" has the meaning assigned to such term in the preamble to this Agreement. (viii) "Employee's Disability" means: (A) if no Change of Control of the Company shall have occurred before the date of determination, the physical or mental disability of the Employee determined in accordance with the disability policy of the Company at the time in effect and generally applicable to its salaried employees; and (B) if a Change of Control of the Company shall have occurred before the date of determination, the physical or mental disability of the Employee determined in 12 accordance with the disability policy of the Company in effect immediately before the occurrence of the first Change of Control of the Company and generally applicable to its salaried employees. . (ix) "Employee's Retirement" means (x) if no Change of Control of the Company shall have occurred before the date of the Employee's proposed retirement, the retirement of the Employee in accordance with the retirement policy of the Company at the time in effect and generally applicable to its salaried employees, and (y) if a Change of Control of the Company shall have occurred before the date of the Employee's proposed retirement, the retirement of the Employee from the employ of the Company in accordance with the retirement policy of the Company in effect immediately before the occurrence of the first Change of Control of the Company and generally applicable to its salaried employees. (x) "Event of Termination for Good Reason" has the meaning assigned to that phrase in Section 5. (xi) "Event of Termination for Cause" has the meaning assigned to that phrase in Section 4. (xii) "Expiration Date" has the meaning assigned to that term in Section 3. (xiii) "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, limited partnership, limited liability company, trust, unincorporated organization, government, or agency or political subdivision of any government. (xiv) "Successor" means a person with or into which the Company shall have been merged or consolidated or to which the Company shall have transferred its assets as an entirety or substantially as an entirety. (xv) "Termination Date" has the meaning assigned to that term in Section 6. (xvi) "This Agreement" means this Change of Control Agreement as it may be amended from time to time. (b) In the event of the enactment of any successor provision to any statute or rule cited in this Agreement, references in this Agreement to such statute or rule shall be to such successor provision. (c) The headings of Sections of this Agreement shall not control the meaning or interpretation of this Agreement. (d) References in this Agreement to any Section are to the corresponding Section of this Agreement unless the context otherwise indicates. 13 In Witness Whereof, the Company and the Employee have executed this Agreement as of the Effective Date. EOG RESOURCES, INC. By /s/ PATRICIA EDWARDS ------------------------------ Name: Patricia Edwards Title: V.P. Human Resources, Administration and Corporate Secretary GARY L. THOMAS /s/ GARY L. THOMAS -------------------------------- ThomasCOC.doc EX-10 17 exhibit10_15.txt CHANGE OF CONTROL SEVERANCE PLAN Exhibit 10.15 EOG RESOURCES, INC. CHANGE OF CONTROL SEVERANCE PLAN (As Amended and Restated Effective May 8, 2001) WHEREAS, EOG Resources, Inc. ("Company") desires to provide severance benefits to eligible employees terminated as a result of a Change of Control; NOW, THEREFORE, the Company hereby adopts the following terms and conditions of the EOG Resources, Inc. Change of Control Severance Plan ("Plan") for the benefit of its eligible employees. Section 1 - Eligible Employees - --------- ------------------ The benefits provided pursuant to this Plan shall be available to all Company (including its subsidiaries, or Affiliates) employees in the United States and on international assignment from the United States who meet all of the following requirements: (a) The employee is classified either as regular full-time or regular part-time and is not covered under any collective bargaining agreement with the Company or a subsidiary, or Affiliate, thereof. (b) The employee is Involuntarily Terminated on or within two years after a Change of Control of the Company. However, if any company, division, subsidiary, or Affiliate, or other business operation of the Company or its subsidiaries, or Affiliates is divested (whether in a stock or asset transaction) by the Company on or within two years after a Change of Control (such business segment being referred to herein as a "Divested Entity"), such divestiture shall not be deemed an Involuntary Termination of any employee employed by a Divested Entity, including an employer of divested assets. No eligible employee shall receive a severance benefit under the Plan if such employee receives an offer of employment at a location within fifty (50) miles from the employee's present work site and at the employee's same or higher rate of Base Pay or accepts an offer of employment at any rate of pay from a Divested Entity, including a purchaser, or Affiliate of a purchaser, of assets from the Company or any of its subsidiaries, or Affiliates. Employees of such a Divested Entity, including employees who accept an offer of employment from such a purchaser, or Affiliate of a purchaser, of assets, who remain employed by the Divested Entity subsequent to the divestiture shall not be eligible for benefits under the Plan merely by reason of the divestiture, but any such employee who is thereafter Involuntarily Terminated within twelve months of the closing date of the divestiture shall continue to be eligible for benefits under this Plan, subject to the provisions of Section 2(a)(ii). Section 2 - Benefits - --------- -------- (a) Subject to Paragraph (c) of this Section 2, an eligible employee who is Involuntarily Terminated shall receive a severance payment in an amount equal to the greater of: (1) six (6) months of Base Pay, or (2) the aggregate sum of: (A) two weeks of Base Pay per Year of Service or portion thereof, plus (B) one month of Base Pay for each $10,000 or 2 portion thereof of the employee's annual Base Pay, plus (C) one month of Base Pay for each five percent (5%) of such employee's annual bonus award opportunity, if any, or portion thereof under the Company's annual bonus program in effect immediately prior to the employee's Involuntary Termination. (i) Payment of the severance benefit provided above shall be made in cash in a lump sum within fifteen (15) days of the date the Company (or its subsidiaries or Affiliates, or a Divested Entity, as the case may be) receives the employee's executed release as provided for in Section 4. (ii) Notwithstanding anything to the contrary in this Plan, the amount of the severance payments provided under this Plan shall be in lieu of any other layoff or severance benefits of the Company or its subsidiaries, or Affiliates (not described in clauses (A) through (D) below), and shall be reduced by any severance payments receivable by the employee from (A) any individual contractual severance arrangement (whether under an employment contract, consulting agreement or other agreement) in effect between the employee and the Company or any of its subsidiaries, or Affiliates, or a Divested Entity, (B) any severance or layoff plan of any Divested Entity of the company, including a purchaser of assets, after divestiture of such entity, and (c) any monies or compensation payable to terminated employees by the Company or any of its subsidiaries, or Affiliates, or a Divested Entity pursuant to any governmental, statutory or regulatory program or scheme. (b) For purposes of this Plan: (iii) "Base Pay" shall mean the employee's compensation from the Company or its subsidiaries, or Affiliates at the regular hourly, monthly or other applicable rate (such as a Benefit Rate) which is in effect immediately prior to the employee's Involuntary Termination. (iv) "Year of Service" with respect to regular full-time employees shall mean each aggregate period of 365 Days of Employment with the Company, or an Affiliate thereof, commencing with the employee's date of hire or rehire. A "Day of Employment" shall mean a day on which the employee is included in the current payroll records of the Company, or an Affiliate thereof. Days of Employment and Years of Service shall be aggregated under this Plan only so long as the period of continuous Days of Employment occurring prior to any interruption in such period is equal to or greater than the number of days of such interruption; otherwise, only the most recent continuous period of Days of Employment and Years of Service shall be counted under this Plan. Any period of authorized leave, layoff, or disability shall not count as an interruption in employment so long as an employee returns to work at the time such status ceases. A Day of Employment shall include a day during which an employee of the Company, or a subsidiary, or Affiliate, thereof, was included on the payroll records of any company acquired by the Company or its subsidiaries, or Affiliates. "Year of Service" with respect to a part-time employee shall mean the greatest number of aggregate years of service for which such employee is given credit for benefit accrual purposes under any single qualified retirement or pension plan of 3 the Company, or an Affiliate thereof. For employees who have been on both regular full-time status and part-time or temporary status, Years of Service shall be computed separately for each status according to the foregoing rules and aggregated for total Years of Service. (c) The Aggregate Present Value (as defined below) of the benefit amount calculated as a lump sum under Paragraph (a) of this Section 2 on the Involuntary Termination Date shall not exceed the lesser of the following amounts: (i) 2.99 multiplied by the Base Amount as defined herein, or (ii) three times the sum of (A) and (B) where (A) equals employee's annual Base Pay immediately prior to the Change of Control Date and (B) equals 100% of employee's annual bonus target award, if any, under the Company's annual bonus program for the year in which the Change of Control Date occurs. For the purpose of this Section 2(c), "Aggregate Present Value" shall have the meaning provided under Section 1274(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code"). If any federal or state tax withholding is required to be made from such benefit amount, the Company (or its subsidiary, or Affiliate, or a Divested Entity, as the case may be) may withhold the required amount from any benefit payable under the Plan. (d) If any payment or right accruing to Employee from the Company or an Affiliate, without the application of this Section 2(d) ("Total Payments"), would constitute a "parachute payment" (as defined in Section 280G of the Code and regulations thereunder), the severance benefit payable under this Plan shall be reduced to the largest amount that will result in no portion of the amounts payable or rights accruing being subject to an excise tax under Section 4999 of the Code or being disallowed as a deduction under Section 280G of the Code. The determination of whether any reduction in the severance benefit payable is to apply shall be made by a public accounting firm chosen by the Company, at the expense of the Company. Such determination be made in good faith after consultation with Employee and shall be conclusive and binding on Employee. Employee shall cooperate in good faith with said accounting firm in making such determination and providing the necessary information for this purpose. The foregoing provisions of this Section 2(d) shall apply only if after reduction for any applicable federal excise tax imposed by Section 4999 of the Code and federal, state or local income or employment tax, the Total Payments accruing to Employee would be less than the amount of the Total Payments as reduced under the foregoing provisions of this Section 2(d) and after reduction for only federal, state or local income or employment taxes. (e) Any severance payment to which an eligible employee may become entitled under this Plan shall be reduced in proportion to any amounts received by the eligible employee under any other severance plan maintained by the Company (or its subsidiaries or Affiliates, or a Divested Entity) or any agreement entered into between the eligible employee and the Company (or its subsidiaries or Affiliates, or a Divested Entity). 4 Section 3 - Involuntary Termination - --------- ----------------------- For purposes of this Plan, "Involuntary Termination" or "Involuntarily Terminated" shall mean: (a) Termination of an eligible employee's employment with the Company (or its subsidiaries, or Affiliates, or a Divested Entity) at the election of the Company (or its subsidiary, or Affiliate, or the new owners of a Divested Entity) for any reason except a Termination for Cause, as defined below. (i) "Termination for Cause" shall mean termination at the election of the Company (or a subsidiary, or Affiliate, thereof or the new owners of a Divested Entity) by reason of the employee's (A) conviction of a felony involving moral turpitude (which, through lapse of time or otherwise, is not subject to appeal), (B) willful refusal without proper legal cause to perform employee's duties and responsibilities, (C) willfully engaging in conduct which the employee has, or in the opinion of the Company (or its subsidiary, or Affiliate, or the new owners of a Divested Entity) should have, reason to know is materially injurious to the Company (or a subsidiary, or Affiliate, or the new owners of the Divested Entity), (D) other extreme personal conduct such as, but not limited to, deliberate infliction of bodily injury to another employee while on duty, gross negligent lack of regard for safety rules and customs, or engaging in business activities directly in conflict with the Company's business, or (E) refusal to accept an alternative job for which employee is qualified within the Company or any of its subsidiaries, or Affiliates, (or, with respect to employees of a Divested Entity, within the business of the new owners of the Divested Entity), which does not involve a significant reduction in the employee's authority and responsibility, at the same salary or wage level and with other employee benefits comparable to those available to the employee prior to such alternative assignment and which does not involve relocation of more than 50 miles of the employee's primary place of work (provided, however, that the 50-mile relocation condition shall no longer apply after the employee has accepted any such relocation after the Change of Control Date). (b) "Termination for Good Reason" which, for purposes of the Plan, shall mean termination, by written notice from an eligible employee setting forth the particulars and delivered to and received by the Company (or its subsidiary, or Affiliate, or a Divested Entity, as the case may be), by the employee of his employment with the Company (or one of its subsidiaries, or Affiliates, or a Divested Entity) in connection with or based upon and within 90 days of: (i) a significant reduction in the employee's authority and/or responsibilities, whether or not occurring solely as a result of the Company's ceasing to be a publicly traded entity; or (ii) a reduction in Employee's Base Pay or, excluding a reduction of benefits by reason of a divestiture described in Section 1, the failure to continue the employee's full participation in any employee benefit plan or program (unless replaced by a 5 substantially comparable plan or program) in which employee is eligible to participate prior to the notification (other than as a result of the normal expiration of such plan or program), in each case other than as a part of a general program to reduce compensation or benefits on a proportional basis relative to all other employees of the Company (or its subsidiary, or Affiliate, or a Divested Entity, as the case may be); or (iii) a relocation of the employee's primary place of work to a location more than 50 miles away from the employee's primary place of work at the time of the notice (provided, however, this clause (iii) shall no longer apply to an employee after he has accepted any such relocation after the Change of Control Date and the above referenced 90 day period has passed); provided, however, in any event the Company (or its subsidiary, or Affiliate, or a Divested Entity, as the case may be) shall have a period of not less than thirty (30) days after the receipt of such written notice by the employee to remedy the situation. In the event the particular facts described by the employee in his or her notice do not constitute an Involuntary Termination, or the Company (or its subsidiary, or Affiliate, or a Divested Entity, as the case may be) remedies the situation during such remedial period of time, the employee shall not be entitled to severance benefits under the Plan with respect thereto. Section 4 - Release - --------- ------- Notwithstanding any other provision of this Plan, no eligible employee who is Involuntarily Terminated shall receive a severance benefit hereunder unless such employee (i) executes and returns to the Company (or its subsidiary, or Affiliate, or a Divested Entity, as the case may be) within such time frame as determined by the Company (or its subsidiary, or Affiliate, or a Divested Entity, as the case may be), not to exceed forty-five (45) days after the later of (x) the date of receipt of the release by the employee or (y) the Involuntary Termination Date, a written release in the form prescribed by the Company (or its subsidiary, or Affiliate, or a Divested Entity, as the case may be) in its sole discretion from any and all claims pertaining to his or her employment and separation from employment with the Company (or its subsidiary, or Affiliate, or a Divested Entity, as the case may be), that may arise under applicable federal, state or local law, including, but not limited to, the Federal Age Discrimination in Employment Act, and (ii) does not subsequently revoke the foregoing release within seven (7) days after its execution and delivery to the Company (or its subsidiary, or Affiliate, or a Divested Entity, as the case may be). In the event the last day of these applicable time periods is not a Business Day, the period shall be extended until the next following Business Day. For purposes of this Section 4, "Business Day" shall mean any day of the year except Saturday, Sunday and any day on which the Company (or its subsidiaries, or Affiliates, or a Divested Entity, as the case may be) is closed. Section 5 - Definitions - --------- ----------- For purposes of this Plan, all capitalized terms shall have the meanings ascribed to them below or as defined elsewhere in this Plan: 6 (a) "Affiliate" is used to indicate a relationship to a specified Person and shall mean a person who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified Person. (b) "Associate" is used to indicate a relationship with a specified Person and shall mean (i) any corporation, partnership or other organization to which such specified Person is an officer or partner or is, directly or indirectly, the Beneficial Owner of ten percent (10%) or more of any class equity securities, (ii) any trust or other estate in which such specified Person has a substantial beneficial interest or as to which such specified Person serves as trustee or in a similar fiduciary capacity, (iii) any relative or spouse of such specified Person, or any relative of such spouse, who has the same home as such specified Person or who is a director or officer of the Company or any of its parents or subsidiaries, or Affiliates, and (iv) any person who is a director or officer of such specified Person or any of its parents or subsidiaries, or Affiliates (other than the Company or any wholly-owned subsidiary, or Affiliate, of the Company). (c) "Base Amount" shall have the meaning provided under Section 280G(b)(3) of the Code and applicable regulations issued thereunder. (d) "Beneficial Owner" shall be defined by reference to Rule 13d-3 under the Securities Exchange Act of 1934, as amended, or any successor rule or regulation; provided, however, and without limitation, any individual, corporation, partnership, group, association or other person or entity which has the right to acquire any Voting Stock at any time in the future, whether such right is contingent or absolute, pursuant to any agreement, arrangement or understanding or upon exercise of conversion rights, warrants or options, or otherwise, shall be the Beneficial Owner of such Voting Stock. (e) "Change of Control" means: (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then- outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that, for purposes of this clause (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Affiliated Company or (iv) any acquisition by any corporation pursuant to a transaction that complies with subclauses (A), (B) and (C) of clause (3) of this definition; (2) Individuals who, as of May 8, 2001, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by 7 a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; (3) Consummation of a reorganization, merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the assets or stock of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entitles that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then- outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation that, as a result of such transaction, owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries, or Affiliates) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then- outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or (4) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. (f) "Change of Control Date" shall mean the day on which a Change of Control becomes effective. (g) "Involuntary Termination Date" shall mean employee's last date of employment by reason of an Involuntary Termination. (h) "Permanent Disability" shall mean such permanent disability that qualifies employee for benefits under Company's long-term disability benefit plan covering the employee at the time. 8 (i) "Person" shall mean an individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization or government or political subdivision thereof. (j) "Voting Stock" shall mean all outstanding shares of capital stock of the Company entitled to vote generally in elections for directors, considered as one class; provided, however, that if the Company has shares of Voting Stock entitled to more or less than one vote for any such share, each reference to a proportion of shares of Voting Stock shall be deemed to refer to such proportion of the votes entitled to be cast by such shares. Section 6 - Named Fiduciary - --------- --------------- The Company shall be the named fiduciary for purposes of carrying out the operation and administration of this Plan. The Company may designate one or more of its employees to carry out the fiduciary responsibilities of the Company under this Plan. Section 7 - Funding - --------- --------- All funds required to provide for payments to be made under this Plan shall come from the general assets of the Company and its subsidiaries, or Affiliates. Section 8 - Amendment and Termination - --------- ------------------------- This Plan may be amended or terminated by the separate approval of the Board of Directors of the Company and the Compensation Committee of the Board of Directors of the Company at any time for any reason; provided, however, no termination of this Plan shall occur, and no amendment shall reduce or restrict the benefits provided hereunder for two years following a Change of Control Date. Notwithstanding the above, the Plan may only be terminated or amended to the detriment of employees of the Company (its subsidiaries or Affiliates, or a Divested Entity) upon giving at least two years' notice to employees affected by the termination or amendment of the Plan. Termination or amendment of the Plan shall not affect the rights of employees who are Involuntarily Terminated prior to the date such termination or amendment is approved. Section 9 - Death, Disability or Retirement - --------- ------------------------------- In the event of the employee's death, retirement, or Permanent Disability following the employee's Involuntary Termination Date, the employee or the employee's legal representatives shall be entitled to receive the balance of any unpaid amounts payable under this Plan. In no event will the employee or the employee's legal representatives receive payments under this Plan if the employee dies, retires or becomes Permanently Disabled prior to his Involuntary Termination Date. Section 10 - No Right to Employment - ---------- ---------------------- This Plan does not constitute or imply a contract between the Company and its employees. Further, this Plan creates no Company obligation nor any individual obligation, right, privilege, term, or condition of employment. The Company (or a subsidiary, or 9 Affiliate, thereof) may at any time dismiss an employee from employment, free from any liability or any claim under this Plan unless otherwise expressly provided in the Plan. Section 11 - Governing Law - ---------- ------------- The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with applicable federal law, and to the extent not preempted thereby, with the laws of the State of Texas notwithstanding any conflict of law principles. Section 12 - Severability - ---------- ------------ If any provision of this Plan is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, such provision shall be construed or deemed amended to conform to applicable laws. If it cannot be so construed or deemed amended without, in the sole determination of the Company, materially altering the intent of the Plan, such provision shall be stricken as to such jurisdiction and the remainder of the Plan shall remain in full force and effect. Section 13 - Claims - ---------- ------ All claims for benefits under the Plan by an eligible employee shall be made in writing to the Company within sixty (60) days of the date of the alleged occurrence giving rise to the claim. If the Company, or any person(s) designated for the purpose of claims resolution, believes that the claim should be denied, the claimant shall be notified in writing of the denial of the claim within thirty (30) days after the Company's receipt of the claim. Such notice shall: (a) set forth the specific reason or reasons for the denial, making reference to the pertinent provisions of the Plan on which the denial is based; (b) describe any additional material or information that should be received before the claim may be acted upon favorably and explain the reason why such material or information, if any, is needed; and (c) inform the claimant of his or her right pursuant to this Section 8 to request review of the decision by the Company. A claimant who believes that he or she has submitted all available and relevant information may appeal the denial of a claim to the Company by submitting a written request for review within sixty (60) days after the date on which such denial is received. The person making the request for review may examine the Plan documents and the request for review may discuss any issues relevant to the claim. The Company shall decide whether or not to grant the claim within thirty (30) days after receipt of the request for review, but this period may be extended by the Company for up to an additional thirty (30) days in special circumstances. The Company's decision shall be in writing, shall include specific reasons for the decision, and shall refer to pertinent provisions of the Plan on which the decision is based. 10 Any and all disputes that may arise between the Company and the claimant following the exhaustion of the claims procedures provided for under the Plan shall be resolved by a court of competent jurisdiction. Section 14 - Effective Date - ---------- -------------- This amended and restated Plan is effective as of May 8, 2001. IN WITNESS WHEREOF the Company has executed this Plan effective as of the date above written. EOG RESOURCES, INC. By: /s/ PATRICIA EDWARDS -------------------------- Title: V.P. Human Resources, Administration and Corporate Secretary Attest: /s/ VICKIE L. GRAHAM ------------------------- EX-12 18 exhibit12.txt COMPUTATION OF RATIOS STATEMENT 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, - --------------------------------------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 - --------------------------------------------------------------------------------------------------------------- EARNINGS AVAILABLE FOR FIXED CHARGES: Net Income $ 398,616 $ 396,931 $ 569,094 $ 56,171 $ 121,970 Less: Capitalized Interest Expense (8,646) (6,708) (10,594) (12,711) (13,706) Add: Fixed Charges 60,468 72,833 77,837 66,982 47,108 Income Tax Provision (Benefit) 232,829 236,626 (1,382) 4,111 41,500 --------- --------- --------- --------- --------- EARNINGS AVAILABLE $ 683,267 $ 699,682 $ 634,955 $ 114,553 $ 196,872 ========= ========= ========= ========= ========= FIXED CHARGES: Interest Expense $ 45,110 $ 61,006 $ 61,819 $ 48,463 $ 27,369 Capitalized Interest 8,646 6,708 10,594 12,711 13,706 Rental Expense Representative of Interest Factor 6,712 5,119 5,424 5,808 6,033 --------- --------- --------- --------- --------- TOTAL FIXED CHARGES 60,468 72,833 77,837 66,982 47,108 Preferred Dividends on a Pre-tax Basis 17,416 17,602 660 - - --------- --------- --------- --------- --------- COMBINED TOTAL FIXED CHARGES AND PREFERRED DIVIDENDS $ 77,884 $ 90,435 $ 78,497 $ 66,982 $ 47,108 ========= ========= ========= ========= ========= RATIO OF EARNINGS TO FIXED CHARGES 11.30 9.61 8.16 1.71 4.18 RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS 8.77 7.74 8.09 1.71 4.18
EX-21 19 exhibit21.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 EOG Resources, Inc. Subsidiaries EOG Resources - Carthage, Inc. EOG Resources Investments, Inc. EOG Resources Property Management, Inc. EOG Resources Acquisitions L.P. ERSO, Inc. EOG Expat Services, Inc. EOG Resources Marketing, Inc. EOG - Canada, Inc. EOG Company of Canada EOG Canada Company Ltd. EOG Resources Canada Company EOG Resources Canada Inc. EOG Finance Canada Inc. EOG Canada Holdings I Inc. EOG Canada Holdings II Inc. Nilo Operating Company EOG Resources - Callaghan, Inc. Online Energy Solutions, Inc. EOG Resources Holdings LLC EOG Resources Properties LLC Big Sky Ranches, Inc. EOG Resources Appalachian LLC EOG Resources East Texas, L.P. EOG Resources International, Inc. EOGI - Abu Dhabi, Inc. EOG Resources Abu Dhabi, Ltd. EOGI - Algeria, Inc. EOGI - Australia, Inc. EOG Resources Bangladesh Ltd. EOGI - France, Inc. EOG Resources France S.A. EOGI - Mozambique, Inc. EOG Resources Mozambique Ltd. EOGI - Qatar, Inc. EOGI - Trinidad, Inc. EOGI Trinidad Company EOG Resources Trinidad Limited EOG Resources Trinidad-LRL Limited EOG Resources Capital Management I, Ltd. Wilsyx International Finance B.V. EOGI Company of Trinidad Harfin Capital and Finance Ltd. OCC Investment Company Ltd. Murrott Capital Ltd. EOGI Trinidad - U(a) Block Company EOG Resources Trinidad - U(a) Block Limited EOGI - United Kingdom, Inc. EOGI United Kingdom Company B.V. EOG Resources UK Limited EOGI - Uzbekistan, Inc. EOGI - Venezuela, Inc. EOGI - Venezuela (Guarico), Inc. Ghana Resources Holding Inc. Ghana Resources I Ltd. Ghana Resources II Ltd. Q Resources (U.S.), Inc. Energy Search, Incorporated EOG Resources Nitro2000 Ltd. EX-23 20 exhibit23_1.txt CONSENTS OF EXPERTS AND COUNSEL EXHIBIT 23.1 DeGolyer and MacNaughton One Energy Square Dallas, Texas 75206 March 18, 2002 EOG Resources, Inc. 333 Clay Street, Suite 4200 Houston, Texas 77002 Gentlemen: We hereby consent to the references to our firm and to the opinions delivered to EOG Resources, Inc. (the Company), formerly Enron Oil & Gas Company, regarding our comparison of estimates prepared by us with those furnished to us by the Company of the proved oil, condensate, natural gas liquids, and natural gas reserves of certain selected properties owned by the Company. The opinions are contained in our letter reports dated February 8, 2000, February 8, 2001, and January 25, 2002, for estimates as of December 31, 1999, December 31, 2000, and December 31, 2001, respectively. The opinions are referred to in the section "Supplemental Information to Consolidated Financial Statements - Oil and Gas Producing Activities" in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 28, 2002 (the Form 8-K filed on February 28, 2002). That section of the Form 8-K filed on February 28, 2002 is in turn incorporated by reference in item 14 of the Company's Annual Report on Form 10-K for the year ended December 31, 2001, to be filed with the Securities and Exchange Commission. Additionally, we hereby consent to the incorporation by reference of such references to our firm and to our opinions in the Company's previously filed Registration Statement Nos. 33-48358, 33-52201, 33- 58103, 33-62005, 333-09919, 333-20841, 333-18511, 333-31715, 333- 44785, 333-69483, 333-46858, 333-62256, 333-63184, and 333-84014. Very truly yours, DeGOLYER and MacNAUGHTON EX-23 21 exhibit23_3.txt CONSENTS OF EXPERTS AND COUNSEL EXHIBIT 23.3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated February 21, 2002 incorporated by reference in this Form 10-K into EOG Resources Inc. and subsidiaries' previously filed Registration Statement Nos. 33-48358, 33-52201, 33- 58103, 33-62005, 333-09919, 333-20841, 333-18511, 333-31715, 333- 44785, 333-69483 and 333-46858. ARTHUR ANDERSEN LLP Houston, Texas March 18, 2002 EX-24 22 exhibit24.txt POWERS OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that in connection with the filing by EOG Resources, Inc., a Delaware corporation (the "Company") of its Annual Report on Form 10-K for the year ended December 31, 2001 with the Securities and Exchange Commission, the undersigned director of the Company hereby constitutes and appoints Barry Hunsaker, Jr. and Patricia L. Edwards, and each of them (with full power to each of them to act alone), his true and lawful attorney-in-fact and agent, for him and on his behalf and in his name, place and stead, in any and all capacities, to sign, execute and file such Annual Report on Form 10-K, together with any amendments or supplements thereto, with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and action requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all the said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereto set his hand this 6th day of March, 2002. /s/ FRANK G. WISNER -------------------------- FRANK G. WISNER POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that in connection with the filing by EOG Resources, Inc., a Delaware corporation (the "Company") of its Annual Report on Form 10-K for the year ended December 31, 2001 with the Securities and Exchange Commission, the undersigned director of the Company hereby constitutes and appoints Barry Hunsaker, Jr. and Patricia L. Edwards, and each of them (with full power to each of them to act alone), his true and lawful attorney-in-fact and agent, for him and on his behalf and in his name, place and stead, in any and all capacities, to sign, execute and file such Annual Report on Form 10-K, together with any amendments or supplements thereto, with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and action requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all the said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereto set his hand this 6th day of March, 2002. /s/ GEORGE A. ALCORN ---------------------------- GEORGE A. ALCORN POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that in connection with the filing by EOG Resources, Inc., a Delaware corporation (the "Company") of its Annual Report on Form 10-K for the year ended December 31, 2001 with the Securities and Exchange Commission, the undersigned director of the Company hereby constitutes and appoints Barry Hunsaker, Jr. and Patricia L. Edwards, and each of them (with full power to each of them to act alone), his true and lawful attorney-in-fact and agent, for him and on his behalf and in his name, place and stead, in any and all capacities, to sign, execute and file such Annual Report on Form 10-K, together with any amendments or supplements thereto, with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and action requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all the said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereto set his hand this 6th day of March, 2002. /s/ EDWARD RANDALL, III ------------------------------ EDWARD RANDALL, III POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that in connection with the filing by EOG Resources, Inc., a Delaware corporation (the "Company") of its Annual Report on Form 10-K for the year ended December 31, 2001 with the Securities and Exchange Commission, the undersigned director of the Company hereby constitutes and appoints Barry Hunsaker, Jr. and Patricia L. Edwards, and each of them (with full power to each of them to act alone), his true and lawful attorney-in-fact and agent, for him and on his behalf and in his name, place and stead, in any and all capacities, to sign, execute and file such Annual Report on Form 10-K, together with any amendments or supplements thereto, with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and action requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all the said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereto set his hand this 6th day of March, 2002. /s/ EDMUND P. SEGNER, III -------------------------------- EDMUND P. SEGNER, III POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that in connection with the filing by EOG Resources, Inc., a Delaware corporation (the "Company") of its Annual Report on Form 10-K for the year ended December 31, 2001 with the Securities and Exchange Commission, the undersigned director of the Company hereby constitutes and appoints Barry Hunsaker, Jr. and Patricia L. Edwards, and each of them (with full power to each of them to act alone), his true and lawful attorney-in-fact and agent, for him and on his behalf and in his name, place and stead, in any and all capacities, to sign, execute and file such Annual Report on Form 10-K, together with any amendments or supplements thereto, with all exhibits and any and all documents required to be filed with respect thereto with any regulatory authority, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and action requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and confirming all the said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereto set his hand this 6th day of March, 2002. /s/ DONALD F. TEXTOR ---------------------------- DONALD F. TEXTOR EX-99 23 exhibit_99.txt CURRENT REPORT ON FORM 8-K =========================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM 8-K ----------------------- CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: February 27, 2002 ---------------------------- EOG RESOURCES, INC. (Exact name of registrant as specified in its charter) DELAWARE 1-9743 47-0684736 (State or other jurisdiction (Commission File (I.R.S. Employer of incorporation or organization) Number) Identification No.) 333 CLAY STREET SUITE 4200 HOUSTON, TEXAS 77002 (Address of principal executive offices) (Zip code) 713/651-7000 (Registrant's telephone number, including area code) =============================================================================== 2 EOG RESOURCES, INC. Item 7. Financial Statements and Exhibits. (a) Financial Statements of EOG Resources, Inc. Financial Statements of EOG Resources, Inc. and its Consolidated Subsidiaries for the fiscal year ended December 31, 2001, including Report of Arthur Andersen LLP, Independent Public Accountants. (b) Exhibits. 23.1 Consent of DeGolyer and MacNaughton. 23.2 Opinion of DeGolyer and MacNaughton dated January 25, 2002. 23.3 Consent of Arthur Andersen LLP. 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 hereunto duly authorized. EOG RESOURCES, INC. (Registrant) Date: February 27, 2002 By: /s/ TIMOTHY K. DRIGGERS ----------------------------- Timothy K. Driggers Vice President, Accounting & Land Administration (Principal Accounting Officer) 3 EOG RESOURCES, INC. TABLE OF CONTENTS Page No. Management's Discussion and Analysis of Financial Condition and Results of Operations........................ 4 Management's Responsibility for Financial Reporting.......... 13 Report of Independent Public Accountants..................... 14 Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2001, 2000 and 1999....... 15 Consolidated Balance Sheets, December 31, 2001 and 2000....... 16 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2001, 2000 and 1999........... 17 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999..................... 18 Notes to Consolidated Financial Statements................... 19 Supplemental Information to Consolidated Financial Statements...................................... 36 Exhibits Exhibit 23.1 - Consent of DeGolyer and MacNaughton......... 45 Exhibit 23.2 - Opinion of DeGolyer and MacNaughton dated January 25, 2002.................................. 46 Exhibit 23.3 - Consent of Arthur Andersen LLP.............. 48 4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations The following review of operations for each of the three years in the period ended December 31, 2001 should be read in conjunction with the consolidated financial statements of EOG Resources, Inc. ("EOG") and notes thereto beginning with page 15. Results of Operations - --------------------- Net Operating Revenues. Wellhead volume and price statistics for the specified years were as follows: Year Ended December 31, ------------------------ 2001 2000 1999 ------ ------ ------ Natural Gas Volumes (MMcf per day)(1) United States........................................ 680 654 654 Canada............................................... 126 129 115 Trinidad............................................. 115 125 123 India (2)............................................ - - 46 ------ ------ ------ Total............................................ 921 908 938 ====== ====== ====== Average Natural Gas Prices ($/Mcf)(3) United States........................................ $4.26 $3.96 $2.20 Canada............................................... 3.78 3.33 1.88 Trinidad............................................. 1.22 1.17 1.08 India (2)............................................ - - 2.09 Composite........................................ 3.81 3.49 2.01 Crude Oil and Condensate Volumes (MBbl per day)(1) United States........................................ 22.0 22.8 14.4 Canada............................................... 1.7 2.1 2.6 Trinidad............................................. 2.1 2.6 2.4 India (2)............................................ - - 4.1 ------ ------ ------ Total............................................ 25.8 27.5 23.5 ====== ====== ====== Average Crude Oil and Condensate Prices ($/Bbl)(3) United States........................................ $25.06 $29.68 $18.55 Canada............................................... 22.70 27.76 16.77 Trinidad............................................. 24.14 30.14 16.21 India (2)............................................ - - 12.80 Composite........................................ 24.83 29.57 17.12 Natural Gas Liquids Volumes (MBbl per day)(1) United States........................................ 3.5 4.0 2.6 Canada............................................... 0.5 0.7 0.8 ------ ------ ------ Total............................................ 4.0 4.7 3.4 ====== ====== ====== Average Natural Gas Liquids Prices ($/Bbl)(3) United States........................................ $17.17 $20.45 $13.41 Canada............................................... 15.05 16.75 8.23 Composite........................................ 16.89 19.87 12.24 Natural Gas Equivalent Volumes (MMcfe per day)(4) United States........................................ 833 814 757 Canada............................................... 139 146 134 Trinidad............................................. 128 141 138 India (2)............................................ - - 70 ------ ------ ------ Total............................................ 1,100 1,101 1,099 ====== ====== ====== Total Bcfe(4)Deliveries............................... 401 403 401 - ------------------------------- (1) Million cubic feet per day or thousand barrels per day, as applicable. (2) See Note 4 to the Consolidated Financial Statements regarding the Share Exchange Agreement with Enron Corp. (3) Dollars per thousand cubic feet or per barrel, as applicable. (4) Million cubic feet equivalent per day or billion cubic feet equivalent, as applicable; includes natural gas, crude oil, condensate and natural gas liquids.
5 2001 compared to 2000. During 2001, net operating revenues increased $165 million to $1,655 million. Total wellhead revenues of $1,540 million increased by $49 million, or 3%, as compared to 2000. Average wellhead natural gas prices for 2001 were approximately 9% higher than the comparable period in 2000, increasing net operating revenues by $110 million. Average wellhead crude oil and condensate prices were 16% lower, decreasing net operating revenues by $45 million. North America wellhead natural gas deliveries were approximately 3% higher than the comparable period in 2000. The increase in volumes was primarily due to increased production in the Midland and Pittsburgh divisions, partially offset by decreased production in the Denver and Corpus Christi divisions and the implementation of a production moderation strategy in late third quarter. Combined with reduced production in Trinidad, the overall natural gas production was 1% higher than the comparable period in 2000, increasing net operating revenues by $14 million. Wellhead crude oil and condensate volumes were 6% lower than in 2000, decreasing net operating revenues by $20 million. The decrease in wellhead crude oil and condensate volumes is primarily due to decreased deliveries worldwide. Natural gas liquids prices and deliveries were both approximately 15% lower than 2000, decreasing net operating revenues by $4 million and $5 million, respectively. During 2001, EOG recognized mark-to-market gains on commodity contracts of $98 million, of which $62 million were realized gains. Gains on sales of reserves and related assets and other, net totaled a gain of $1 million during 2001 compared to a gain of $9 million in 2000. The difference is due primarily to a $7 million gain on sales of certain North America properties in 2000. Other marketing activities associated with sales and purchases of natural gas transactions increased net operating revenue by $16 million during 2001, compared to a $10 million reduction in 2000. 2000 compared to 1999. During 2000, net operating revenues increased $648 million to $1,490 million. Total wellhead revenues of $1,491 million increased by $641 million, or 75%, as compared to 1999. Average wellhead natural gas prices for 2000 were approximately 74% higher than the comparable period in 1999 increasing net operating revenues by approximately $491 million. Average wellhead crude oil and condensate prices were up by 73% increasing net operating revenues by $125 million. Wellhead natural gas volumes were approximately 3% lower than the comparable period in 1999 decreasing net operating revenues by nearly $20 million. The decrease in wellhead natural gas volumes is primarily due to the transfer of producing properties in connection with the Share Exchange described in Note 4 to the Consolidated Financial Statements, partially offset by increased deliveries in Canada and Trinidad. Wellhead crude oil and condensate volumes were 17% higher than in 1999, increasing net operating revenues by $26 million. The increase in wellhead crude oil and condensate volumes is primarily due to increased deliveries in the United States and Trinidad, partially offset by the transfer of producing properties in the Share Exchange and decreased deliveries in Canada. Natural gas liquids prices and deliveries were approximately 62% and 39% higher than 1999, increasing net operating revenues by $13 million and $6 million, respectively. Gains (losses) on sales of reserves and related assets and other, net totaled a gain of $9 million during 2000 compared to a loss of nearly $1 million in 1999. The difference is due primarily to a $7 million gain on sales of certain North America properties in 2000. Other marketing activities associated with sales and purchases of natural gas transactions decreased net operating revenues by $10 million during 2000, compared to a $7 million reduction in 1999. Operating Expenses - ------------------ 2001 compared to 2000. During 2001, operating expenses of $980 million, which includes $19 million of charges related to the Enron bankruptcies, were approximately $187 million higher than the $793 million incurred in 2000. Lease and well expenses increased $35 million to $175 million primarily due to higher production costs, continually expanding operations and increases in production activity in North America. Exploration expenses of $67 million remained essentially flat compared to 2000. Dry hole expenses of $71 million increased $54 million from 2000. Impairments increased $33 million to $79 million primarily as a result of write-down of assets in the United States. Depreciation, depletion and amortization ("DD&A") expense increased $33 million to $392 million primarily due to increased DD&A rates. General and administrative ("G&A") expenses increased $13 million primarily due to expanded operations. Taxes other than income remained approximately the same as compared to 2000. 6 Total operating costs per unit of production, which include lease and well, DD&A, G&A, taxes other than income and interest expense, increased 9% to $1.97 per thousand cubic feet equivalent ("Mcfe") in 2001 from $1.80 in 2000. This increase is primarily due to higher per unit rates of lease and well, DD&A and G&A expenses, partially offset by a lower per unit rate of interest expense. During the fourth quarter of 2001, EOG recorded charges associated with Enron Corp. bankruptcy of $19 million, of which $17 million were related to 2001 and 2002 natural gas and oil derivative contracts. Interest Expense. The decrease in net interest expense of $16 million for 2001 as compared to 2000 is primarily due to lower long- term debt levels during the year. 2000 compared to 1999. During 2000, operating expenses of $793 million were approximately $31 million lower than the $824 million incurred in 1999. Lease and well expenses increased $9 million to $141 million primarily due to continually expanding operations and increases in production activity in North America. Exploration expenses of $67 million and dry hole expenses of $17 million increased $14 million and $5 million, respectively, from 1999 due to increased exploratory drilling activities. Impairments decreased $115 million to $46 million primarily due to charges of $15 million pursuant to a change in EOG's strategy related to certain offshore operations in the second quarter of 1999, the impairment of various North America properties in the fourth quarter of 1999, and non-recurring charges of $114 million related primarily to assets determined no longer central to EOG's business in the third quarter of 1999. DD&A expense increased $30 million primarily due to increased DD&A rates. G&A expenses decreased $16 million primarily due to non-recurring costs in 1999 of $14 million related to the Share Exchange, the potential sale of EOG and personnel expenses partially offset by savings resulting from the discontinuance of the India and China operations as a result of the Share Exchange. Taxes other than income increased $42 million reflecting higher state severance taxes associated with higher taxable wellhead revenues resulting from higher average prices. Total operating costs per unit of production, which include lease and well, DD&A, G&A, taxes other than income and interest expense, increased 10% to $1.80 Mcfe in 2000 from $1.64 in 1999. This increase is primarily due to higher per unit rates of lease and well, DD&A and taxes other than income, partially offset by a lower per unit rate of G&A expenses. Excluding the aforementioned 1999 charges of $14 million in G&A expenses, the per unit operating costs for EOG were $1.60 per Mcfe in 1999. The per unit operating costs in 2000 of $1.80 was $.20 higher than the adjusted per unit operating costs of 1999, primarily due to higher per unit rates of lease and well, DD&A and taxes other than income. Other Income (Expense). Other income of $611 million for 1999 included a $575 million net gain from the Share Exchange, a $59.6 million gain on the sale of 3.2 million options owned by EOG to purchase Enron Corp. common stock, and a $19.4 million charge for estimated exit costs related to EOG's decision to dispose of certain international assets. Income Taxes. Income tax provision increased approximately $238 million for 2000 as compared to 1999 as a result of a higher pre-tax income year to year after removing the non-taxable gain on the Share Exchange in 1999. Capital Resources and Liquidity - ------------------------------- Cash Flow. The primary sources of cash for EOG during the three-year period ended December 31, 2001 included cash generated from operations, including realized gains from mark-to-market commodity derivative contracts, proceeds from the sales of other assets, selected oil and gas reserves and related assets and funds from new borrowings and proceeds from equity offerings. Primary cash outflows included funds used in operations, exploration and development expenditures, common stock repurchases, dividends paid to EOG shareholders, repayments of debt and cash contributed to transferred subsidiaries in the Share Exchange. Net operating cash flows of $1,197 million in 2001 increased approximately $230 million as compared to 2000 primarily due to higher net operating revenues resulting from higher natural gas prices, net of increased cash operating expenses, and lower current income taxes, partially offset by a lower tax benefit from stock options exercised. Changes in working capital and other liabilities increased operating cash flows by $75 million as compared to 2000 primarily due to changes in accounts receivable, accrued royalties payable and accrued production taxes caused by fluctuation of commodity prices at each yearend. Net investing cash outflows of $1,088 million in 2001 increased by $421 million as compared to 2000 due primarily to increased exploration and development expenditures of $426 million (including producing property acquisitions) and decreased proceeds from sales of reserves and related assets, partially offset by decreased equity investments. Changes in components of working capital associated with investing activities included changes in 7 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. Cash used in financing activities in 2001 was $127 million as compared to $305 million in 2000. Financing activities in 2001 included repayments of debt of $4 million, common stock repurchases of $127 million and dividend payments of $29 million, partially offset by proceeds from sales of treasury stock of $31 million. Net operating cash flows of $967 million in 2000 increased approximately $524 million as compared to 1999 due to higher net operating revenues resulting from higher prices, net of cash operating expenses, and higher tax benefits from stock options exercised partially offset by higher current income taxes. Changes in working capital and other liabilities decreased operating cash flows by $16 million as compared to 1999 primarily due to changes in accounts receivable, accrued royalties payable and accrued production taxes caused by fluctuation of commodity prices at each yearend. Net investing cash outflows of $667 million in 2000 increased by $304 million as compared to 1999 due primarily to increased exploration and development expenditures of $226 million (including producing property acquisitions), increased equity investments, and the non-recurrence of proceeds from sales of Enron Corp. options in 1999, partially offset by increased 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. Cash used in financing activities in 2000 was $305 million as compared to $62 million in 1999. Financing activities in 2000 included repayments of debt of $131 million, common stock repurchases of $273 million and dividend payments of $26 million, partially offset by proceeds from sales of treasury stock of $127 million. Discretionary cash flow available to common, a frequently used measure of performance for exploration and production companies, is generally derived by adjusting net income to include tax benefits on stock options exercised and to eliminate the effects of depreciation, depletion and amortization, impairments, deferred income taxes, gains on sales of oil and gas reserves and related assets, certain other non-cash amounts, except for amortization of deferred revenue and exploration and dry hole costs. EOG generated discretionary cash flow available to common of approximately $1,162 million in 2001, $1,007 million in 2000, $477 million in 1999. Discretionary cash flow available to common should not be considered as an alternative to income from operations or to cash flows from operating activities (as determined in accordance with accounting principles generally accepted in the United States) and should not be construed as an indication of a company's operating performance or as a measure of liquidity. Exploration and Development Expenditures. The table below sets out components of exploration and development expenditures for the years ended December 31, 2001, 2000 and 1999, along with the total budgeted for 2002, excluding acquisitions. 1999 Excluding India and Budgeted 2002 Actual China Operations(1) (excluding acquisitions) ------------------------ ------------------- ------------------------ Expenditure Category 2001 2000 1999 - -------------------- ------ ------ ------ (In Millions) Capital Drilling and Facilities.................. $ 722 $ 443 $ 319 $ 293 Leasehold Acquisitions................... 76 51 21 21 Producing Property Acquisitions.......... 168 102 45 43 Capitalized Interest..................... 9 7 11 8 ------ ------ ------ ------- Subtotal............................... 975 603 396 365 Exploration Costs......................... 67 67 53 51 Dry Hole Costs............................ 71 17 12 12 ------ ------ ------ ------- Subtotal............................... 1,113 687 461 428 Deferred Income Taxes..................... 50 23 - - ------ ------ ------ ------- Total.................................. $1,163 $ 710 $ 461 $ 428 $600 - $750 ====== ====== ====== ======= =========== (1) See Note 4 to Consolidated Financial Statements.
Total exploration and development expenditures increased $453 million in 2001 as compared to 2000 primarily due to increased exploration and development activities in North America and Trinidad, and acquisitions of oil and gas properties in North America. 8 Derivative Transactions. During 2001, EOG recognized mark-to- market gains on commodity derivative contracts of $98 million, of which $62 million were realized gains (see Note 12 to the Consolidated Financial Statements). The following is a summary of EOG's price swap and physical contract positions at February 20, 2002: (a) 2002 Price Swap Positions o Natural Gas Price Swaps - Tabulated below is a summary of EOG's 2002 natural gas price swap positions with prices expressed in dollars per million British thermal units ($/MMBtu) and notional volumes in million British thermal units per day (MMBtud). EOG accounts for these swap contracts under mark-to-market accounting. Average Price Volume 2002 ($/MMBtu) (MMBtud) ---------------------- ------------- -------- January (closed) $ 3.21 140,000 February (closed) $ 3.13 190,000 March $ 3.13 140,000 April and May $ 2.68 290,000 June $ 2.76 200,000 July through December $ 3.26 100,000 o Crude Oil Price Swaps - Notional volumes of two thousand barrels of oil per day for the period March 2002 to December 2002 at an average price of $21.50 per barrel. EOG accounts for these swap contracts under mark-to-market accounting. (b) 2002 Natural Gas Physical Contracts EOG had 2002 natural gas physical contracts for 95,000 MMBtud at an average price of $3.03 per MMBtu for January and February 2002 in the U.S. and approximately 24,000 MMBtud at an average price of US$3.35 per MMBtu for the period January through December 2002 in Canada. Financing. EOG's long-term debt-to-total-capitalization ratio was 34% as of December 31, 2001 compared to 38% as of December 31, 2000. During 2001, total long-term debt decreased slightly to $856 million primarily due to higher cash flow from operations primarily resulting from slightly higher natural gas prices, partially offset by additions to oil and gas properties and significant share repurchases of common stock (see Note 2 to the Consolidated Financial Statements). The estimated fair value of EOG's long-term debt at December 31, 2001 and 2000 was $838 million and $831 million, respectively, based upon quoted market prices and, where such prices were not available, upon interest rates currently available to EOG at yearend. EOG's debt is primarily at fixed interest rates. At December 31, 2001, a 1% change in interest rates would result in a $47 million change in the estimated fair value of the fixed rate obligations (see Note 12 to the Consolidated Financial Statements). The following table summarizes EOG's contractual obligations at December 31, 2001 (in thousands): 2008 & Contractual Obligations(1) Total 2002 2003 - 2005 2006 - 2007 beyond - ------------------------- -------- -------- ----------- ----------- -------- Long-Term Debt............................. $855,969 $ - $195,147 $226,870 $433,952 Non-cancelable Operating Leases............ 32,779 7,773 18,896 6,110 - Drilling Rig Commitments................... 28,234 24,711 3,523 - - Transportation Service Commitments(2)...... 49,473 16,377 17,541 10,427 5,128 -------- -------- -------- -------- -------- Total Contractual Obligations.............. $966,455 $ 48,861 $235,107 $243,407 $439,080 ======== ======== ======== ======== ======== (1) See Notes 2 and 7 to Consolidated Financial Statements. (2) Amounts shown are based on current transportation rates and foreign currency exchange rate at December 31, 2001. Management does not believe that any future changes in these rates before the expiration dates of these commitments will have a materially adverse effect on the financial condition or results of operations of EOG.
9 Shelf Registration. During the third quarter of 2000, EOG filed a shelf registration statement for the offer and sale from time to time of up to $600 million of EOG debt securities, preferred stock and/or common stock. The registration statement was declared effective by the Securities and Exchange Commission on October 27, 2000. As of February 20, 2002, EOG had sold no securities pursuant to this shelf registration. When combined with the unused portion of a previously filed registration statement declared effective in January 1998, these registration statements provide for the offer and sale from time to time of EOG debt securities, preferred stock and/or common stock by EOG in an aggregate amount up to $688 million. Outlook. Natural gas prices historically have been volatile, and this volatility is expected to continue. Uncertainty continues to exist as to the direction of future North America natural gas and crude oil price trends, and there remains a rather wide divergence in the opinions held by some in the industry. This divergence in opinion is caused by various factors including the current industrial recession and economic downturn, improvements in the technology used in drilling and completing crude oil and natural gas wells, improvements being realized in the availability and utilization of natural gas storage capacity and warmer weather experienced in the latter part of 2001. However, the increasing recognition of natural gas as a more environmentally friendly source of energy along with the availability of significant domestically sourced supplies should result in increases in demand. Being primarily a natural gas producer, EOG is more significantly impacted by changes in natural gas prices than by changes in crude oil and condensate prices. At December 31, 2001, based on EOG's tax position and the portion of EOG's anticipated natural gas volumes for 2002 for which prices have not, in effect, been hedged using NYMEX-related commodity market transactions and long-term marketing contracts, EOG's price sensitivity for each $0.10 per Mcf change in average wellhead natural gas prices is $15 million (or $0.13 per share) for net income and $23 million for current operating cash flow. EOG is not impacted as significantly by changing crude oil prices for those volumes not otherwise hedged. EOG's price sensitivity for each $1.00 per barrel change in average wellhead crude oil prices is $5 million (or $0.04 per share) for net income and $8 million for current operating cash flow. EOG plans to continue to focus a substantial portion of its exploration and development expenditures in its major producing areas in North America. However, in order to diversify its overall asset portfolio and as a result of its overall success realized in Trinidad, EOG anticipates expending a portion of its available funds in the further development of opportunities outside North America. In addition, EOG expects to conduct limited exploratory activity in other areas outside of North America and will continue to evaluate the potential for involvement in other exploitation type opportunities. Budgeted 2002 exploration and development expenditures, excluding acquisitions, are in the range of $600 - $750 million, addressing the continuing uncertainty with regard to the future of the North America natural gas and crude oil and condensate price environment. Budgeted expenditures for 2002 are structured to maintain the flexibility necessary under EOG's continuing strategy of funding North America exploration, exploitation, development and acquisition activities primarily from available internally generated cash flow. The level of exploration and development expenditures may vary in 2002 and will vary in future periods depending on energy market conditions and other related economic factors. Based upon existing economic and market conditions, EOG believes net operating cash flow and available financing alternatives in 2002 will be sufficient to fund its net investing cash requirements for the year. However, EOG has significant flexibility with respect to its financing alternatives and adjustment of its exploration, exploitation, development and acquisition expenditure plans if circumstances warrant. While EOG has certain continuing commitments associated with expenditure plans related to operations in Trinidad, such commitments are not anticipated to be material when considered in relation to the total financial capacity of EOG. Environmental Regulations. Various federal, state and local laws and regulations covering the discharge of materials into the environment, or otherwise relating to protection of the environment, may affect EOG's operations and costs as a result of their effect on natural gas and crude oil exploration, exploitation, development and production operations. In addition, EOG has acquired certain oil and gas properties from third parties whose actions with respect to the management and disposal or release of hydrocarbons or other wastes were not under EOG's control. Under environmental laws and regulations, EOG could be required to remove or remediate wastes disposed of or released by prior owners or operators. EOG also has acquired or merged with companies that own and operate oil and gas properties. Any obligations or liabilities of these companies under environmental laws would continue as liabilities of the acquired company, or of EOG in the event of a merger, even if the obligations or liabilities resulted from actions that took place before the acquisition or merger. Compliance with such laws and regulations has not had a material adverse effect on EOG's operations or financial condition. It is not anticipated, based on current laws and regulations, that EOG will be required in the near future to expend amounts that are material in relation to its total exploration and development expenditure program by reason of environmental laws and regulations. However, inasmuch as such laws and regulations are frequently changed, EOG is unable to predict the ultimate cost of compliance. 10 EOG also could incur costs related to the clean up of sites to which it sent regulated substances for disposal and for damages to natural resources or other claims related to releases of regulated substances at such sites. In this regard, EOG has been named as a potentially responsible party in certain proceedings initiated pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act and may be named as a potentially responsible party in other similar proceedings in the future. It is not anticipated that the costs incurred by EOG in connection with the presently pending proceedings will, individually or in the aggregate, have a materially adverse effect on the financial condition or results of operations of EOG. Summary of Significant Accounting Policies - ------------------------------------------ Principles of Consolidation. The consolidated financial statements of EOG, a Delaware corporation, include the accounts of all domestic and foreign subsidiaries. Investments in unconsolidated affiliates, in which EOG is able to exercise significant influence, are accounted for using the equity method. All material intercompany accounts and transactions have been eliminated. 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 revenue 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 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 ("SFAS") 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 $11 million and $133 million for 2000 and 1999, respectively. Financial Instruments. EOG's financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and long-term debt. The carrying values of cash and cash equivalents, marketable securities, accounts receivable and accounts payable approximate fair value (see Note 2 "Long-Term Debt" for fair value of long-term debt). Cash and Cash Equivalents. EOG records as cash equivalents all highly liquid short-term investments with original maturities of three months or less. Oil and Gas Operations. EOG accounts for its natural gas and crude oil exploration and production activities under the successful efforts method of accounting. Oil and gas lease acquisition costs are capitalized when incurred. Unproved properties with significant acquisition costs are assessed quarterly on a property-by-property basis, and any impairment in value is recognized. Unproved properties with acquisition costs that are not individually significant are aggregated, and the portion of such costs estimated to be nonproductive, based on historical experience, is amortized over the average holding period. If the unproved properties are determined to be productive, the appropriate related costs are transferred to proved oil and gas properties. Lease rentals are expensed as incurred. Oil and gas exploration costs, other than the costs of drilling exploratory wells, are charged to expense as incurred. The costs of drilling exploratory wells are capitalized pending determination of whether they have discovered proved commercial reserves. If proved commercial reserves are not discovered, such drilling costs are expensed. Costs to develop proved reserves, including the costs of all development wells and related equipment used in the production of natural gas and crude oil, are capitalized. Depreciation, depletion and amortization of the cost of proved oil and gas properties is calculated using the unit-of-production method. Estimated future dismantlement, restoration and abandonment costs (classified as long-term liabilities), net of salvage values, are taken into account. Certain other assets are depreciated on a straight-line basis. Periodically, or when circumstances indicate that an asset may be impaired, EOG compares expected undiscounted future cash flows at a producing field level to the unamortized capitalized cost of the asset. If the future undiscounted cash flows, based on EOG's estimate of future crude oil and natural gas prices and operating costs and anticipated production from proved 11 reserves are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is calculated by discounting the future cash flows at an appropriate risk-adjusted discount rate. Inventories, consisting primarily of tubular goods and well equipment held for use in the exploration for, and development and production of natural gas and crude oil reserves, are carried at cost with adjustments made from time to time to recognize any reductions in value. Natural gas revenues are recorded when production is delivered. EOG natural gas revenues are recorded on the entitlement method based on EOG's percentage ownership of current production. Each working interest owner in a well generally has the right to a specific percentage of production, although actual production sold may differ from an owner's ownership percentage. Under entitlement accounting, a receivable is recorded when underproduction occurs and a payable when overproduction occurs. Gains and losses associated with the sale of in place natural gas and crude oil reserves and related assets are classified as net operating revenues in the consolidated statements of income and comprehensive income based on EOG's strategy of continuing such sales in order to maximize the economic value of its assets. New Accounting Pronouncements. In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133--"Accounting for Derivative Instruments and Hedging Activities" effective for fiscal years beginning after June 15, 1999. SFAS No. 133, as amended by SFAS No. 137 and No. 138, cannot be applied retroactively. EOG adopted SFAS No. 133, as amended, on January 1, 2001 for the accounting periods which begin thereafter. The adoption of SFAS No. 133 did not have a material impact on EOG's financial statements. In June 2001, the FASB issued SFAS No. 143--"Accounting for Asset Retirement Obligations" effective for fiscal years beginning after June 15, 2002. SFAS No.143 requires entities to record the fair value of a liability for legal obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. If the obligation is settled for other than the carrying amount of the liability, a gain or loss is recognized on settlement. This statement will impact how EOG accounts for its abandonment liability related to its oil and gas wells. EOG is currently evaluating the effect of adopting SFAS No. 143 on its financial statements and has not yet determined the timing of adoption. In August 2001, the FASB issued SFAS No. 144--"Accounting for the Impairment or Disposal of Long-Lived Assets" effective for fiscal years beginning after December 15, 2001. SFAS No. 144, which supersedes SFAS No. 121--"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," provides that long-lived assets to be disposed of by sale be measured at the lower of carrying amount or fair value less cost to sell. In addition, SFAS No. 144, which also supersedes the accounting and reporting provisions of Accounting Principles Board ("APB") Opinion No. 30--"Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," broadens the reporting of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the entity and that will be eliminated from the ongoing operations of the entity in a disposal transaction. EOG adopted the provisions of SFAS No. 144 on January 1, 2002. This statement will impact how EOG tests for long- lived asset impairments. EOG does not expect the impact of SFAS No. 144 to have a material effect on its financial position or results of operations. Accounting for Price Risk Management Activities. EOG engages in price risk management activities from time to time. These activities are intended to manage EOG's exposure to fluctuations in commodity prices for natural gas and crude oil. EOG utilizes derivative financial instruments, primarily price swaps and costless collars, as the means to manage this price risk. EOG adopted SFAS No. 133-- "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and No. 138, on January 1, 2001 for the accounting periods which begin thereafter. The statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. The statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the statements of income and requires a company to formally document, designate and assess the effectiveness of transactions that receive hedge accounting treatment. The adoption of SFAS No. 133 did not have a material impact on EOG's financial statements. During 2001, EOG elected not to designate any of its price risk management activities as accounting hedges under SFAS No. 133, and accordingly, accounted for them using the mark-to-market accounting method. Under this accounting method, the changes in the market value of outstanding financial instruments are recognized as gains or losses in the period of change. The gains or losses are recorded in Mark-to-market 12 Gains (Losses) on Commodity Derivative Contracts in the Net Operating Revenues section of the Consolidated Statements of Income. The related cash flow impact is reflected as cash flows from operating activities in the Consolidated Statements of Cash Flows (see Note 12 "Prices and Interest Rate Risk Management Activities"). Capitalized Interest Costs. Certain interest costs have been capitalized as a part of the historical cost of unproved oil and gas properties and work in progress for development drilling and related facilities with significant cash outlays. Income Taxes. EOG accounts for income taxes under the provisions of SFAS No. 109--"Accounting for Income Taxes." SFAS No. 109 requires the asset and liability approach for accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases (see Note 5 "Income Taxes"). Foreign Currency Translation. For subsidiaries whose functional currency is deemed to be other than the U.S. dollar, asset and liability accounts are translated at year-end exchange rates and revenue and expenses are translated at average exchange rates prevailing during the year. Translation adjustments are included as a separate component of shareholders' equity. Any gains or losses on transactions or monetary assets or liabilities in currencies other than the functional currency are included in net income in the current period. Net Income Per Share. In accordance with the provisions of SFAS No. 128--"Earnings per Share," basic net income per share is computed on the basis of the weighted-average number of common shares outstanding during the periods. Diluted net income per share is computed based upon the weighted-average number of common shares plus the assumed issuance of common shares for all potentially dilutive securities (see Note 8 "Net Income Per Share Available to Common" for additional information to reconcile the difference between the Average Number of Common Shares outstanding for basic and diluted net income per share). Stock Option Plans. EOG accounts for stock options under the provisions and related interpretations of APB Opinion No. 25-- "Accounting for Stock Issued to Employees." No compensation expense is recognized for such options. As allowed by SFAS No. 123-- "Accounting for Stock-Based Compensation" issued in 1995, EOG has continued to apply APB Opinion No. 25 for purposes of determining net income and to present the pro forma disclosures required by SFAS No. 123. Information Regarding Forward-Looking Statements - ------------------------------------------------ This Current Report on Form 8-K 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, the ability to increase reserves, or the ability 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: the timing and extent of changes in commodity prices for crude oil, natural gas and related products and interest rates; the extent and effect of any hedging activities engaged in by EOG; the extent of EOG's success in discovering, developing, marketing and producing reserves and in acquiring oil and gas properties; the accuracy of reserve estimates, which by their nature involve the exercise of professional judgment and may therefore be imprecise; political developments around the world, including terrorist activities and responses to such activities; 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. 13 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING The following consolidated financial statements of EOG Resources, Inc. and its subsidiaries ("EOG") were prepared by management, which is responsible for their integrity, objectivity and fair presentation. The statements have been prepared in conformity with accounting principles generally accepted in the United States and, accordingly, include some amounts that are based on the best estimates and judgments of management. Arthur Andersen LLP, independent public accountants, was engaged to audit the consolidated financial statements of EOG and issue a report thereon. In the conduct of the audit, Arthur Andersen LLP was given unrestricted access to all financial records and related data including minutes of all meetings of shareholders, the Board of Directors and committees of the Board. Their audit was made in accordance with auditing standards generally accepted in the United States and included a review of the system of internal controls to the extent considered necessary to determine the audit procedures required to support their opinion on the consolidated financial statements. Management believes that all representations made to Arthur Andersen LLP during the audit were valid and appropriate. The system of internal controls of EOG is designed to provide reasonable assurance as to the reliability of financial statements and the protection of assets from unauthorized acquisition, use or disposition. This system includes, but is not limited to, written policies and guidelines including a published code for the conduct of business affairs, conflicts of interest and compliance with laws regarding antitrust, antiboycott and foreign corrupt practices policies, the careful selection and training of qualified personnel, and a documented organizational structure outlining the separation of responsibilities among management representatives and staff groups. The adequacy of financial controls of EOG and the accounting principles employed in financial reporting by EOG are under the general oversight of the Audit Committee of the Board of Directors. No member of this committee is an officer or employee of EOG. The independent public accountants and internal auditors have full, free, separate and direct access to the Audit Committee and meet with the committee from time to time to discuss accounting, auditing and financial reporting matters. It should be recognized that there are inherent limitations to the effectiveness of any system of internal control, including the possibility of human error and circumvention or override. Accordingly, even an effective system can provide only reasonable assurance with respect to the preparation of reliable financial statements and safeguarding of assets. Furthermore, the effectiveness of an internal control system can change with circumstances. It is management's opinion that, considering the criteria for effective internal control over financial reporting and safeguarding of assets which consists of interrelated components including the control environment, risk assessment process, control activities, information and communication systems, and monitoring, EOG maintained an effective system of internal control as to the reliability of financial statements and the protection of assets against unauthorized acquisition, use or disposition during the year ended December 31, 2001. MARK G. PAPA EDMUND P. SEGNER, III TIMOTHY K. DRIGGERS Chairman and President and Chief of Staff Vice President, Accounting Chief Executive and Land Administration Officer Houston, Texas February 21, 2002 14 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To EOG Resources, Inc.: We have audited the accompanying consolidated balance sheets of EOG Resources, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income and comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of EOG Resources, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Houston, Texas February 21, 2002 15 EOG RESOURCES, INC. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (In Thousands, Except Per Share Amounts) Year Ended December 31, ------------------------------------ 2001 2000 1999 ---------- ---------- ---------- NET OPERATING REVENUES Natural Gas.............................................................. $1,298,102 $1,155,804 $ 683,469 Crude Oil, Condensate and Natural Gas Liquids............................ 258,101 325,726 159,373 Mark-to-market Gains (Losses) on Commodity Derivative Contracts.......... 97,750 (1,000) - Gains (Losses) on Sales of Reserves and Related Assets and Other, Net.... 934 9,365 (743) ---------- ---------- ---------- Total................................................................. 1,654,887 1,489,895 842,099 OPERATING EXPENSES Lease and Well........................................................... 175,446 140,915 132,233 Exploration Costs........................................................ 67,467 67,196 52,773 Dry Hole Costs........................................................... 71,360 17,337 11,893 Impairments.............................................................. 79,156 46,478 161,817 Depreciation, Depletion and Amortization................................. 392,399 359,265 329,668 General and Administrative............................................... 79,963 66,932 82,857 Taxes Other Than Income.................................................. 95,333 94,909 52,670 Charges Associated with Enron Bankruptcy................................. 19,211 - - ---------- ---------- ---------- Total................................................................. 980,335 793,032 823,911 ---------- ---------- ---------- OPERATING INCOME........................................................... 674,552 696,863 18,188 OTHER INCOME (EXPENSE) Gain on Share Exchange................................................... - - 575,151 Other, Net............................................................... 2,003 (2,300) 36,192 ---------- ---------- ---------- Total................................................................. 2,003 (2,300) 611,343 ---------- ---------- ---------- INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES............................ 676,555 694,563 629,531 INTEREST EXPENSE Incurred................................................................. 53,756 67,714 72,413 Capitalized.............................................................. (8,646) (6,708) (10,594) ---------- ---------- ---------- Net Interest Expense.................................................. 45,110 61,006 61,819 ---------- ---------- ---------- INCOME BEFORE INCOME TAXES................................................. 631,445 633,557 567,712 INCOME TAX PROVISION (BENEFIT)............................................. 232,829 236,626 (1,382) ---------- ---------- ---------- NET INCOME................................................................. 398,616 396,931 569,094 PREFERRED STOCK DIVIDENDS.................................................. 10,994 11,028 535 ---------- ---------- ---------- NET INCOME AVAILABLE TO COMMON............................................. $ 387,622 $ 385,903 $ 568,559 ========== ========== ========== EARNINGS PER SHARE AVAILABLE TO COMMON Basic.................................................................... $ 3.35 $ 3.30 $ 4.04 ========== ========== ========== Diluted.................................................................. $ 3.30 $ 3.24 $ 4.01 ========== ========== ========== AVERAGE NUMBER OF COMMON SHARES Basic.................................................................... 115,765 116,934 140,648 ========== ========== ========== Diluted.................................................................. 117,488 119,102 141,627 ========== ========== ========== COMPREHENSIVE INCOME NET INCOME................................................................. $ 398,616 $ 396,931 $ 569,094 OTHER COMPREHENSIVE INCOME (LOSS) Foreign Currency Translation Adjustment.................................. (22,044) (12,338) 16,038 Unrealized Gain (Loss) on Available-for-sale Security, Net of Tax........ (1,318) 392 - ---------- ---------- ---------- COMPREHENSIVE INCOME....................................................... $ 375,254 $ 384,985 $ 585,132 ========== ========== ========== The accompanying notes are an integral part of these consolidated financial statements.
16 EOG RESOURCES, INC. CONSOLIDATED BALANCE SHEETS (In Thousands) At December 31, --------------------------- ASSETS 2001 2000 ----------- ----------- CURRENT ASSETS Cash and Cash Equivalents.............................................. $ 2,512 $ 20,152 Accounts Receivable, net............................................... 194,624 342,579 Inventories............................................................ 18,871 16,623 Assets from Price Risk Management Activities........................... 19,161 438 Federal Income Tax Deposit............................................. 19,332 - Other.................................................................. 17,921 15,073 ----------- ----------- Total.............................................................. 272,421 394,865 OIL AND GAS PROPERTIES (Successful Efforts Method)...................... 6,065,603 5,122,728 Less: Accumulated Depreciation, Depletion and Amortization............ (3,009,693) (2,597,721) ----------- ----------- Net Oil and Gas Properties......................................... 3,055,910 2,525,007 OTHER ASSETS............................................................ 85,713 81,381 ----------- ----------- TOTAL ASSETS........................................................... $ 3,414,044 $ 3,001,253 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable....................................................... $ 219,561 $ 246,468 Accrued Taxes Payable.................................................. 40,219 78,838 Dividends Payable...................................................... 5,045 4,525 Accrued Employee Benefits.............................................. 16,345 13,654 Other.................................................................. 29,677 26,631 ----------- ----------- Total.............................................................. 310,847 370,116 LONG-TERM DEBT.......................................................... 855,969 859,000 OTHER LIABILITIES....................................................... 53,522 51,133 DEFERRED INCOME TAXES................................................... 551,020 340,079 SHAREHOLDERS' EQUITY Preferred Stock, $.01 Par, 10,000,000 Shares Authorized: Series B, 100,000 shares Issued, Cumulative, $100,000,000 Liquidation Preference............................... 98,116 97,879 Series D, 500 shares Issued, Cumulative, $50,000,000 Liquidation Preference................................ 49,466 49,285 Common Stock, $.01 Par, 320,000,000 shares Authorized and 124,730,000 shares Issued............................................ 201,247 201,247 Additional Paid In Capital............................................. - 4,221 Unearned Compensation.................................................. (14,953) (3,756) Accumulated Other Comprehensive Loss................................... (55,118) (31,756) Retained Earnings...................................................... 1,668,708 1,301,067 Common Stock Held in Treasury, 9,278,382 shares at December 31, 2001 and 7,825,708 shares at December 31, 2000............................ (304,780) (237,262) ----------- ----------- Total Shareholders' Equity............................................. 1,642,686 1,380,925 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................. $ 3,414,044 $ 3,001,253 =========== =========== The accompanying notes are an integral part of these consolidated financial statements.
17 EOG RESOURCES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In Thousands, Except Per Share Amounts) Accumulated Common Additional Other Stock Total Preferred Common Paid In Unearned Comprehensive Retained Held In Shareholders' Stock Stock Capital Compensation Income(Loss) Earnings Treasury Equity ---------------------------------------------------------------------------------------------- Balance at December 31, 1998.... $ -- $201,600 $ 401,524 $(4,900) $(35,848) $ 838,371 $ (120,443) $ 1,280,304 Net Income..................... -- -- -- -- -- 569,094 -- 569,094 Preferred Stock Issued....... 147,175 -- -- -- -- -- -- 147,175 Amortization of Preferred Stock Discount.............. 15 -- -- -- -- -- -- 15 Common Stock Issued.......... -- 270 577,662 -- -- -- -- 577,932 Preferred Stock Dividends Paid/Declared................ -- -- -- -- -- (535) -- (535) Common Stock Dividends Declared, $.12 Per Share.... -- -- -- -- -- (16,377) -- (16,377) Translation Adjustment........ -- -- -- -- 16,038 -- -- 16,038 Treasury Stock Purchased..... -- -- -- -- -- -- (2,143) (2,143) Treasury Stock Received in Share Exchange.................... -- -- -- -- -- -- (1,459,484) (1,459,484) Common Stock Retired......... -- (623) (978,224) -- -- (458,033) 1,436,880 -- Treasury Stock Issued Under Stock Option Plans.......... -- -- (2,274) 136 -- (1,582) 16,854 13,134 Tax Benefits from Stock Options Exercised.......... -- -- 1,387 -- -- -- -- 1,387 Amortization of Unearned Compensation................ -- -- -- 3,146 -- -- -- 3,146 Other.......................... -- -- (75) -- -- -- -- (75) -------------------------------------------------------------------------------------------------- Balance at December 31, 1999.... 147,190 201,247 -- (1,618) (19,810) 930,938 (128,336) 1,129,611 Net Income..................... -- -- -- -- -- 396,931 -- 396,931 Amortization of Preferred Stock Discount.............. 419 -- -- -- -- (419) -- -- Exchange Offer Fees.......... (445) -- -- -- -- -- -- (445) Preferred Stock Dividends Paid/Declared............... -- -- -- -- -- (10,609) -- (10,609) Common Stock Dividends Declared, $.14 Per Share..... -- -- -- -- -- (15,774) -- (15,774) Translation Adjustment......... -- -- -- -- (12,338) -- -- (12,338) Unrealized Gain on Available- for-sale Security........... -- -- -- -- 392 -- -- 392 Treasury Stock Purchased..... -- -- -- -- -- -- (272,723) (272,723) Treasury Stock Issued Under Stock Option Plans.......... -- -- (36,701) -- -- -- 163,350 126,649 Tax Benefits from Stock Options Exercised.......... -- -- 41,307 -- -- -- -- 41,307 Restricted Stock and Units..... -- -- 2,805 (3,411) -- -- 606 -- Amortization of Unearned Compensation................ -- -- -- 1,273 -- -- -- 1,273 Equity Derivative Transactions. -- -- (3,190) -- -- -- -- (3,190) Other.......................... -- -- -- -- -- -- (159) (159) -------------------------------------------------------------------------------------------------- Balance at December 31, 2000.... 147,164 201,247 4,221 (3,756) (31,756) 1,301,067 (237,262) 1,380,925 Net Income..................... -- -- -- -- -- 398,616 -- 398,616 Amortization of Preferred Stock Discount.............. 418 -- -- -- -- (418) -- -- Preferred Stock Dividends Paid/Declared............... -- -- -- -- -- (10,576) -- (10,576) Common Stock Dividends Declared, $.16 Per Share..... -- -- -- -- -- (18,523) -- (18,523) Translation Adjustment......... -- -- -- -- (22,044) -- -- (22,044) Unrealized Loss on Available- for-sale Security............ -- -- -- -- (1,318) -- -- (1,318) Treasury Stock Purchased..... -- -- -- -- -- -- (126,769) (126,769) Treasury Stock Issued Under Stock Option Plans........ -- -- (19,097) -- -- (1,458) 50,403 29,848 Treasury Stock Issued Under Employee Stock Purchase Plan. -- -- (104) -- -- -- 1,061 957 Tax Benefits from Stock Options Exercised.......... -- -- 7,332 -- -- -- -- 7,332 Restricted Stock and Units.... -- -- 6,583 (14,467) -- -- 7,884 -- Amortization of Unearned Compensation................ -- -- -- 3,270 -- -- -- 3,270 Equity Derivative Transactions. -- -- 1,201 -- -- -- -- 1,201 Other.......................... -- -- (136) -- -- -- (97) (233) -------------------------------------------------------------------------------------------------- Balance at December 31, 2001.... $147,582 $201,247 $ -- $ (14,953) $(55,118) $1,668,708 $ (304,780) $ 1,642,686 ================================================================================================== The accompanying notes are an integral part of these consolidated financial statements.
18 EOG RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Year Ended December 31, ------------------------------------- 2001 2000 1999 ----------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Reconciliation of Net Income to Net Operating Cash Inflows: Net Income................................................................... $ 398,616 $ 396,931 $ 569,094 Items Not Requiring (Providing) Cash Depreciation, Depletion and Amortization................................... 392,399 359,265 329,668 Impairments................................................................ 79,156 46,478 161,817 Deferred Income Taxes...................................................... 164,945 97,729 (26,252) Charges Related to Enron Bankruptcy.................................... 19,211 -- -- Other, Net................................................................. 10,423 6,693 25,583 Exploration Costs............................................................ 67,467 67,196 52,773 Dry Hole Costs............................................................... 71,360 17,337 11,893 Mark-to-market Commodity Derivative Contracts Total (Gains) Losses........................................................ (97,750) 1,000 -- Realized Gains (Losses)..................................................... 62,110 (1,438) -- Losses (Gains) On Sales of Reserves and Related Assets and Other, Net...... 835 (5,539) 5,602 Gains on Sales of Other Assets............................................... -- -- (59,647) Gain on Share Exchange....................................................... -- -- (575,151) Tax Benefits from Stock Options Exercised.................................... 7,332 41,307 1,387 Other, Net................................................................... (3,127) (8,935) (19,081) Changes in Components of Working Capital and Other Liabilities Accounts Receivable......................................................... 146,235 (191,492) (12,914) Inventories................................................................. (2,248) 2,345 5,180 Accounts Payable............................................................ (26,949) 97,374 4,395 Accrued Taxes Payable....................................................... (38,619) 54,556 2,449 Other Liabilities........................................................... (3,422) 348 (15,438) Other, Net.................................................................. (16,442) 11,378 (9,960) Changes in Components of Working Capital Associated with Investing and Financing Activities........................ (34,105) (25,123) (7,879) ----------- ----------- --------- NET OPERATING CASH INFLOWS.................................................... 1,197,427 967,410 443,519 INVESTING CASH FLOWS Additions to Oil and Gas Properties.......................................... (974,016) (602,638) (396,450) Exploration Costs............................................................ (67,467) (67,196) (52,773) Dry Hole Costs............................................................... (71,360) (17,337) (11,893) Proceeds from Sales of Reserves and Related Assets........................... 8,032 26,189 10,934 Proceeds from Sales of Other Assets...................................... -- -- 82,965 Changes in Components of Working Capital Associated with Investing Activities...................................... 32,405 22,798 7,909 Other, Net................................................................... (15,649) (28,977) (4,057) ----------- ----------- ---------- NET INVESTING CASH OUTFLOWS................................................... (1,088,055) (667,161) (363,365) FINANCING CASH FLOWS Long-Term Debt Third Party................................................................. (4,155) (131,306) 47,527 Affiliate................................................................... -- -- (200,000) Proceeds from Preferred Stock Issued..................................... -- -- 147,175 Proceeds from Common Stock Issued............................................ -- -- 577,932 Dividends Paid............................................................... (28,580) (26,071) (17,395) Treasury Stock Purchased..................................................... (126,769) (272,723) (2,143) Proceeds from Sales of Treasury Stock........................................ 30,805 127,090 13,341 Equity Contribution to Transferred Subsidiaries.............................. -- -- (608,750) Other, Net................................................................... 1,687 (1,923) (19,308) ----------- ----------- ---------- NET FINANCING CASH OUTFLOWS................................................... (127,012) (304,933) (61,621) ----------- ----------- ---------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............................. (17,640) (4,684) 18,533 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR............................... 20,152 24,836 6,303 ----------- ----------- ---------- CASH AND CASH EQUIVALENTS AT END OF YEAR..................................... $ 2,512 $ 20,152 $ 24,836 =========== =========== ========== The accompanying notes are an integral part of these consolidated financial statements.
19 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies ------------------------------------------ Principles of Consolidation. The consolidated financial statements of EOG Resources, Inc. ("EOG"), a Delaware corporation, include the accounts of all domestic and foreign subsidiaries. Investments in unconsolidated affiliates, in which EOG is able to exercise significant influence, are accounted for using the equity method. All material intercompany accounts and transactions have been eliminated. 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 revenue 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 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 ("SFAS") 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 $11 million and $133 million for 2000 and 1999, respectively. Financial Instruments. EOG's financial instruments consist of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and long-term debt. The carrying values of cash and cash equivalents, marketable securities, accounts receivable and accounts payable approximate fair value (see Note 2 "Long-Term Debt" for fair value of long-term debt). Cash and Cash Equivalents. EOG records as cash equivalents all highly liquid short-term investments with original maturities of three months or less. Oil and Gas Operations. EOG accounts for its natural gas and crude oil exploration and production activities under the successful efforts method of accounting. Oil and gas lease acquisition costs are capitalized when incurred. Unproved properties with significant acquisition costs are assessed quarterly on a property-by-property basis, and any impairment in value is recognized. Unproved properties with acquisition costs that are not individually significant are aggregated, and the portion of such costs estimated to be nonproductive, based on historical experience, is amortized over the average holding period. If the unproved properties are determined to be productive, the appropriate related costs are transferred to proved oil and gas properties. Lease rentals are expensed as incurred. Oil and gas exploration costs, other than the costs of drilling exploratory wells, are charged to expense as incurred. The costs of drilling exploratory wells are capitalized pending determination of whether they have discovered proved commercial reserves. If proved commercial reserves are not discovered, such drilling costs are expensed. Costs to develop proved reserves, including the costs of all development wells and related equipment used in the production of natural gas and crude oil, are capitalized. Depreciation, depletion and amortization of the cost of proved oil and gas properties is calculated using the unit-of-production method. Estimated future dismantlement, restoration and abandonment costs (classified as long-term liabilities), net of salvage values, are taken into account. Certain other assets are depreciated on a straight-line basis. Periodically, or when circumstances indicate that an asset may be impaired, EOG compares expected undiscounted future cash flows at a producing field level to the unamortized capitalized cost of the asset. If the future undiscounted cash flows, based on EOG's estimate of future crude oil and natural gas prices and operating costs and anticipated production from proved reserves, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is calculated by discounting the future cash flows at an appropriate risk-adjusted discount rate. 20 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Inventories, consisting primarily of tubular goods and well equipment held for use in the exploration for, and development and production of natural gas and crude oil reserves, are carried at cost with adjustments made from time to time to recognize any reductions in value. Natural gas and liquids revenues are recorded when production is delivered. Additionally, natural gas revenues are recorded on the entitlement method based on EOG's percentage ownership of current production. Each working interest owner in a well generally has the right to a specific percentage of production, although actual production sold may differ from an owner's ownership percentage. Under entitlement accounting, a receivable is recorded when underproduction occurs and a payable when overproduction occurs. Gains and losses associated with the sale of in place natural gas and crude oil reserves and related assets are classified as net operating revenues in the consolidated statements of income and comprehensive income based on EOG's strategy of continuing such sales in order to maximize the economic value of its assets. New Accounting Pronouncements. In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133--"Accounting for Derivative Instruments and Hedging Activities" effective for fiscal years beginning after June 15, 1999. SFAS No. 133, as amended by SFAS No. 137 and No. 138, cannot be applied retroactively. EOG adopted SFAS No. 133, as amended, on January 1, 2001 for the accounting periods which begin thereafter. The adoption of SFAS No. 133 did not have a material impact on EOG's financial statements. In June 2001, the FASB issued SFAS No. 143--"Accounting for Asset Retirement Obligations" effective for fiscal years beginning after June 15, 2002. SFAS No. 143 requires entities to record the fair value of a liability for legal obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. If the obligation is settled for other than the carrying amount of the liability, a gain or loss is recognized on settlement. This statement will impact how EOG accounts for its abandonment liability related to its oil and gas wells. EOG is currently evaluating the effect of adopting SFAS No. 143 on its financial statements and has not yet determined the timing of adoption. In August 2001, the FASB issued SFAS No. 144--"Accounting for the Impairment or Disposal of Long-Lived Assets" effective for fiscal years beginning after December 15, 2001. SFAS No. 144, which supersedes SFAS No. 121--"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," provides that long-lived assets to be disposed of by sale be measured at the lower of carrying amount or fair value less cost to sell. In addition, SFAS No. 144, which also supersedes the accounting and reporting provisions of Accounting Principles Board ("APB") Opinion No. 30-- "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," broadens the reporting of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the entity and that will be eliminated from the ongoing operations of the entity in a disposal transaction. EOG adopted the provisions of SFAS No. 144 on January 1, 2002. This statement will impact how EOG tests for long-lived asset impairments. EOG does not expect the impact of SFAS No. 144 to have a material effect on its financial position or results of operations. Accounting for Price Risk Management Activities. EOG engages in price risk management activities from time to time. These activities are intended to manage EOG's exposure to fluctuations in commodity prices for natural gas and crude oil. EOG utilizes derivative financial instruments, primarily price swaps and costless collars, as the means to manage this price risk. EOG adopted SFAS No. 133-- "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and No. 138, on January 1, 2001 for the accounting periods which begin thereafter. The statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset 21 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS or liability measured at its fair value. The statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the statements of income and requires a company to formally document, designate and assess the effectiveness of transactions that receive hedge accounting treatment. The adoption of SFAS No. 133 did not have a material impact on EOG's financial statements. During 2001, EOG elected not to designate any of its price risk management activities as accounting hedges under SFAS No. 133, and accordingly, accounted for them using the mark-to-market accounting method. Under this accounting method, the changes in the market value of outstanding financial instruments are recognized as gains or losses in the period of change. The gains or losses are recorded in Mark-to-market Gains (Losses) on Commodity Derivative Contracts in the Net Operating Revenues section of the Consolidated Statements of Income. The related cash flow impact is reflected as cash flows from operating activities in the Consolidated Statements of Cash Flows (see Note 12 "Prices and Interest Rate Risk Management Activities"). Capitalized Interest Costs. Certain interest costs have been capitalized as a part of the historical cost of unproved oil and gas properties and work in progress for development drilling and related facilities with significant cash outlays. Income Taxes. EOG accounts for income taxes under the provisions of SFAS No. 109--"Accounting for Income Taxes." SFAS No. 109 requires the asset and liability approach for accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases (see Note 5 "Income Taxes"). Foreign Currency Translation. For subsidiaries whose functional currency is deemed to be other than the U.S. dollar, asset and liability accounts are translated at year-end exchange rates and revenue and expenses are translated at average exchange rates prevailing during the year. Translation adjustments are included as a separate component of shareholders' equity. Any gains or losses on transactions or monetary assets or liabilities in currencies other than the functional currency are included in net income in the current period. Net Income Per Share. In accordance with the provisions of SFAS No. 128--"Earnings per Share," basic net income per share is computed on the basis of the weighted-average number of common shares outstanding during the periods. Diluted net income per share is computed based upon the weighted-average number of common shares plus the assumed issuance of common shares for all potentially dilutive securities (see Note 8 "Net Income Per Share Available to Common" for additional information to reconcile the difference between the Average Number of Common Shares outstanding for basic and diluted net income per share). Stock Options Plans. EOG accounts for stock options under the provisions and related interpretations of APB Opinion No. 25-- "Accounting for Stock Issued to Employees." No compensation expense is recognized for such options. As allowed by SFAS No. 123-- "Accounting for Stock-Based Compensation" issued in 1995, EOG has continued to apply APB Opinion No. 25 for purposes of determining net income and to present the pro forma disclosures required by SFAS No. 123. 2. Long-Term Debt -------------- Long-Term Debt at December 31 consisted of the following (in thousands): 2001 2000 --------- --------- Uncommitted Credit Facilities............... $ 95,147 $ 38,800 6.50% Notes due 2004........................ 100,000 100,000 6.70% Notes due 2006........................ 126,870 150,000 6.50% Notes due 2007........................ 100,000 100,000 6.00% Notes due 2008........................ 173,952 175,000 6.65% Notes due 2028........................ 140,000 150,000 Subsidiary Debt due 2001.................... -- 105,000 Subsidiary Debt due 2002.................... -- 40,200 Subsidiary Debt due 2011.................... 120,000 -- --------- --------- Total.................................. $ 855,969 $ 859,000 ========= ========= 22 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) EOG maintains two credit facilities with different expiration dates. In July 2001, the $375 million credit facility that was scheduled to expire was renewed for $300 million and the $400 million facility due to expire in 2004 was reduced to $300 million, thereby reducing aggregate long-term committed credit from $775 million to $600 million. Credit facility expirations are as follows: $300 million in July 2002 and $300 million in July 2004. With respect to the $300 million expiring in 2002, EOG may, at its option, extend the final maturity date of any advances made under the facility by one full year from the expiration date of the facility, effectively qualifying such debt as long term. Advances under both agreements bear interest, at the option of EOG, based upon a base rate or a Eurodollar rate. No amounts were borrowed on these committed credit facilities at December 31, 2001. During 2001 and 2000, EOG utilized commercial paper and short-term funding from uncommitted credit facilities, bearing market interest rates, for various corporate financing purposes. Commercial paper and uncommitted credit borrowings are classified as long-term debt based on EOG's intent and ability to ultimately replace such amounts with other long-term debt. The 6.00% to 6.70% Notes due 2004 to 2028 were issued through public offerings and have effective interest rates of 6.14% to 6.83%. The Subsidiary Debts due 2001 and 2002 were fully paid in 2001 by increased borrowings from commercial paper and uncommitted credit facilities. The Subsidiary Debt due 2011 bears interest at a fixed rate of 7% and is guaranteed by EOG. At December 31, 2001, the aggregate annual maturities of long- term debt outstanding were none for 2002, none for 2003, $100 million for 2004, none for 2005, and $127 million in 2006. EOG's credit facilities contain certain restrictive covenants, including a maximum debt-to-total capitalization ratio of 65% and a minimum ratio of EBITDAX (earnings before interest, taxes, DD&A, and exploration expense) to interest expense of at least three times. Other than these covenants, EOG does not have any other financial covenants in its financing agreements. EOG continues to comply with these two covenants and does not view them as materially restrictive. Shelf Registration. During the third quarter of 2000, EOG filed a shelf registration statement for the offer and sale from time to time of up to $600 million of EOG debt securities, preferred stock and/or common stock. The registration statement was declared effective by the Securities and Exchange Commission on October 27, 2000. As of February 21, 2002, EOG had sold no securities pursuant to this shelf registration. When combined with the unused portion of a previously filed registration statement declared effective in January 1998, these registration statements provide for the offer and sale from time to time of EOG debt securities, preferred stock and/or common stock by EOG in an aggregate amount up to $688 million. Fair Value Of Long-Term Debt. At December 31, 2001 and 2000, EOG had $856 million and $859 million, respectively, of long-term debt which had fair values of approximately $838 million and $831 million, respectively. The fair value of long-term debt is the value EOG would have to pay to retire the debt, including any premium or discount to the debtholder for the differential between the stated interest rate and the year-end market rate. The fair value of long-term debt is based upon quoted market prices and, where such quotes were not available, upon interest rates available to EOG at yearend. 3. Shareholders' Equity -------------------- EOG purchases from time to time in the open market its common stock to be held in treasury for the purpose of, but not limited to, fulfilling any obligations arising under EOG's stock option plans and any other approved transactions or activities for which such common stock shall be required. In September 2001, the Board of Directors authorized the purchase of an aggregate maximum of 10 million shares of common stock of EOG which superseded all previous authorizations. At December 31, 2001, 8,617,000 shares remain available for repurchases under this authorization. To supplement its share repurchase program, EOG enters into equity derivative transactions from time to time. These transactions are accounted for as equity transactions with premiums received recorded to Additional Paid In Capital in the Consolidated Balance Sheets. Settlement alternatives under all circumstances are at the option of EOG and include physical share, net share and net cash settlement. During the second quarter of 2001, EOG sold put options for $1.2 million obligating EOG to purchase up to 0.6 million shares of its common stock at an average price of $33.42 per share. These options expired unexercised in December 2001. During the first half of 2000, EOG entered into a series of equity derivative transactions receiving $0.6 million. During the third quarter of 2000, EOG closed substantially all of its equity derivative contracts which were to expire in April 2001 by paying $3.75 million. EOG had one million put options which it had written 23 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) which were outstanding at December 31, 2000. The strike price of these options was $18.00 per share, and they expired unexercised in April 2001. On July 23, 1999, EOG filed a registration statement with the Securities and Exchange Commission for the public offering of 27,000,000 shares of EOG's common stock. The public offering was completed on August 16, 1999, and the portion of net proceeds received by EOG was used to repay short-term borrowings used to fund a significant portion of the cash capital contribution in connection with the Share Exchange Agreement ("Share Exchange") described in Note 4 "Transactions with Enron Corp." As a result of the public offering and the retirement of the 62,270,000 shares of EOG's common stock received from Enron Corp. in the Share Exchange transaction, the number of shares of EOG's common stock issued was reduced to 124,730,000 from 160,000,000 prior to the Share Exchange. The following summarizes shares of common stock outstanding (in thousands): Common Shares ------------------------------ 2001 2000 1999 -------- -------- -------- Outstanding at January 1................................ 116,904 119,105 153,724 Repurchased............................................ (3,281) (8,910) (130) Issued Pursuant to Stock Options and Stock Plans....... 1,829 6,709 781 Retired................................................ - - (62,270) Public Offering........................................ - - 27,000 Outstanding at December 31.............................. 115,452 116,904 119,105
Series A. On December 10, 1999, EOG issued 100,000 shares of Fixed Rate Cumulative Perpetual Senior Preferred Stock, Series A, with a $1,000 Liquidation Preference per share, in a private transaction. Dividends will be payable on the shares only if declared by EOG's board of directors and will be cumulative. If declared, dividends will be payable at a rate of $71.95 per share, per year on March 15, June 15, September 15, and December 15 of each year beginning March 15, 2000. EOG may redeem all or a part of the Series A preferred stock at any time beginning on December 15, 2009 at $1,000 per share, plus accrued and unpaid dividends. The shares may also be redeemable, in whole but not in part, in the event that certain amendments are made to the Dividend Received Percentage. The Series A preferred shares are not convertible into, or exchangeable for, common stock of EOG. Series C. On December 22, 1999, EOG issued 500 shares of Flexible Money Market Cumulative Preferred Stock, Series C, with a liquidation preference of $100,000 per share, in a private transaction. Dividends will be payable on the shares only if declared by EOG's board of directors and will be cumulative. The initial dividend rate on the shares will be 6.84% until December 15, 2004 (the "Initial Period-End Dividend Payment Date"). Through the Initial Period-End Dividend Payment Date dividends will be payable, if declared, on March 15, June 15, September 15, and December 15 of each year beginning March 15, 2000. The cash dividend rate for each subsequent dividend period will be determined pursuant to periodic auctions conducted in accordance with certain auction procedures. The first auction date will be December 14, 2004. After December 15, 2004 (unless EOG has elected a "Non-Call Period" for a subsequent dividend period), EOG may redeem the shares, in whole or in part, on any dividend payment date at $100,000 per share plus accumulated and unpaid dividends. The shares may also be redeemable, in whole but not in part, in the event that certain amendments are made to the Dividend Received Percentage. The Series C preferred shares are not convertible into, or exchangeable for, common stock of EOG. During the third quarter of 2000, EOG completed two exchange offers for its preferred stock whereby shares of EOG's Series A preferred stock were exchanged for shares of EOG's Series B preferred stock, and shares of EOG's Series C preferred stock were exchanged for shares of EOG's Series D preferred stock. All preferred shares were validly tendered and not withdrawn prior to expiration of the offers. EOG accepted all of the tendered shares and issued the respective series in exchange. Both exchange offers were registered under the Securities Act of 1933. The Series B preferred stock has substantially the same terms as Series A and the Series D preferred stock has substantially the same terms as Series C. On February 14, 2000, EOG's Board of Directors declared a dividend of one preferred share purchase right (a "Right," and the agreement governing the terms of such Rights, the "Rights Agreement") for each outstanding share of common stock, par value $.01 per share. The Board of Directors has adopted this Rights Agreement to protect stockholders from coercive or otherwise unfair takeover tactics. The dividend was distributed to the stockholders of record on February 24, 2000. Each Right, expiring February 24, 2010, represents a right to buy from EOG one hundredth (1/100) of a share of Series E Junior Participating Preferred Stock ("Preferred Share") for $90, once the Rights become exercisable. This portion of a Preferred Share will give the stockholder approximately the same dividend, voting, and liquidation rights as would one share of common 24 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) stock. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights. If issued, each one hundredth (1/100) of a Preferred Share (i) will not be redeemable; (ii) will entitle holders to quarterly dividend payments of $.01 per share, or an amount equal to the dividend paid on one share of common stock, whichever is greater; (iii) will entitle holders upon liquidation either to receive $1 per share or an amount equal to the payment made on one share of common stock, whichever is greater; (iv) will have the same voting power as one share of common stock; and (v) if shares of EOG's common stock are exchanged via merger, consolidation, or a similar transaction, will entitle holders to a per share payment equal to the payment made on one share of common stock. As amended on December 13, 2001, the Rights will not be exercisable until ten days after the public announcement that a person or group has become an acquiring person ("Acquiring Person") by obtaining beneficial ownership of 10% or more of EOG's common stock, or if earlier, ten business days (or a later date determined by EOG's Board of Directors before any person or group becomes an Acquiring Person) after a person or group begins a tender or exchange offer which, if consummated, would result in that person or group becoming an Acquiring Person. If a person or group becomes an Acquiring Person, all holders of Rights except the Acquiring Person may, for $90, purchase shares of EOG's common stock with a market value of $180, based on the market price of the common stock prior to such acquisition. If EOG is later acquired in a merger or similar transaction after the Rights become exercisable, all holders of Rights except the Acquiring Person may, for $90, purchase shares of the acquiring corporation with a market value of $180 based on the market price of the acquiring corporation's stock, prior to such merger. EOG's Board of Directors may redeem the Rights for $.01 per Right at any time before any person or group becomes an Acquiring Person. If the Board of Directors redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of Rights will be to receive the redemption price of $.01 per Right. The redemption price will be adjusted if EOG has a stock split or stock dividends of EOG's common stock. After a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of EOG's outstanding common stock, the Board of Directors may exchange the Rights for common stock or equivalent security at an exchange ratio of one share of common stock or an equivalent security for each such Right, other than Rights held by the Acquiring Person. 4. Transactions with Enron Corp. ----------------------------- Enron Corp. Bankruptcy. In December 2001, Enron Corp. and certain of its affiliates, including Enron North America Corp., filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code. EOG recorded $19.2 million in charges associated with the Enron bankruptcies in the fourth quarter of 2001 related to certain contracts with Enron affiliates, including 2001 and 2002 natural gas and crude oil derivative contracts. EOG has other contractual relationships with Enron Corp. and certain of its affiliates. Based on EOG's review of these other matters, EOG believes that Enron Corp.'s Chapter 11 proceedings will not have a material adverse effect on EOG's financial position. Share Exchange. On August 16, 1999, EOG and Enron Corp. completed the Share Exchange whereby EOG received 62,270,000 shares of EOG's common stock out of 82,270,000 shares owned by Enron Corp. in exchange for all the stock of EOG's subsidiary, EOGI-India, Inc. Prior to the Share Exchange, EOG made an indirect capital contribution of approximately $600 million in cash, plus certain intercompany receivables, to EOGI-India, Inc. At the time of completion of this transaction, this subsidiary owned, through subsidiaries, all of EOG's assets and operations in India and China. EOG recognized a $575 million tax-free gain on the Share Exchange based on the fair value of the shares received, net of transaction fees of $14 million. Immediately following the Share Exchange, EOG retired the 62,270,000 shares of EOG's common stock received in the transaction. The weighted average basis in the treasury shares retired was first deducted from and fully eliminated existing additional paid in capital with the remaining value deducted from retained earnings. This transaction is a tax-free exchange to EOG. On August 30, 1999, EOG changed its corporate name to "EOG Resources, Inc." from "Enron Oil & Gas Company" and has since made similar changes to its subsidiaries' names. 25 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Immediately prior to the closing of the Share Exchange, Enron Corp. owned 82,270,000 shares of EOG's common stock, representing approximately 53.5 percent of all of the shares of EOG's common stock that were issued and outstanding. As a result of the closing of the Share Exchange, the sale by Enron Corp. of 8,500,000 shares of EOG's common stock as a selling stockholder in the public offering referred to in Note 3 "Shareholders' Equity," and the completion on August 17, 1999 and August 20, 1999 of the offering of Enron Corp. notes mandatorily exchangeable at maturity into a minimum of 9,746,250 up to a maximum of 11,500,000 shares of EOG's common stock, Enron Corp's maximum remaining interest in EOG after the automatic conversion of its notes on July 31, 2002, will be under two percent (assuming the notes are exchanged for less than the 11,500,000 shares of EOG's common stock). As a result of Enron Corp.'s bankruptcy filing and because the Enron Corp. notes were unsecured, EOG believes it is unlikely that they will be exchanged for the shares of EOG's common stock. The entire 11,500,000 shares of EOG's common stock are included in EOG's outstanding common stock. Two entities not affiliated with Enron Corp. have recently filed Schedule 13Gs with the Securities and Exchange Commission with respect to these shares. Effective as of August 16, 1999, the closing date of the Share Exchange, the members of the board of directors of EOG who were officers or directors of Enron Corp. resigned their positions as directors of EOG. Natural Gas and Crude Oil, Condensate and Natural Gas Liquids Net Operating Revenues. Prior to the Share Exchange, Natural Gas and Crude Oil, Condensate and Natural Gas Liquids Net Operating Revenues included revenues from and associated costs paid to various subsidiaries and affiliates of Enron Corp. pursuant to contracts which, in the opinion of management, were no less favorable than could be obtained from third parties. Revenues from sales to Enron Corp. and its affiliates totaled $57.3 million in 1999 prior to the Share Exchange. Natural Gas and Crude Oil, Condensate and Natural Gas Liquids Net Operating Revenues also included certain commodity price swap and NYMEX-related commodity transactions with Enron Corp. affiliated companies, which in the opinion of management, were no less favorable than could be received from third parties (see Note 12 "Price and Interest Rate Risk Management Activities"). General and Administrative Expenses. Prior to the Share Exchange, EOG was charged by Enron Corp. for all direct costs associated with its operations. Such direct charges, excluding benefit plan charges (see Note 6 "Employee Benefit Plans"), totaled $10.6 million for the year ended December 31, 1999. Additionally, certain administrative costs not directly charged to any Enron Corp. operations or business segments were allocated to the entities of the consolidated group. Approximately $3.4 million was incurred by EOG for indirect general and administrative expenses for 1999. Management believes that these charges were reasonable. Sale of Enron Corp. Options. In December 1997, EOG and Enron Corp. entered into an Equity Participation and Business Opportunity Agreement. Under the agreement, among other things, Enron Corp. granted EOG options to purchase 3.2 million shares of Enron Corp. During 1999, EOG sold the 3.2 million options and recognized a pre- tax gain of $59.6 million. The gain on sale of the options is included in other income (expense) - other, net in the consolidated statements of income and comprehensive income. 26 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. Income Taxes The principal components of EOG's net deferred income tax liability at December 31, 2001 and 2000 were as follows (in thousands): 2001 2000 -------- -------- Deferred Income Tax Assets Non-Producing Leasehold Costs................................... $ 26,727 $ 22,623 Seismic Costs Capitalized for Tax............................... 17,828 15,536 Trading Activity................................................ - 4,420 Section 29 Credit Monetization.................................. - 12,774 Other........................................................... 26,325 16,743 -------- -------- Total Deferred Income Tax Assets........................... 70,880 72,096 Deferred Income Tax Liabilities Oil and Gas Exploration and Development Costs Deducted for Tax Over Book Depreciation, Depletion and Amortization....... 599,945 403,808 Capitalized Interest............................................ 8,373 5,697 Trading Activity................................................ 10,107 - Other........................................................... 3,475 2,670 -------- -------- Total Deferred Income Tax Liabilities...................... 621,900 412,175 -------- -------- Net Deferred Income Tax Liability.......................... $551,020 $340,079 ======== ========
The components of income (loss) before income taxes were as follows (in thousands): 2001 2000 1999 -------- -------- -------- United States...................................................... $488,741 $491,823 $580,285 Foreign............................................................ 142,704 141,734 (12,573) -------- -------- -------- Total........................................................... $631,445 $633,557 $567,712 ======== ======== ========
Total income tax provision (benefit) was as follows (in thousands): 2001 2000 1999 -------- -------- -------- Current: Federal........................................................... $ 36,737 $ 81,912 $ 5,510 State............................................................. 5,475 7,528 3,234 Foreign........................................................... 25,672 49,457 16,126 -------- -------- -------- Total............................................................ 67,884 138,897 24,870 Deferred: Federal........................................................... 131,127 78,833 (49,474) State............................................................. 10,411 10,324 (502) Foreign........................................................... 23,407 8,572 23,724 -------- -------- -------- Total............................................................ 164,945 97,729 (26,252) -------- -------- -------- Income Tax Provision (Benefit)...................................... $232,829 $236,626 $ (1,382) ======== ======== ========
The differences between taxes computed at the U.S. federal statutory tax rate and EOG's effective rate were as follows: 2001 2000 1999 -------- -------- -------- Statutory Federal Income Tax Rate................................... 35.00% 35.00% 35.00% State Income Tax, Net of Federal Benefit............................ 1.64 1.83 0.31 Income Tax Provision Related to Foreign Operations.................. 0.36 1.32 1.60 Tight Gas Sands Federal Income Tax Credits........................ (0.16) - (1.45) Revision of Prior Years' Tax Estimates.............................. (0.21) 0.16 (0.21) Share Exchange...................................................... - - (35.46) Other............................................................... 0.24 (0.96) (0.03) ------- ------- ------- Effective Income Tax Rate...................................... 36.87% 37.35% (0.24)% ======= ====== =======
27 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) EOG's foreign subsidiaries' undistributed earnings of approximately $515 million at December 31, 2001 are considered to be indefinitely invested outside the U.S. and, accordingly, no U.S. federal or state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends, EOG may be subject to both foreign withholding taxes and U.S. income taxes, net of allowable foreign tax credits. Determination of any potential amount of unrecognized deferred income tax liabilities is not practicable. In 1999 and 2000, EOG entered into arrangements with a third party whereby certain Section 29 credits (Tight Gas Sands Federal Income Tax Credits) were sold by EOG to the third party, and payments for such credits will be received on an as-generated basis. As a result of these transactions, EOG recorded a deferred tax asset representing a tax gain on the sale of the Section 29 credit properties, which will reverse as the results of operations of such properties are recognized for book purposes. 6. Employee Benefit Plans ---------------------- Employees of EOG were covered by various retirement, stock purchase and other benefit plans of Enron Corp. through August 1999. During the year ended December 31, 1999, EOG was charged $4.4 million for all such benefits, including pension expense totaling $0.9 million by Enron Corp. Pension Plans Since August 1999, EOG has adopted defined contribution pension and savings plans for most of its employees in the United States. EOG's contributions to these plans are based on various percentages of compensation, and in some instances, are based upon the amount of the employees' contributions to the plan. For 2001 and 2000, the cost of these plans amounted to approximately $6.2 million and $5.5 million, respectively. From August 31, 1999 to December 31, 1999 the cost of these plans amounted to approximately $1.2 million. EOG also has in effect pension and savings plans related to its Canadian and Trinidadian subsidiaries. Activity related to these plans is not material relative to EOG's operations. Postretirement Plan During 2000, EOG adopted postretirement medical and dental benefits for eligible employees and their eligible dependents. Benefits are provided under the provisions of a contributory defined dollar benefit plan. EOG accrues these postretirement benefit costs over the service lives of the employees expected to be eligible to receive such benefits. As of December 31, 2001 and December 31, 2000, the postretirement plan had a benefit obligation of $2.0 million and $1.5 million, respectively. During 2001 and 2000, EOG recognized a net periodic benefit cost related to this plan of $0.4 million and $0.3 million, respectively. Stock Plans Stock Options. EOG has various stock plans ("the Plans") under which employees of EOG and its subsidiaries and nonemployee members of the Board of Directors have been or may be granted rights to purchase shares of common stock of EOG at a price not less than the market price of the stock at the date of grant. Stock options granted under the Plans vest either immediately at the date of grant or up to four years from the date of grant based on the nature of the grants and as defined in the individual grant agreements. Terms for stock options granted under the Plans have not exceeded a maximum term of 10 years. 28 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table sets forth the option transactions under the Plans for the years ended December 31 (options in thousands): 2001 2000 1999 ----------------- ------------------ ----------------- Average Average Average Grant Grant Grant Options Price Options Price Options Price ------- -------- ------- ------- ------- ------- Outstanding at January 1................. 7,056 $ 20.70 12,667 $ 18.66 15,036 $ 18.35 Granted................................ 1,631 36.63 1,317 30.88 1,280 19.88 Exercised............................. (1,563) 19.18 (6,726) 18.90 (822) 16.22 Forfeited............................. (111) 23.84 (202) 19.09 (2,827) 18.26 ------ ------ ------ Outstanding at December 31............... 7,013 24.69 7,056 20.70 12,667 18.66 ====== ====== ====== Options Exercisable at December 31....... 4,034 22.04 3,845 19.83 8,118 19.23 ====== ====== ====== Options Available for Future Grant....... 4,531 6,387 5,564 ====== ====== ====== Average Fair Value of Options Granted During Year.................... $16.76 $12.20 $ 7.43 ====== ====== ======
The fair value of each option grant is estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2001, 2000, and 1999, respectively: (1) dividend yield of 0.5%, 0.6% and 0.6%, (2) expected volatility of 43%, 30%, and 28%, (3) risk-free interest rate of 4.6%, 6.0%, and 5.9%, and (4) expected life of 6.0 years, 6.0 years and 6.0 years. The following table summarizes certain information for the options outstanding at December 31, 2001 (options in thousands): Options Outstanding Options Exercisable ------------------------------- ---------------------- Weighted Weighted Weighted Average Average Average Remaining Grant Grant Range of Grant Prices Options Life Price Options Price - --------------------- ------- --------- --------- -------- ---------- (years) $ 13.00 to $ 17.99.............. 1,653 6 $14.66 1,104 $14.85 18.00 to 22.99.............. 2,356 6 20.12 1,783 20.13 23.00 to 28.99.............. 411 4 24.03 392 23.89 29.00 to 39.99.............. 2,381 9 34.35 631 33.97 40.00 to 54.99.............. 212 8 46.46 124 46.94 ------ ------ 7,013 7 24.69 4,034 22.04 ====== ======
29 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) EOG's pro forma net income and net income per share of common stock for 2001, 2000 and 1999, had compensation costs been recorded in accordance with SFAS No. 123, are presented below (in millions except per share data): 2001 2000 1999 ------------------- ------------------- ------------------- As As As Reported Pro Forma Reported Pro Forma Reported Pro Forma -------- --------- -------- --------- -------- --------- Net Income Available to Common................ $ 387.6 $ 375.7 $ 385.9 $ 373.4 $ 568.6 $ 565.7 Net Income per Share Available to Common Basic........................................ $ 3.35 $ 3.25 $ 3.30 $ 3.19 $ 4.04 $ 4.02 ======= ======= ======= ======= ======= ======= Diluted...................................... $ 3.30 $ 3.20 $ 3.24 $ 3.14 $ 4.01 $ 3.99 ======= ======= ======= ======= ======= =======
The effects of applying SFAS No. 123 in this pro forma disclosure should not be interpreted as being indicative of future effects. SFAS No. 123 does not apply to awards prior to 1995, and the extent and timing of additional future awards cannot be predicted. The Black-Scholes model used by EOG to calculate option values, as well as other currently accepted option valuation models, were developed to estimate the fair value of freely tradable, fully transferable options without vesting and/or trading restrictions, which significantly differ from EOG's stock option awards. These models also require highly subjective assumptions, including future stock price volatility and expected time until exercise, which significantly affect the calculated values. Accordingly, management does not believe that this model provides a reliable single measure of the fair value of EOG's stock option awards. Restricted Stock and Units. Under the Plans, participants may be granted restricted stock and/or units without cost to the participant. The shares and units granted vest to the participant at various times ranging from one to five years. Upon vesting, the restricted shares are released to the participants and the restricted units released to the participants are converted into one share of common stock. The following summarizes shares of restricted stock and units granted (shares and units in thousands): Restricted Shares and Units --------------------------- 2001 2000 1999 -------- ------- -------- Outstanding at January 1................................. 309 288 378 Granted................................................ 353 201 23 Released to Participants............................... (15) (178) (39) Forfeited or Expired................................... (15) (2) (74) ------ ------ ------ Outstanding at December 31............................... 632 309 288 ------ ------ ------ Average Fair Value of Shares Granted During Year......... $42.08 $16.10 $20.67 ====== ====== ======
The fair value of the restricted shares and units at date of grant has been recorded in shareholders' equity as unearned compensation and is being amortized over the vesting period as compensation expense. Related compensation expense for 2001, 2000 and 1999 was approximately $3.3 million, $1.3 million and $3.1 million, respectively. Employee Stock Purchase Plan. During 2001, EOG implemented an Employee Stock Purchase Plan (the "ESPP") that allows eligible employees to semiannually purchase, through payroll deductions, shares of EOG common stock at 85 percent of the fair market value at specified dates. Contributions to the ESPP are limited to 10 percent of the employees' pay (subject to certain ESPP limits) during each of the two six-month offering periods. As of December 31, 2001, 467,699 common shares remained available for issuance under the plan. During 2001, 306 employees participated in the plan and 32,301 common shares were purchased at an aggregate price of approximately $1 million. Treasury Shares. During 2001, 2000 and 1999, EOG purchased approximately 1,828,000, 6,709,000, and 130,000 of its common shares, respectively, to offset the dilution resulting from shares issued under the EOG employee stock plans. The difference between the cost of the treasury shares and the exercise price of the options, net of federal income tax benefit of $7.3 million, $41.3 million, and $1.4 million for the years 2001, 2000 and 1999, respectively, is reflected as an adjustment to additional paid in capital to the extent EOG has accumulated additional paid in capital relating to treasury stock and retained earnings thereafter. 30 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. Commitments and Contingencies ----------------------------- Letters Of Credit. At December 31, 2001 and 2000, EOG had letters of credit and guarantees outstanding totaling approximately $136 million and $122 million, respectively. Of these amounts, $120 million and $105 million, respectively, represent guarantees of subsidiary indebtedness included under Note 2 "Long-Term Debt." Other Commitments. EOG has leases for buildings, facilities and equipment with varying expiration dates through 2007. Rental expenses associated with these leases amounted to $20 million, $15 million and $ 16 million for 2001, 2000 and 1999, respectively. At December 31, 2001, total minimum commitments from minimum rental commitments under long-term non-cancelable operating leases, drilling rig commitments and transportation service commitments based upon current transportation rates and foreign currency exchange rate at December 31, 2001, are as follows (in thousands): Total Minimum Commitments ------------- 2002........................ $ 48,861 2003 - 2005................. 39,960 2006 - 2007................. 16,537 2008 and thereafter......... 5,128 -------- $110,486 ======== Contingencies. On July 21, 1999, two stockholders of EOG filed separate lawsuits purportedly on behalf of EOG against Enron Corp. and those individuals who were then directors of EOG, alleging that Enron Corp. and those directors breached their fiduciary duties of good faith and loyalty in approving the Share Exchange. The lawsuits sought to rescind the transaction or to receive monetary damages and costs and expenses, including reasonable attorneys' and experts' fees. A Stipulation of Dismissal without prejudice of these suits was entered by the court on December 12, 2001. During 2000 and 2001, EOG was engaged in arbitration hearings to settle 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. The arbitration resulted in a decision in favor of EOG. EOG and numerous other companies in the natural gas industry are named as defendants in various lawsuits alleging violations of the civil False Claims Act. These lawsuits have been consolidated for pre- trial proceedings in the United States District Court for the District of Wyoming. The plaintiffs contend that defendants have underpaid royalties on natural gas and natural gas liquids produced on federal and Indian lands through the use of below-market prices, improper deductions, improper measurement techniques and transactions with affiliated companies. Plaintiffs allege that the royalties paid by defendants were lower than the royalties required to be paid under federal regulations and that the forms filed by defendants with the Minerals Management Service reporting these royalty payments were false, thereby violating the civil False Claims Act. The United States has intervened in certain of the cases as to some of the defendants, but has not intervened as to EOG. Based on EOG's present understanding of these cases, EOG believes that it has substantial defenses to these claims and intends to vigorously assert these defenses. However, if EOG is found to have violated the Civil False Claims Act, EOG could be subject to a variety of sanctions, including treble damages and substantial monetary fines. 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. 31 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. Net Income Per Share Available to Common ---------------------------------------- The following table sets forth the computation of basic and diluted earnings from net income available to common for the years ended December 31 (in thousands, except per share amounts): 2001 2000 1999 --------- --------- --------- Numerator for basic and diluted earnings per share - Net income available to common......................... $ 387,622 $ 385,903 $ 568,559 ========= ========= ========= Denominator for basic earnings per share - Weighted average shares................................. 115,765 116,934 140,648 Potential dilutive common shares - Stock options........................................... 1,453 2,038 964 Restricted stock and units.............................. 270 130 15 --------- --------- --------- Denominator for diluted earnings per share - Adjusted weighted average shares...................... 117,488 119,102 141,627 ========= ========= ========= Net income per share of common stock Basic................................................... $ 3.35 $ 3.30 $ 4.04 ========= ========= ========= Diluted................................................. $ 3.30 $ 3.24 $ 4.01 ========= ========= =========
9. Supplemental Cash Flow Information ---------------------------------- On August 16, 1999, EOG and Enron Corp. completed the Share Exchange whereby EOG received 62,270,000 shares of EOG's common stock out of 82,270,000 shares owned by Enron Corp. in exchange for all the stock of EOG's subsidiary, EOGI-India, Inc (see Note 4 "Transactions with Enron Corp."). Prior to the Share Exchange, EOG made an indirect capital contribution of approximately $600 million in cash, plus certain intercompany receivables, to EOGI-India, Inc. At the time of completion of this transaction, EOG's net investment in EOGI-India, Inc. was $870 million. Cash paid for interest and income taxes was as follows for the years ended December 31 (in thousands): 2001 2000 1999 -------- --------- -------- Interest (net of amount capitalized).......................... $ 45,715 $ 61,679 $ 67,965 Income taxes.................................................. 106,312 87,285 19,810
32 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. Business Segment Information ---------------------------- EOG's operations are all natural gas and crude oil exploration and production related. SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," establishes standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports. Operating segments are defined as components of an enterprise about which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. EOG's chief operating decision making process is informal and involves the Chairman and Chief Executive Officer and other key officers. This group routinely reviews and makes operating decisions related to significant issues associated with each of EOG's major producing areas in the United States and each significant international location. For segment reporting purposes, the major U.S. producing areas have been aggregated as one reportable segment due to similarities in their operations as allowed by SFAS No. 131. Financial information by reportable segment is presented below for the years ended December 31, or at December 31 (in thousands): United States Canada Trinidad India(1) Other(2) Total -------------- ------------ --------- --------- --------- ------------- 2001 Net Operating Revenues...................... $ 1,394,457(3) $ 191,219(3) $ 69,140 $ -- $ 71 $ 1,654,887(3) Depreciation, Depletion and Amortization.... 348,539 31,821 12,031 -- 8 392,399 Operating Income (Loss)..................... 536,671 107,524 36,761 -- (6,404) 674,552 Interest Income............................. 415 2,943 1,702 -- -- 5,060 Other Income (Expense)...................... (3,284) 71 154 -- 2 (3,057) Interest Expense............................ 45,061 750 (701) -- -- 45,110 Income (Loss) Before Income Taxes........... 488,741 109,788 39,318 -- (6,402) 631,445 Income Tax Provision (Benefit).............. 187,285 28,438 20,166 -- (3,060) 232,829 Additions to Oil and Gas Properties......... 729,655 176,101 68,260 -- -- 974,016 Total Assets................................ 2,676,160 510,476 227,229 -- 179 3,414,044 2000 Net Operating Revenues...................... $ 1,223,315(3) $ 184,092(3) $ 82,430 $ -- $ 58 $ 1,489,895(3) Depreciation, Depletion and Amortization.... 310,685 34,621 13,959 -- -- 359,265 Operating Income (Loss)..................... 552,091 103,229 41,974 -- (431) 696,863 Interest Income............................. 354 2,186 915 -- 382 3,837 Other Income (Expense)..................... (6,343) 302 31 -- (127) (6,137) Interest Expense............................ 54,279 11,140 (4,413) -- -- 61,006 Income (Loss) Before Income Taxes........... 491,823 94,577 47,333 -- (176) 633,557 Income Tax Provision (Benefit).............. 181,506 31,159 24,076 -- (115) 236,626 Additions to Oil and Gas Properties......... 499,207 69,157 33,223 -- 1,051 602,638 Total Assets................................ 2,465,642 374,476 159,872 -- 1,263 3,001,253 1999 Net Operating Revenues...................... $ 635,587(3) $ 97,817(3) $ 62,689 $ 53,897 $ (7,891) $ 842,099(3) Depreciation, Depletion and Amortization.... 279,056 29,570 12,787 7,223 1,032 329,668 Operating Income (Loss)..................... (7,714) 33,941 32,643 22,699 (63,381) 18,188 Interest Income............................. 113 184 626 51 63 1,037 Other Income (Expense)...................... 630,872 112 128 (992) (19,814) 610,306 Interest Expense............................ 42,986 9,459 323 (2,625) 11,676 61,819 Income (Loss) Before Income Taxes........... 580,285 24,778 33,074 24,383 (94,808) 567,712 Income Tax Provision (Benefit).............. (4,200) 4,637 18,484 8,858 (29,161) (1,382) Additions to Oil and Gas Properties......... 292,970 63,783 7,361 23,281 9,055 396,450 Total Assets................................ 2,118,843 344,465 145,186 -- 2,299 2,610,793 (1) See Note 4"Transactions with Enron Corp." (2) Other includes China operations in 1999. See Note 4 "Transactions with Enron Corp." (3) EOG had sales activity in 2001 with a certain purchaser in the United States and Canada segments that totaled approximately $224.5 million of the Consolidated Net Operating Revenues. Sales activity with another purchaser in the United States and Canada segments in 2000 and 1999 totaled approximately $183.2 million and $98.1 million, respectively, of the Consolidated Net Operating Revenues.
33 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. Other Income (Expense), Net --------------------------- Other income (expense) - other, net for the year ended December 31, 1999, included the gain of $59.6 million on the sale of 3.2 million shares of Enron Corp. options granted to EOG under the 1997 Equity Participation and Business Opportunity Agreement with Enron Corp., and $19.4 million loss relating to anticipated costs of abandonment of certain international activities. 12. Price and Interest Rate Risk Management Activities -------------------------------------------------- EOG engages in price risk management activities from time to time. These activities are intended to manage EOG's exposure to fluctuations in commodity prices for natural gas and crude oil. EOG utilizes derivative financial instruments, primarily price swaps and costless collars, as the means to manage this price risk. During 2001 and 2000, EOG elected not to designate any of its derivative contracts as accounting hedges and accordingly, accounted for these derivative contracts under mark-to-market accounting. During 2001, EOG recognized mark-to-market gains on commodity contracts of $98 million, of which $62 million were realized gains. During 2000, EOG recognized and realized approximately $1 million mark-to-market losses on commodity contracts. During the fourth quarter of 2001, as a result of the Enron Corp.'s bankruptcy proceedings, EOG wrote off $17 million in Charges Related to Enron Bankruptcy in the Consolidated Statements of Income and Comprehensive Income related to 2001 and 2002 natural gas and crude oil derivative contracts entered into with a subsidiary of Enron Corp. (see Note 4 to the Consolidated Financial Statements). These contracts covered approximately 19.5 trillion British thermal units and 0.8 million barrels ("MMBbl"). At December 31, 2001, excluding positions related to the Enron bankruptcies, EOG had open natural gas price swap contracts covering approximately 15% of its 2002 North America production. The fair value of these contracts was $19.6 million. Tabulated below is a summary of these open natural gas price swap positions at December 31, 2001, with prices expressed in dollars per million British thermal units ("$/MMBtu") and volumes in million British thermal units per day ("MMBtud"): Average Price Volume 2002 ($/MMBtu) (MMBtud) --------------------- ------------- -------- January $ 3.21 140,000 February $ 3.13 190,000 March through May $ 3.09 140,000 June through December $ 3.24 100,000 At December 31, 2001, excluding positions related to the Enron bankruptcies, EOG had outstanding oil swap contracts, covering notional volumes of approximately 0.5 MMBbl. At December 31, 2001, the fair value of these contracts was a negative $0.4 million. At December 31, 2000, EOG had outstanding swap positions covering notional volumes of approximately 0.7 MMBbl of crude oil and condensate for 2001 that had a fair value of $0.4 million. Such swap positions were settled in 2001 for a loss of $1.7 million. 34 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Subsequent to December 31, 2001, EOG entered into certain natural gas and crude oil swap contracts. The following is a summary of EOG's price swap positions at February 20, 2002, including these contracts: o Natural Gas Price Swaps Average Price Volume 2002 ($/MMBtu) (MMBtud) ---------------------- ------------- -------- January (closed) $ 3.21 140,000 February (closed) $ 3.13 190,000 March $ 3.13 140,000 April and May $ 2.68 290,000 June $ 2.76 200,000 July through December $ 3.26 100,000 o Crude Oil Price Swaps - Notional volumes of two thousand barrels of oil per day for the period March 2002 to December 2002 at an average price of $21.50 per barrel. During 2001, 2000 and 1999, EOG recognized in natural gas and crude oil and condensate revenues hedge losses of $1 million, $17 million and $5 million, respectively, related to closed hedge positions. Interest Rate Swap Agreements and Foreign Currency Contracts. At December 31, 2000, a subsidiary of EOG and EOG were parties to offsetting foreign currency and interest rate swap agreements with an aggregate notional principal amount of $210 million. Such swap agreements terminated in January 2001. Presently, EOG is not a party to any foreign currency or interest rate swap agreement. The following table summarizes the estimated fair value of financial instruments and related transactions at December 31, 2001 and 2000: 2001 2000 ------------------------ ------------------------ Carrying Estimated Carrying Estimated Amount Fair Value(1) Amount Fair Value(1) -------- ------------- -------- ------------- (In Millions) (In Millions) Long-Term Debt(2)................................ $ 856.0 $ 838.3 $ 859.0 $ 831.1 NYMEX-Related Commodity Market Positions.......... 19.2 19.2 (5.6) (5.6) (1) Estimated fair values have been determined by using available market data and valuation methodologies. Judgment is necessarily required in interpreting market data and the use of different market assumptions or estimation methodologies may affect the estimated fair value amounts. (2) See Note 2 "Long-Term Debt."
Credit Risk. While notional contract amounts are used to express the magnitude of commodity price and interest rate swap agreements, the amounts potentially subject to credit risk, in the event of nonperformance by the other parties, are substantially smaller. EOG evaluates its exposure to all counterparties on an ongoing basis, including those arising from physical and financial transactions. In some instances EOG requires collateral from its counterparties to minimize any risk, and EOG is actively considering other means of reducing its exposure to individual companies. At December 31, 2001, approximately 11% of EOG's net accounts receivable balance related to natural gas, crude oil and condensate sales was due from a major utility company. The amount due from this utility company at December 31, 2000, which approximated 10% of the net accounts receivable balance, was collected during 2001. No other individual purchaser accounted for 10% or more of the net accounts receivable balance at December 31, 2001 and 2000. At December 31, 2001, EOG had an allowance for doubtful accounts of $20.1 million, of which $19.2 million is associated with the Enron Corp. bankruptcy. 35 EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded) 13. Concentration of Credit Risk ---------------------------- Substantially all of EOG's accounts receivable at December 31, 2001 and 2000 result from crude oil and natural gas sales and/or joint interest billings to third party companies including foreign state-owned entities in the oil and gas industry. This concentration of customers and joint interest owners may impact EOG's overall credit risk, either positively or negatively, in that these entities may be similarly affected by changes in economic or other conditions. In determining whether or not to require collateral from a customer or joint interest owner, EOG analyzes the entity's net worth, cash flows, earnings, and credit ratings. Receivables are generally not collateralized. Historical credit losses incurred on receivables by EOG have been immaterial except for those associated with the Enron bankruptcies. 14. Accounting for Certain Long-Lived Assets ---------------------------------------- Periodically, EOG reviews its oil and gas properties for impairment purposes by comparing the expected undiscounted future cash flows at a producing field level to the unamortized capitalized cost of the asset. During 2001 and 2000, such reviews indicated that unamortized capitalized costs of certain properties were higher than their expected undiscounted future cash flows due primarily to downward reserve revisions and lower natural gas and crude oil prices. As a result, EOG recorded in Impairments pre-tax charges of $39 million and $11 million, respectively, for 2001 and 2000 in the United States operating segment. The carrying values for assets determined to be impaired were adjusted to estimated fair values based on projected future net cash flows discounted using EOG risk- adjusted discount rate. In 1999, as a result of the change to EOG's portfolio of assets brought about by the Share Exchange (see Note 4 "Transactions with Enron Corp."), EOG conducted a re-evaluation of its overall business. As a result of this re-evaluation, some of EOG's projects were no longer deemed central to its business. EOG recorded non-cash charges in connection with the impairment and/or EOG's decision to dispose of such projects of $133 million pre-tax ($89 million after-tax). In addition, EOG recorded charges of $15 million pre-tax ($10 million after-tax) pursuant to a change in EOG's strategy related to certain offshore operations in the second quarter and an impairment of various North America properties in the fourth quarter of 1999 to Impairments. In the United States operating segment, a pre-tax impairment charge of $85 million was recorded to Impairments. The carrying values for assets determined to be impaired were adjusted to estimated fair values based on projected future discounted net cash flows for such assets. In the Other operating segment, a pre-tax charge of $36 million was recorded to Impairments to fully write-off EOG's basis and a pre-tax charge of $19 million was recorded to other income (expense) - other, net for the estimated exit costs related to EOG's decision to dispose of certain international operations. Net loss for the Other operating segment operations for 1999, excluding these charges, was approximately $3 million. 15. Investment in Caribbean Nitrogen Company Limited ------------------------------------------------ EOG, through a subsidiary, owns an approximate 16% equity interest in a Trinidadian company named Caribbean Nitrogen Company Limited ("CNCL"). The other shareholders in CNCL are subsidiaries of Ferrostall AG, Duke Energy, Halliburton and CL Financial Ltd. At December 31, 2001, investment in CNCL was approximately $12.7 million with the final equity payment of approximately $1.2 million due in the first quarter of 2002. CNCL is constructing an ammonia plant in Trinidad and is expected to commence production in 2002. At December 31, 2001, CNCL had a long-term debt balance of approximately $197 million, which is non-recourse to CNCL's shareholders. EOG will be liable for its share of any pre-completion deficiency funds loans to fund plant cost overruns up to $15 million, approximately $2.6 million of which is net to EOG's interest. EOG will also be liable for its share of any post-completion deficiency funds loans to fund the costs of operation, payment of principal and interest to the principal creditor and other cash deficiencies of CNCL up to $30 million, approximately $5 million of which is net to EOG's interest. The Shareholders' Agreement requires the consent of the holders of 90% or more of the shares to take certain material actions. Accordingly, given its current level of equity ownership, EOG is able to exercise significant influence over the operating and financial policies of CNCL and therefore, it accounts for the investment using the equity method. 36 EOG RESOURCES, INC. SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (In Thousands Except Per Share Amounts Unless Otherwise Indicated) (Unaudited Except for Results of Operations for Oil and Gas Producing Activities) Oil and Gas Producing Activities - -------------------------------- The following disclosures are made in accordance with SFAS No. 69--"Disclosures about Oil and Gas Producing Activities": Oil and Gas Reserves. Users of this information should be aware that the process of estimating quantities of "proved," "proved developed" and "proved undeveloped" crude oil and natural gas reserves is very complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic data for each reservoir. The data for a given reservoir may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history, and continual reassessment of the viability of production under varying economic conditions. Consequently, material revisions to existing reserve estimates occur from time to time. Although every reasonable effort is made to ensure that reserve estimates reported represent the most accurate assessments possible, the significance of the subjective decisions required and variances in available data for various reservoirs make these estimates generally less precise than other estimates presented in connection with financial statement disclosures. Proved reserves represent estimated quantities of natural gas, crude oil, condensate, and natural gas liquids that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under economic and operating conditions existing at the time the estimates were made. Proved developed reserves are proved reserves expected to be recovered, through wells and equipment in place and under operating methods being utilized at the time the estimates were made. Proved undeveloped reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage are limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Proved reserves for other undrilled units can be claimed only where it can be demonstrated with certainty that there is continuity of production from the existing productive formation. Estimates for proved undeveloped reserves are not attributed to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual tests in the area and in the same reservoir. Canadian provincial royalties are determined based on a graduated percentage scale which varies with prices and production volumes. Canadian reserves, as presented on a net basis, assume prices and royalty rates in existence at the time the estimates were made, and EOG's estimate of future production volumes. Future fluctuations in prices, production rates, or changes in political or regulatory environments could cause EOG's share of future production from Canadian reserves to be materially different from that presented. As a result of the re-evaluation of EOG's portfolio of assets following the Share Exchange (see Note 4 "Transactions with Enron Corp."), on November 12, 1999 senior management proposed to the Board of Directors ("the Board") of EOG to defer the development of the Big Piney Madison deep Paleozoic formation methane reserves in Wyoming for the foreseeable future. The Board approved the recommendation. As a result, the 1.2 trillion cubic feet of methane reserves in the formation, which are located on acreage owned by EOG and held by production for the foreseeable future, and which were classified as proved undeveloped reserves at December 31, 1998, were removed as a revision during 1999. At December 31, 1998, these reserves represented approximately $100 million or 5% of EOG's Standardized Measure of Discounted Future Net Cash Flows as adjusted for the sale of the India and China reserves as a result of the Share Exchange. At December 31, 2001, EOG had no plan to develop these reserves for the foreseeable future. 37 EOG RESOURCES, INC. SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Estimates of proved and proved developed reserves at December 31, 2001, 2000 and 1999 were based on studies performed by the engineering staff of EOG for reserves in the United States, Canada, Trinidad, India and China (See Note 4 to the Consolidated Financial Statements regarding operations transferred under the Share Exchange). Opinions by DeGolyer and MacNaughton ("D&M"), independent petroleum consultants, for the years ended December 31, 2001, 2000, and 1999 covered producing areas containing 71%, 49% and 52%, respectively, of proved reserves of EOG on a net-equivalent-cubic- feet-of-gas basis. D&M's opinions indicate that the estimates of proved reserves prepared by EOG's engineering staff for the properties reviewed by D&M, when compared in total on a net- equivalent-cubic-feet-of-gas basis, do not differ materially from the estimates prepared by D&M. Such estimates by D&M in the aggregate varied by not more than 5% from those prepared by the engineering staff of EOG. All reports by D&M were developed utilizing geological and engineering data provided by EOG. No major discovery or other favorable or adverse event subsequent to December 31, 2001 is believed to have caused a material change in the estimates of proved or proved developed reserves as of that date. The following table sets forth EOG's net proved and proved developed reserves at December 31 for each of the four years in the period ended December 31, 2001, and the changes in the net proved reserves for each of the three years in the period then ended as estimated by the engineering staff of EOG. NET PROVED AND PROVED DEVELOPED RESERVE SUMMARY United States Canada Trinidad SUBTOTAL India(1) Other(2) TOTAL ------------- ------ --------- -------- -------- -------- -------- Natural Gas (Bcf)(3) Net proved reserves at December 31, 1998........ 2,853.4(4) 464.2 976.4 4,294.0 824.6 110.3 5,228.9 Revisions of previous estimates............... (1,199.1)(5) (1.3) 4.5 (1,195.9) - - (1,195.9) Purchases in place............................ 108.5 34.0 - 142.5 - - 142.5 Extensions, discoveries and other additions... 208.2 69.8 51.0 329.0 - - 329.0 Sales in place(1)........................... (70.9) (1.4) - (72.3) (807.9) (110.3) (990.5) Production.................................... (242.9) (41.8) (37.3) (322.0) (16.7) - (338.7) -------- ------ -------- -------- ------ ------ -------- Net proved reserves at December 31, 1999........ 1,657.2 523.5 994.6 3,175.3 - - 3,175.3 Revisions of previous estimates............. 47.2 6.4 (0.4) 53.2 - - 53.2 Purchases in place............................ 188.8 39.4 - 228.2 - - 228.2 Extensions, discoveries and other additions... 255.4 23.8 65.1 344.3 - - 344.3 Sales in place............................... (84.2) (0.1) - (84.3) - - (84.3) Production.................................... (243.0) (47.3) (45.8) (336.1) - - (336.1) -------- ------ ------- -------- ------ ------ -------- Net proved reserves at December 31, 2000........ 1,821.4 545.7 1,013.5 3,380.6 - - 3,380.6 Revisions of previous estimates.............. 15.0 (26.8) (121.6) (133.4) - - (133.4) Purchases in place............................ 66.1 111.5 - 177.6 - - 177.6 Extensions, discoveries and other additions... 358.3 59.7 295.2 713.2 - - 713.2 Sales in place............................... (1.0) - - (1.0) - - (1.0) Production.................................... (252.5) (46.0) (42.0) (340.5) - - (340.5) --------- ------ ------- -------- ------ ------ -------- Net proved reserves at December 31, 2001........ 2,007.3 644.1 1,145.1(6) 3,796.5 - - 3,796.5 ========= ====== ======= ======== ====== ====== ========
38 EOG RESOURCES, INC. SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) United States Canada Trinidad SUBTOTAL India(1) Other(2) TOTAL ----------- ------- --------- -------- --------- -------- ---------- Liquids (MBbl)(7) Net proved reserves at December 31, 1998....... 36,827 7,592 16,204 60,623 42,785 1,162 104,570 Revisions of previous estimates.............. 5,085 117 (72) 5,130 - - 5,130 Purchases in place........................... 2,753 39 - 2,792 - - 2,792 Extensions, discoveries and other additions.. 9,520 2,416 509 12,445 - - 12,445 Sales in place(1).......................... (121) (37) - (158) (41,306) (1,162) (42,626) Production................................... (6,217) (1,231) (878) (8,326) (1,479) - (9,805) --------- ------- ------- -------- -------- ------- -------- Net proved reserves at December 31, 1999....... 47,847 8,896 15,763 72,506 - - 72,506 Revisions of previous estimates.............. (1,951) 46 28 (1,877) - - (1,877) Purchases in place........................... 3,948 - - 3,948 - - 3,948 Extensions, discoveries and other additions.. 12,433 404 738 13,575 - - 13,575 Sales in place.............................. (484) (2,474) - (2,958) - - (2,958) Production................................... (9,780) (1,055) (957) (11,792) - - (11,792) --------- ------- ------- -------- -------- ------- -------- Net proved reserves at December 31, 2000....... 52,013 5,817 15,572 73,402 - - 73,402 Revisions of previous estimates.............. (3,111) 1,294 (3,691) (5,508) - - (5,508) Purchases in place........................... 586 35 - 621 - - 621 Extensions, discoveries and other additions.. 12,380 361 1,967 14,708 - - 14,708 Sales in place............................... (192) (35) - (227) - - (227) Production................................... (9,293) (820) (749) (10,862) - - (10,862) --------- ------- ------- -------- -------- ------- -------- Net proved reserves at December 31, 2001...... 52,383 6,652 13,099(6) 72,134 - - 72,134 ========= ======= ======= ======== ======== ======= ======== Bcf Equivalent (Bcfe)(3) Net proved reserves at December 31, 1998...... 3,074.5(4) 509.7 1,073.6 4,657.8 1,081.3 117.2 5,856.3 Revisions of previous estimates.............. (1,168.8)(5) (0.6) 4.1 (1,165.3) - - (1,165.3) Purchases in place........................... 125.1 34.3 - 159.4 - - 159.4 Extensions, discoveries and other additions.. 265.3 84.3 54.0 403.6 - - 403.6 Sales in place(1)......................... (71.6) (1.6) - (73.2) (1,055.7) (117.2) (1,246.1) Production................................... (280.2) (49.2) (42.5) (371.9) (25.6) - (397.5) --------- ------- ------- -------- -------- ------ -------- Net proved reserves at December 31, 1999...... 1,944.3 576.9 1,089.2 3,610.4 - - 3,610.4 Revisions of previous estimates............. 35.5 6.8 (0.2) 42.1 - - 42.1 Purchases in place......................... 212.5 39.4 - 251.9 - - 251.9 Extensions, discoveries and other additions.. 330.0 26.2 69.5 425.7 - - 425.7 Sales in place............................. (87.1) (15.0) - (102.1) - - (102.1) Production................................... (301.7) (53.7) (51.6) (407.0) - - (407.0) --------- ------- ------- -------- -------- ------- -------- Net proved reserves at December 31, 2000...... 2,133.5 580.6 1,106.9 3,821.0 - - 3,821.0 Revisions of previous estimates.......... (3.7) (19.1) (143.7) (166.5) - - (166.5) Purchases in place........................... 69.7 111.6 - 181.3 - - 181.3 Extensions, discoveries and other additions.. 432.5 62.0 307.0 801.5 - - 801.5 Sales in place.............................. (2.2) (0.2) - (2.4) - - (2.4) Production................................... (308.2) (50.9) (46.5) (405.6) - - (405.6) --------- ------- ------- -------- -------- ------- -------- Net proved reserves at December 31, 2001....... 2,321.6 684.0 1,223.7(6)4,229.3 - - 4,229.3 ========= ======= ======= ======= ======== ======= ========
39 EOG RESOURCES, INC. SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) United States Canada Trinidad SUBTOTAL India(1) TOTAL ------------- ------ ---------- ---------- --------- --------- Net proved developed reserves at Natural Gas (Bcf)(3) December 31, 1998............. 1,429.7 387.4 283.0 2,100.1 407.4 2,507.5 December 31, 1999............. 1,446.5 451.1 250.2 2,147.8 -- 2,147.8 December 31, 2000............. 1,498.6 479.4 207.0 2,185.0 -- 2,185.0 December 31, 2001............. 1,588.4 587.6 620.6(8) 2,796.6 -- 2,796.6 Liquids (MBbl)(7) December 31, 1998............. 33,045 7,465 4,782 45,292 33,472 78,764 December 31, 1999............. 41,717 7,041 3,833 52,591 -- 52,591 December 31, 2000............. 42,132 5,695 2,967 50,794 -- 50,794 December 31, 2001............. 41,205 6,532 8,435(8) 56,172 -- 56,172 Bcf Equivalents (Bcfe)(3) December 31, 1998............. 1,628.0 432.1 311.7 2,371.8 608.2 2,980.0 December 31, 1999............. 1,696.8 493.3 273.2 2,463.3 -- 2,463.3 December 31, 2000............. 1,751.4 513.6 224.8 2,489.8 -- 2,489.8 December 31, 2001............. 1,835.7 626.8 671.1(8) 3,133.6 -- 3,133.6 ___________________________ (1) See Note 4 "Transactions with Enron Corp." (2) Other includes China operations only. See Note 4 "Transactions with Enron Corp." (3) Billion cubic feet or billion cubic feet equivalent, as applicable. (4) Includes 1,180 Bcf of proved undeveloped methane reserves contained, along with high concentrations of carbon dioxide and other gases, in deep Paleozoic (Madison) formations in the Big Piney area of Wyoming. (5) Includes reduction of the 1,180 Bcf of proved undeveloped methane reserves mentioned in (4) as a result of EOG's decision to defer the development of the Big Piney Madison deep Paleozoic formation methane reserves in Wyoming for the foreseeable future. (6) Includes net proved reserves of 263.5 Bcf, 2,031 MBbl or 275.7 Bcfe, as applicable, from the SECC Block beyond the concession term. EOG believes that such concession term will be extended by the Trinidadian government as a matter of course. (7) Thousand barrels; includes crude oil, condensate and natural gas liquids. (8) Includes net proved developed reserves of 4.3 Bcf, 50 MBbl or 4.6 Bcfe, as applicable, from the SECC Block beyond the concession term. EOG believes that such concession term will be extended by the Trinidadian government as a matter of course.
Capitalized Costs Relating to Oil and Gas Producing Activities. The following table sets forth the capitalized costs relating to EOG's natural gas and crude oil producing activities at December 31, 2001 and 2000: 2001 2000 ------------ ------------ Proved Properties.............................................. $ 5,847,053 $ 4,966,667 Unproved Properties............................................ 218,550 156,061 ----------- ----------- Total..................................................... 6,065,603 5,122,728 Accumulated depreciation, depletion and amortization........... (3,009,693) (2,597,721) ----------- ----------- Net capitalized costs.......................................... $ 3,055,910 $ 2,525,007 =========== ===========
Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities. The acquisition, exploration and development costs disclosed in the following tables are in accordance with definitions in SFAS No. 19--"Financial Accounting and Reporting by Oil and Gas Producing Companies." Acquisition costs include costs incurred to purchase, lease, or otherwise acquire property. Exploration costs include exploration expenses, additions to exploration wells including those in progress, and depreciation of support equipment used in exploration activities. 40 EOG RESOURCES, INC. SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Development costs include additions to production facilities and equipment, additions to development wells including those in progress and depreciation of support equipment and related facilities used in development activities. The following tables set forth costs incurred related to EOG's oil and gas activities for the years ended December 31: United States Canada Trinidad Other SUBTOTAL India(1) China(1) TOTAL ------------- -------- --------- ------- ----------- -------- --------- ---------- 2001 Acquisition Costs of Properties Unproved........................ $ 69,308 $ 6,967 $ - $ - $ 76,275 $ - $ - $ 76,275 Proved.......................... 95,646 72,660 - - 168,306 - - 168,306 --------- -------- -------- ------- ---------- ------- ------- ---------- Subtotal................... 164,954 79,627 - - 244,581 - - 244,581 Exploration Costs................. 163,602 16,708 13,695 8,739 202,744 - - 202,744 Development Costs................ 512,175 92,374 60,969 - 665,518 - - 665,518 --------- -------- -------- ------- ---------- ------- ------- ---------- Subtotal................... 840,731 188,709 74,664 8,739 1,112,843 - - 1,112,843 Deferred Income Taxes............. 19,411 30,845 - - 50,256 - - 50,256 --------- -------- -------- ------- ---------- ------- ------- ---------- Total...................... $ 860,142 $219,554 $ 74,664 $ 8,739 $1,163,099 $ - $ - $1,163,099 ========= ======== ======== ======= ========== ======= ======= ========== 2000 Acquisition Costs of Properties Unproved........................ $ 45,456 $ 5,741 $ - $ - $ 51,197 $ - $ - $ 51,197 Proved.......................... 88,473 13,965 - - 102,438 - - 102,438 --------- -------- -------- ------- ---------- ------- ------- ---------- Subtotal................... 133,929 19,706 - - 153,635 - - 153,635 Exploration Costs................. 98,654 9,711 10,849 3,581 122,795 - - 122,795 Development Costs................ 335,053 46,000 29,688 - 410,741 - - 410,741 --------- -------- -------- ------- ---------- ------- ------- ---------- Subtotal................... 567,636 75,417 40,537 3,581 687,171 - - 687,171 Deferred Income Taxes............. 18,744 3,685 - - 22,429 - - 22,429 --------- -------- -------- ------- ---------- ------- ------- ---------- Total...................... $ 586,380 $ 79,102 $ 40,537 $ 3,581 $ 709,600 $ - $ - $ 709,600 ========= ======== ======== ======= ========== ======= ======= ========== 1999 Acquisition Costs of Properties Unproved........................ $ 18,964 $ 2,276 $ - $ - $ 21,240 $ - $ - $ 21,240 Proved.......................... 22,092 20,838 - - 42,930 - - 42,930 --------- -------- -------- ------- ---------- ------- ------- ---------- Subtotal................... 41,056 23,114 - - 64,170 - - 64,170 Exploration Costs................. 65,070 6,516 8,425 4,350 84,361 1,083 1,014 86,458 Development Costs................ 234,900 39,544 4,801 20 279,265 23,281 7,942 310,488 --------- -------- -------- ------- ---------- ------- ------- ---------- Subtotal................... 341,026 69,174 13,226 4,370 427,796 24,364 8,956 461,116 Deferred Income Taxes............. - - - - - - - - --------- -------- -------- ------- ---------- ------- ------- ---------- Total...................... $ 341,026 $ 69,174 $ 13,226 $ 4,370 $ 427,796 $24,364 $ 8,956 $ 461,116 ========= ======== ======== ======= ========== ======= ======= ========== (1) See Note 4 "Transactions with Enron Corp."
41 EOG RESOURCES, INC. SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Results of Operations for Oil and Gas Producing Activities(1). The following tables set forth results of operations for oil and gas producing activities for the years ended December 31: United States Canada Trinidad SUBTOTAL India(2) Other(3) TOTAL ---------- --------- -------- ---------- -------- -------- ---------- 2001 Natural Gas, Crude Oil and Condensate Revenues..................... $1,295,894 $ 191,096 $ 69,141 $1,556,131 $ - $ 72 $1,556,203 Gains (Losses) on Sales of Reserves and Related Assets and Other, Net.. 811 123 - 934 - - 934 ---------- --------- -------- ---------- -------- ------- ---------- Total................................... 1,296,705 191,219 69,141 1,557,065 - 72 1,557,137 Exploration Expenses, including Dry Hole...... 113,419 12,596 6,405 132,420 - 6,407 138,827 Production Costs.............................. 219,504 34,426 10,308 264,238 - 49 264,287 Impairments................................... 76,801 2,355 - 79,156 - - 79,156 Depreciation, Depletion and Amortization...... 348,397 31,821 12,031 392,249 - 9 392,258 ---------- --------- -------- ---------- -------- -------- ---------- Income (Loss) before Income Taxes............. 538,584 110,021 40,397 689,002 - (6,393) 682,609 Income Tax Provision (Benefit)................ 198,243 32,663 22,218 253,124 - (2,238) 250,886 ---------- --------- -------- ---------- -------- -------- ---------- Results of Operations......................... $ 340,341 $ 77,358 $ 18,179 $ 435,878 $ - $ (4,155) $ 431,723 ========== ========= ======== ========== ======== ======== ========== 2000 Natural Gas, Crude Oil and Condensate Revenues..................... $1,215,051 $ 183,989 $ 82,431 $1,481,471 $ - $ 59 $1,481,530 Gains (Losses) on Sales of Reserves and Related Assets and Other, Net.. 9,262 103 - 9,365 - - 9,365 ---------- --------- -------- ---------- -------- -------- ---------- Total................................... 1,224,313 184,092 82,431 1,490,836 - 59 1,490,895 Exploration Expenses, including Dry Hole...... 72,000 4,881 7,314 84,195 - 337 84,532 Production Costs............................. 181,266 31,784 15,669 228,719 - 129 228,848 Impairments................................... 39,775 6,703 - 46,478 - - 46,478 Depreciation, Depletion and Amortization...... 310,612 34,621 13,959 359,192 - 2 359,194 ---------- --------- -------- ---------- -------- -------- ---------- Income (Loss) before Income Taxes............. 620,660 106,103 45,489 772,252 - (409) 771,843 Income Tax Provision (Benefit)................ 226,657 41,274 25,019 292,950 - (143) 292,807 ---------- --------- -------- ---------- -------- -------- ---------- Results of Operations......................... $ 394,003 $ 64,829 $ 20,470 $ 479,302 $ - $ (266) $ 479,036 ========== ========= ======== ========== ======== ======== ========== 1999 Natural Gas, Crude Oil and Condensate Revenues..................... $ 629,435 $ 96,781 $ 62,689 $ 788,905 $ 53,897 $ 40 $ 842,842 Gains (Losses) on Sales of Reserves and Related Assets and Other, Net.. 6,152 1,036 - 7,188 - (7,931) (743) ---------- --------- -------- ---------- -------- -------- ---------- Total................................... 635,587 97,817 62,689 796,093 53,897 (7,891) 842,099 Exploration Expenses, including Dry Hole...... 49,181 5,122 5,865 60,168 1,083 3,415 64,666 Production Costs.............................. 129,868 24,698 8,322 162,888 13,413 2,333 178,634 Impairments................................... 121,933 2,480 - 124,413 - 37,404 161,817 Depreciation, Depletion and Amortization...... 279,054 29,570 12,787 321,411 7,223 1,034 329,668 ---------- --------- -------- ---------- -------- -------- ---------- Income (Loss) before Income Taxes............. 55,551 35,947 35,715 127,213 32,178 (52,077) 107,314 Income Tax Provision (Benefit)................ 14,605 12,259 19,643 46,507 15,445 (18,227) 43,725 ---------- --------- -------- ---------- -------- -------- ---------- Results of Operations......................... $ 40,946 $ 23,688 $ 16,072 $ 80,706 $ 16,733 $(33,850) $ 63,589 ========== ========= ======== ========== ======== ======== ========== (1) Excludes mark-to-market gains or losses on commodity derivative contracts, interest charges and general corporate expenses for each of the three years in the period ended December 31, 2001. (2) See Note 4 "Transactions with Enron Corp." (3) Other includes China (in 1999) and other international operations. See Note 4 "Transactions with Enron Corp."
42 EOG RESOURCES, INC. SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves. The following information has been developed utilizing procedures prescribed by SFAS No. 69 and based on crude oil and natural gas reserve and production volumes estimated by the engineering staff of EOG. It may be useful for certain comparison purposes, but should not be solely relied upon in evaluating EOG or its performance. Further, information contained in the following table should not be considered as representative of realistic assessments of future cash flows, nor should the Standardized Measure of Discounted Future Net Cash Flows be viewed as representative of the current value of EOG. The future cash flows presented below are based on sales prices, cost rates, and statutory income tax rates in existence as of the date of the projections. It is expected that material revisions to some estimates of crude oil and natural gas reserves may occur in the future, development and production of the reserves may occur in periods other than those assumed, and actual prices realized and costs incurred may vary significantly from those used. Management does not rely upon the following information in making investment and operating decisions. Such decisions are based upon a wide range of factors, including estimates of probable as well as proved reserves, and varying price and cost assumptions considered more representative of a range of possible economic conditions that may be anticipated. The following table sets forth the standardized measure of discounted future net cash flows from projected production of EOG's crude oil and natural gas reserves for the years ended December 31: United States Canada Trinidad TOTAL -------------- ------------ ------------ ------------ 2001 Future cash inflows.................................. $ 5,677,824 $ 1,490,552 $ 1,472,197 $ 8,640,573 Future production costs.............................. (1,528,474) (371,124) (335,395) (2,234,993) Future development costs............................. (387,048) (31,232) (110,331) (528,611) ----------- ----------- ----------- ----------- Future net cash flows before income taxes............ 3,762,302 1,088,196 1,026,471 5,876,969 Future income taxes.................................. (930,505) (295,739) (265,709) (1,491,953) ----------- ----------- ----------- ----------- Future net cash flows................................ 2,831,797 792,457 760,762 4,385,016 Discount to present value at 10% annual rate......... (1,121,771) (321,980) (413,876) (1,857,627) ----------- ----------- ----------- ----------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves(1).................. $ 1,710,026 $ 470,477 $ 346,886 $ 2,527,389 =========== =========== =========== =========== 2000 Future cash inflows.................................. $18,500,822 $ 4,704,243 $ 1,860,366 $25,065,431 Future production costs.............................. (2,766,579) (389,819) (668,549) (3,824,947) Future development costs............................. (279,407) (44,011) (194,741) (518,159) ----------- ----------- ----------- ----------- Future net cash flows before income taxes............ 15,454,836 4,270,413 997,076 20,722,325 Future income taxes.................................. (5,074,986) (1,451,776) (230,712) (6,757,474) ----------- ----------- ----------- ----------- Future net cash flows................................ 10,379,850 2,818,637 766,364 13,964,851 Discount to present value at 10% annual rate......... (4,368,717) (1,304,886) (377,811) (6,051,414) ----------- ----------- ----------- ----------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves...................... $ 6,011,133 $ 1,513,751 $ 388,553 $ 7,913,437 =========== =========== =========== =========== 1999 Future cash inflows.................................. $ 4,653,014 $ 1,159,024 $ 1,455,951 $ 7,267,989 Future production costs............................. (1,277,485) (300,332) (486,902) (2,064,719) Future development costs............................ (175,039) (46,966) (158,778) (380,783) ----------- ----------- ----------- ----------- Future net cash flows before income taxes........... 3,200,490 811,726 810,271 4,822,487 Future income taxes.................................. (630,876) (226,118) (253,373) (1,110,367) ----------- ----------- ----------- ----------- Future net cash flows................................ 2,569,614 585,608 556,898 3,712,120 Discount to present value at 10% annual rate......... (842,382) (207,717) (267,965) (1,318,064) ----------- ----------- ----------- ----------- Standardized measure of discounted future net cash flows relating to proved oil and gas reserves..................... $ 1,727,232 $ 377,891 $ 288,933 $ 2,394,056 =========== =========== =========== =========== (1) Natural gas prices have declined since December 31, 2001; consequently, the discounted future net cash flows would be reduced if the standardized measure was calculated in the first quarter of 2002.
EOG RESOURCES, INC. SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Changes in Standardized Measure of Discounted Future Net Cash Flows. The following table sets forth the changes in the standardized measure of discounted future net cash flows at December 31, for each of the three years in the period ended December 31, 2001. United States Canada Trinidad SUBTOTAL India(1) Other(2) TOTAL -------------- ---------- --------- ------------ ---------- --------- ------------ December 31, 1998....................... $ 1,570,547(3) $ 306,318 $ 237,795 $ 2,114,660 $ 386,293 $ 19,961 $ 2,520,914 Sales and transfers of oil and gas produced, net of production costs...................... (520,961) (73,044) (47,578) (641,583) (40,484) 2,334 (679,733) Net changes in prices and production costs...................... 265,946 77,195 76,381 419,522 -- -- 419,522 Extensions, discoveries, additions and improved recovery net of related costs.......... 310,470 68,396 8,523 387,389 -- -- 387,389 Development costs incurred............. 42,500 16,100 -- 58,600 23,820 8,010 90,430 Revisions of estimated development costs..................... 133,741 687 8,178 142,606 -- -- 142,606 Revisions of previous quantity estimates. (163,423)(4) (505) 2,051 (161,877) -- -- (161,877) Accretion of discount.................. 171,588 33,815 37,790 243,193 -- -- 243,193 Net change in income taxes............... (27,883) (79,397) (22,874) (130,154) -- -- (130,154) Purchases of reserves in place........... 102,086 18,769 -- 120,855 -- -- 120,855 Sales of reserves in place............. (81,607) (1,276) -- (82,883) (369,629) (30,305) (482,817) Changes in timing and other............ (75,772) 10,833 (11,333) (76,272) -- -- (76,272) ---------- ---------- -------- ----------- --------- --------- ----------- December 31, 1999......................... 1,727,232 377,891 288,933 2,394,056 -- -- 2,394,056 Sales and transfers of oil and gas produced, net of production costs...................... (1,048,804) (152,602) (66,761) (1,268,167) -- -- (1,268,167) Net changes in prices and production costs...................... 5,459,629 1,850,021 153,961 7,463,611 -- -- 7,463,611 Extensions, discoveries, additions and improved recovery net of related costs....... 1,502,377 94,379 20,544 1,617,300 -- -- 1,617,300 Development costs incurred............. 77,000 24,100 29,600 130,700 -- -- 130,700 Revisions of estimated development costs...................... (19,055) 39 (39,590) (58,606) -- -- (58,606) Revisions of previous quantity estimates. 153,862 30,376 (129) 184,109 -- -- 184,109 Accretion of discount.................. 190,045 48,912 45,192 284,149 -- -- 284,149 Net change in income taxes............... (2,436,834) (606,556) 8,566 (3,034,824) -- -- (3,034,824) Purchases of reserves in place......... 671,604 136,138 -- 807,742 -- -- 807,742 Sales of reserves in place............. (331,960) (22,454) -- (354,414) -- -- (354,414) Changes in timing and other.............. 66,037 (266,493) (51,763) (252,219) -- -- (252,219) ---------- ---------- -------- ------------ --------- --------- ----------- December 31, 2000......................... 6,011,133 1,513,751 388,553 7,913,437 -- -- 7,913,437 Sales and transfers of oil and gas produced, net of production costs...................... (1,060,926) (156,787) (58,832) (1,276,545) -- -- (1,276,545) Net changes in prices and production costs...................... (6,400,910) (1,822,229) (194,995) (8,418,134) -- -- (8,418,134) Extensions, discoveries, additions and improved recovery net of related costs.......... 347,088 48,271 114,871 510,230 -- -- 510,230 Development costs incurred............. 101,900 27,500 71,088 200,488 -- -- 200,488 Revisions of estimated development cost....................... (5,296) 2,931 10,947 8,582 -- -- 8,582 Revisions of previous quantity estimates. (3,563) (12,536) 47,418 31,319 -- -- 31,319 Accretion of discount.................. 862,118 223,154 54,297 1,139,569 -- -- 1,139,569 Net change in income taxes............... 2,313,068 592,322 15,087 2,920,477 -- -- 2,920,477 Purchases of reserves in place......... 35,686 78,790 -- 114,476 -- -- 114,476 Sales of reserves in place............... (6,165) (303) -- (6,468) -- -- (6,468) Changes in timing and other.............. (484,107) (24,387) (101,548) (610,042) -- -- (610,042) ----------- ---------- --------- ----------- --------- --------- ----------- December 31, 2001......................... $ 1,710,026 $ 470,477 $ 346,886(5) $ 2,527,389 $ -- $ -- $ 2,527,389 =========== ========== ========= =========== ========= ========= =========== (1) See Note 4 "Transactions with Enron Corp." (2) Other includes China operations only. See Note 4 "Transactions with Enron Corp." (3) Includes approximately $100,284 in 1998 related to the reserves in the Big Piney deep Paleozoic formations. (4) Includes reserves reduction of approximately $172,057, discounted before income taxes, related to the reserves in the Big Piney deep Paleozoic formations. (5) Includes cash flows of $34.1 million from proved reserves of 275.7 Bcfe from the SECC Block beyond the concession term. EOG believes that such concession term will be extended by the Trinidadian government as a matter of course. 44 EOG RESOURCES, INC. SUPPLEMENTAL INFORMATION TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded) Unaudited Quarterly Financial Information Quarter Ended --------------------------------------------------- March 31 June 30 Sept. 30 Dec. 31 ---------- ---------- ---------- ---------- 2001 Net Operating Revenues.......................... $ 597,253 $ 466,048 $ 354,172 $ 237,414 ========= ========= ========= ========= Operating Income (Loss)......................... $ 354,024 $ 234,239 $ 123,947 $ (37,658) ========= ========= ========= ========= Income (Loss) before Income Taxes............... $ 340,096 $ 224,865 $ 114,977 $ (48,493) Income Tax Provision (Benefit).................. 124,849 88,662 43,014 (23,696) --------- --------- --------- --------- Net Income (Loss)............................... 215,247 136,203 71,963 (24,797) Preferred Stock Dividends..................... 2,721 2,757 2,759 2,757 --------- --------- --------- --------- Net Income (Loss) Available to Common........... $ 212,526 $ 133,446 $ 69,204 $ (27,554) ========= ========= ========= ========= Net Income (Loss) per Share Available to Common Basic (1)..................................... $ 1.83 $ 1.15 $ 0.60 $ (0.24) ========= ========= ========= ========= Diluted (1)................................... $ 1.79 $ 1.13 $ 0.59 $ (0.24) ========= ========= ========= ========= Average Number of Common Shares Basic......................................... 116,384 115,870 115,692 115,115 ========= ========= ========= ========= Diluted....................................... 118,952 118,047 117,141 115,115 ========= ========= ========= ========= 2000 Net Operating Revenues.......................... $ 259,897 $ 322,725 $ 402,152 $ 505,121 ========= ========= ========= ========= Operating Income................................ $ 80,210 $ 139,235 $ 203,658 $ 273,760 ========= ========= ========= ========= Income before Income Taxes..................... $ 65,659 $ 124,417 $ 188,943 $ 254,538 Income Tax Provision............................ 24,169 46,900 72,466 93,091 --------- --------- --------- --------- Net Income...................................... 41,490 77,517 116,477 161,447 Preferred Stock Dividends..................... 2,654 2,860 2,755 2,759 --------- --------- --------- --------- Net Income Available to Common.................. $ 38,836 $ 74,657 $ 113,722 $ 158,688 ========= ========= ========= ========= Net Income per Share Available to Common Basic (1)..................................... $ 0.33 $ 0.64 $ 0.98 $ 1.36 ========= ========= ========= ========= Diluted (1)................................... $ 0.33 $ 0.63 $ 0.95 $ 1.33 ========= ========= ========= ========= Average Number of Common Shares Basic......................................... 117,827 116,666 116,559 116,684 ========= ========= ========= ========= Diluted....................................... 118,273 119,179 119,262 119,582 ========= ========= ========= ========= (1) The sum of quarterly net income per share available to common may not agree with total year net income per share available to common as each quarterly computation is based on the weighted average of common shares outstanding.
45 EXHIBIT 23.1 CONSENT OF DEGOLYER AND MACNAUGHTON February 25, 2002 We hereby consent to the references to our firm and to the opinions delivered to EOG Resources, Inc., formerly Enron Oil & Gas Company (the Company), regarding our comparison of estimates prepared by us with those furnished to us by the Company of the proved oil, condensate, natural gas liquids, and natural gas reserves of certain selected properties owned by the Company. The opinions are contained in our letter reports dated February 8, 2000, February 8, 2001 and January 25, 2002 for estimates as of December 31, 1999, December 31, 2000, and December 31, 2001, respectively. The opinions are referred to in the section "Supplemental Information to Consolidated Financial Statements - Oil and Gas Producing Activities" in the Company's Current Report on Form 8-K dated February 27, 2002, to be filed with the Securities and Exchange Commission (the "Form 8-K"). DeGolyer and MacNaughton also consents to the inclusion of our letter report, dated January 25, 2002, addressed to the Company as Exhibit (23.2) to the Company's Form 8-K. Additionally, we hereby consent to the incorporation by reference of such references to our firm and to our opinions included in the Company's Form 8-K in the Company's previously filed Registration Statement Nos. 33-48358, 33-52201, 33- 58103, 33-62005, 333-09919, 333-20841, 333-18511, 333-31715, 333- 44785, 333-69483, 333-46858, 333-62256 and 333-63184. DeGOLYER and MacNAUGHTON 46 EXHIBIT 23.2 OPINION OF DEGOLYER AND MACNAUGHTON January 25, 2002 EOG Resources, Inc. 333 Clay Street, Suite 4200 Houston, Texas 77002 Gentlemen: Pursuant to your request, we have prepared estimates of the proved crude oil, condensate, natural gas liquids, and natural gas reserves, as of December 31, 2001, of certain selected properties in the United States, Canada, and Trinidad owned by EOG Resources, Inc. (EOG). The properties consist of working and royalty interests located in California, New Mexico, Texas, Utah, and Wyoming and offshore from Texas, Louisiana, and Alabama; in Alberta and Saskatchewan, Canada; and offshore from Trinidad. The estimates are reported in detail in our "Report as of December 31, 2001, on Proved Reserves of Certain Properties in the United States owned by EOG Resources, Inc. Selected Properties," our "Report as of December 31, 2001, on Proved Reserves of Certain Properties in Canada owned by EOG Resources, Inc. Selected Properties," our "Report as of December 31, 2001 on Proved Reserves of the U(a) Block Offshore Trinidad owned by EOG Resources, Inc.," and our "Report as of December 31, 2001, on Proved Reserves of the Kiskadee and Oil Bird Fields Offshore Trinidad owned by EOG Resources, Inc." hereinafter collectively referred to as the "Reports." We also have reviewed information provided to us by EOG that it represents to be EOG's estimates of the reserves, as of December 31, 2001, for the same properties as those included in the Reports. Proved reserves estimated by us and referred to herein are judged to be economically producible in future years from known reservoirs under existing economic and operating conditions and assuming continuation of current regulatory practices using conventional production methods and equipment. Proved reserves are defined as those that have been proved to a high degree of certainty by reason of actual completion, successful testing, or in certain cases by adequate core analyses and electrical-log interpretation when the producing characteristics of the formation are known from nearby fields. These reserves are defined areally by reasonable geological interpretation of structure and known continuity of oil- or gas-saturated material. This definition is in agreement with the definition of proved reserves prescribed by the Securities and Exchange Commission (SEC). EOG represents that its estimates of the proved reserves, as of December 31, 2001, net to its interests in the properties included in the Reports are as follows, expressed in thousands of barrels (Mbbl) or millions of cubic feet (MMcf): Oil, Condensate, and Net Natural Gas Liquids Natural Gas Equivalent (Mbbl) (MMcf) (MMcf) -------------------- ------------ ------------ 49,274 2,711,201 3,006,845 Note: Net equivalent million cubic feet is based on 1 barrel of oil, condensate, or natural gas liquids being equivalent to 6,000 cubic feet of gas. EOG has advised us, and we have assumed, that its estimates of proved oil, condensate, natural gas liquids, and natural gas reserves are in accordance with the rules and regulations of the SEC. Proved reserves net to EOG's interests estimated by us for the properties included in the Reports, as of December 31, 2001, are as follows, expressed in thousands of barrels (Mbbl) or millions of cubic feet (MMcf): 47 Oil, Condensate, and Net Natural Gas Liquids Natural Gas Equivalent (Mbbl) (MMcf) (MMcf) -------------------- ----------- ------------ 47,089 2,726,906 3,009,440 Note: Net equivalent million cubic feet is based on 1 barrel of oil, condensate, or natural gas liquids being equivalent to 6,000 cubic feet of gas. In making a comparison of the detailed reserves estimates prepared by us and by EOG of the properties involved, we have found differences, both positive and negative, in reserves estimates for individual properties. These differences appear to be compensating to a great extent when considering the reserves of EOG in the properties included in the Reports, resulting in overall differences not being substantial. It is our opinion that the reserves estimates prepared by EOG on the properties reviewed by us and referred to above, when compared on the basis of net equivalent million cubic feet of gas, do not differ materially from those prepared by us. Submitted, DeGOLYER and MacNAUGHTON 48 EXHIBIT 23.3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 8-K, into EOG Resources, Inc.'s previously filed Registration Statement File Nos. 33-48358, 33-52201, 33-58103, 33-62005, 333-09919, 333-20841, 333-18511, 333-31715, 333-46858, 333-44785, 333-69483, 333-62256 and 333-63184. ARTHUR ANDERSEN LLP Houston, Texas February 27, 2002 -----END PRIVACY-ENHANCED MESSAGE-----