EX-99 2 ex99-1pr.txt PRESS RELEASE OF EOG RESOURCES, INC. Exhibit 99.1 EOG Resources, Inc. News Release For Further Information Contact: Investors Maire A. Baldwin (713) 651-6EOG (651-6364) Media and Investors Elizabeth M. Ivers (713) 651-7132 EOG RESOURCES REPORTS FIRST QUARTER 2004 RESULTS, INCREASES 2004 PRODUCTION GROWTH TARGETS, REDUCES UNIT COST GUIDANCE AND ANNOUNCES SUCCESS IN TEXAS BARNETT SHALE NATURAL GAS PLAY FOR IMMEDIATE RELEASE: Sunday, May 2, 2004 HOUSTON - EOG Resources, Inc. (EOG) today reported first quarter 2004 net income available to common of $98.1 million, or $0.83 per share. This compares to first quarter 2003 net income available to common of $126.7 million, or $1.09 per share. EOG increased 2004 production growth targets, reduced unit cost guidance and announced drilling success in Texas' Barnett Shale Play. "EOG is raising its previously announced 2004 total company production growth target from 6.5 to 8 percent. With this increase, our three-year total growth target is now 27 percent -- 8 percent in 2004, 10 percent in 2005 and 7 percent in 2006. In addition, based on our early drilling success and to-date 2004 actual results and commodity prices, EOG has reduced its 2004 full year unit cost guidance as outlined in our most recent 8-K filing," said Mark G. Papa, Chairman and Chief Executive Officer. The results for first quarter 2004 included a previously disclosed $44.5 million ($28.6 million after tax, or $0.24 per share) loss on the mark-to-market of commodity price transactions. During the quarter, net cash outflows from the settlement of commodity price transactions were $2.3 million ($1.5 million after tax, or $0.01 per share). Consistent with some analysts' practice of matching realizations to settlement months, adjusted non-GAAP net income available to common for the quarter was $125.2 million, or $1.06 per share. Similarly, EOG's first quarter 2003 results included a $45.2 million ($29.1 million after tax, or $0.25 per share) loss on mark-to-market commodity price transactions, net cash outflows from the settlement of commodity price transactions of $27.9 million ($18.0 million after tax, or $0.15 per share) and a one-time cumulative after-tax charge of $7.1 million ($0.06 per share) from a change in accounting principle to adopt Statement of Financial Accounting Standards No. 143 relating to asset retirement obligations of oil and gas properties. Reflecting these items, first quarter 2003 adjusted non-GAAP net income available to common was $144.9 million, or $1.25 per share. (Please refer to the table below for the reconciliation of net income available to common to adjusted non-GAAP net income available to common.) Operational Highlights "Results from our U.S. and Canada singles and doubles drilling programs have surpassed original expectations and we are pleased to announce success with our horizontal Barnett Shale program in Johnson County, Texas. Additionally, our Trinidad and U.K. North Sea programs continue to be on track," said Papa. In the Barnett Shale Play, EOG has acquired approximately 175,000 acres at essentially 100 percent working interest over the last three years. To date, EOG has drilled nine horizontal wells, focusing on optimizing drilling and completion methodologies. Since completing its initial horizontal well in the play, EOG has decreased drilling time from 30 to 10 days and reduced total well costs by over 50 percent. The Evans Unit #1H and the River Hills #2H wells recently came on-line and are producing around 2.6 and 3.2 million cubic feet per day (MMcfd), respectively. With 400 to 800 potential net well locations, EOG expects to increase drilling activity in the play beginning mid-2004. "This play is expected to have a very significant impact on EOG's U.S. natural gas production growth, reserve additions and reinvestment rate of return," said Papa. Results from EOG's South Texas drilling program in the Roleta, Frio and Wilcox Plays continue to be strong. In the Roleta formation, EOG drilled two key vertical wells during the first quarter. The Marshall State #5 and #6 are currently being completed and initial production is expected to be 10 to 15 MMcfd from each well. EOG has 50 percent working interest in these wells. In Trinidad, the Parula #2 and #3 development wells were successfully drilled on the SECC Block. Combined with the Parula #1 discovery, the three wells are expected to have total deliverability of 300 MMcfd. Natural gas production from these wells and other sources will supply existing gas contracts including new ammonia and methanol plants that are scheduled to commence operations in mid-2004 and 2005, respectively. Capital During the quarter, EOG generated $114 million of free cash flow that was used to decrease debt by $23 million and increase cash and cash equivalents by $91 million. (Please refer to the table below for the reconciliation of net operating cash inflows to free cash flow.) Conference Call Scheduled for May 3, 2004 EOG's first quarter 2004 conference call will be available via live audio webcast at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) Monday, May 3, 2004. To listen to this webcast, log on to www.eogresources.com. The webcast will be archived on EOG's website through May 17, 2004. EOG Resources, Inc. is one of the largest independent (non-integrated) oil and natural gas companies in the United States with substantial proved reserves in the U.S., Canada, offshore Trinidad and, to a lesser extent, the United Kingdom North Sea. EOG Resources, Inc. is listed on the New York Stock Exchange and is traded under the ticker symbol "EOG." This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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, foreign currency exchange rates and interest rates; the timing and impact of liquefied natural gas imports and changes in demand or prices for ammonia or methanol; 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; the extent to which EOG can replicate on its other Barnett Shale acreage the results of its most recent Barnett Shale wells; political developments around the world; acts of war and terrorism and responses to these acts; 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. The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. As noted above, statements of proved reserves are only estimates and may be imprecise. Any reserve estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include not only proved reserves, but also other categories of reserves that the SEC's guidelines strictly prohibit EOG from including in filings with the SEC. Investors are urged to consider closely the disclosure in EOG's Form 10-K for fiscal year ended December 31, 2003, available from EOG at P.O. Box 4362, Houston, Texas 77210-4362 (Attn: Investor Relations). You can also obtain this form from the SEC by calling 1-800- SEC-0330. In addition, reconciliation schedules for Non- GAAP Financial Measures referred to in this presentation can be found on the EOG Resources website at www.eogresources.com. EOG RESOURCES, INC. FINANCIAL REPORT (Unaudited; in millions, except per share amounts)
Quarter Ended March 31 2004 2003 Net Operating Revenues $ 464.3 $ 464.7 Net Income Available to Common $ 98.1 $ 126.7 Net Income Per Share Available to Common Basic $ 0.85 $ 1.11 Diluted $ 0.83 $ 1.09 Average Number of Shares Outstanding Basic 115.6 114.4 Diluted 117.6 116.2
SUMMARY INCOME STATEMENTS (Unaudited; in thousands)
Quarter Ended March 31 2004 2003 Net Operating Revenues Natural Gas $417,389 $434,091 Crude Oil, Condensate and Natural Gas Liquids 90,458 75,508 Losses on Mark-to-Market Commodity Derivative Contracts (44,455) (45,221) Other, Net 928 291 Total 464,320 464,669 Operating Expenses Lease and Well 64,417 48,339 Exploration Costs 25,996 17,458 Dry Hole Costs 10,027 6,620 Impairments 17,648 11,956 Depreciation, Depletion and Amortization 113,797 103,553 General and Administrative 24,915 20,421 Taxes Other Than Income 36,084 30,193 Total 292,884 238,540 Operating Income 171,436 226,129 Other Income (Expense), Net (2,729) 152 Income Before Interest Expense and Income Taxes 168,707 226,281 Interest Expense, Net 16,683 15,318 Income Before Income Taxes 152,024 210,963 Income Tax Provision 51,171 74,407 Net Income Before Cumulative Effect of Change in Accounting Principle 100,853 136,556 Cumulative Effect of Change in Accounting Principle, Net of Income Tax - (7,131) Net Income 100,853 129,425 Preferred Stock Dividends 2,758 2,758 Net Income Available to Common $ 98,095 $126,667
EOG RESOURCES, INC. OPERATING HIGHLIGHTS (Unaudited)
Quarter Ended March 31 2004 2003 Wellhead Volumes and Prices Natural Gas Volumes (MMcf/d) United States 618 642 Canada 203 158 United States & Canada 821 800 Trinidad 154 154 Total 975 954 Average Natural Gas Prices ($/Mcf) United States $ 5.40 $ 5.92 Canada 4.98 5.18 United States & Canada Composite 5.30 5.77 Trinidad 1.49 1.32 Composite 4.70 5.05 Crude Oil/Condensate Volumes (MBD) United States 20.0 18.4 Canada 2.6 2.1 United States & Canada 22.6 20.5 Trinidad 2.6 2.3 Total 25.2 22.8 Average Crude Oil/Condensate Prices ($/Bbl) United States $34.76 $32.96 Canada 31.72 31.78 United States & Canada Composite 34.41 32.84 Trinidad 32.91 33.27 Composite 34.25 32.89 Natural Gas Liquids Volumes (MBD) United States 4.8 3.1 Canada 0.6 0.7 Total 5.4 3.8 Average Natural Gas Liquids Prices ($/Bbl) United States $24.71 $23.24 Canada 20.14 22.09 Composite 24.21 23.04 Natural Gas Equivalent Volumes (MMcfe/d) United States 767 771 Canada 222 174 United States & Canada 989 945 Trinidad 169 169 Total 1,158 1,114 Total Bcfe Deliveries 105.4 100.3
EOG RESOURCES, INC. SUMMARY BALANCE SHEETS (In thousands, except share data)
March 31, December 31, 2004 2003 (Unaudited) ASSETS Current Assets Cash and Cash Equivalents $ 95,717 $ 4,443 Accounts Receivable, Net 303,566 295,118 Inventories 23,758 21,922 Deferred Income Taxes 46,515 31,548 Other 34,288 42,983 Total 503,844 396,014 Oil and Gas Properties (Successful Efforts Method) 8,384,989 8,189,062 Less: Accumulated Depreciation, Depletion and Amortization (4,048,682) (3,940,145) Net Oil and Gas Properties 4,336,307 4,248,917 Other Assets 114,902 104,084 Total Assets $ 4,955,053 $ 4,749,015 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts Payable $ 296,457 $ 282,379 Accrued Taxes Payable 51,305 33,276 Dividends Payable 7,377 6,175 Liabilities from Price Risk Management Activities 80,196 37,779 Deferred Income Taxes 14,274 73,611 Other 43,415 43,299 Total 493,024 476,519 Long-Term Debt 1,085,822 1,108,872 Other Liabilities 180,729 171,115 Deferred Income Taxes 879,921 769,128 Shareholders' Equity Preferred Stock, $.01 Par, 10,000,000 Shares Authorized: Series B, 100,000 Shares Issued, Cumulative, $100,000,000 Liquidation Preference 98,648 98,589 Series D, 500 Shares Issued, Cumulative, $50,000,000 Liquidation Preference 49,872 49,827 Common Stock, $.01 Par, 320,000,000 Shares Authorized and 124,730,000 Shares Issued 201,247 201,247 Additional Paid In Capital 8,180 1,625 Unearned Compensation (29,411) (23,473) Accumulated Other Comprehensive Income 61,761 73,934 Retained Earnings 2,212,300 2,121,214 Common Stock Held in Treasury, 8,452,475 shares at March 31, 2004 and 8,819,600 shares at December 31, 2003 (287,040) (299,582) Total Shareholders' Equity 2,315,557 2,223,381 Total Liabilities and Shareholders' Equity $ 4,955,053 $ 4,749,015
EOG RESOURCES, INC. SUMMARY STATEMENTS OF CASH FLOWS (Unaudited; in thousands)
Quarter Ended March 31 2004 2003 Cash Flows From Operating Activities Reconciliation of Net Income to Net Operating Cash Inflows: Net Income $ 100,853 $ 129,425 Items Not Requiring Cash Depreciation, Depletion and Amortization 113,797 103,553 Impairments 17,648 11,956 Deferred Income Taxes 32,016 50,441 Cumulative Effect of Change in Accounting Principle - 7,131 Other, Net 7,432 2,611 Exploration Costs 25,996 17,458 Dry Hole Costs 10,027 6,620 Mark-to-Market Commodity Derivative Contracts Total Losses 44,455 45,221 Realized Losses (2,342) (27,929) Tax Benefits From Stock Options Exercised 2,419 2,959 Other, Net (825) 69 Changes in Components of Working Capital and Other Liabilities Accounts Receivable (8,404) (111,034) Inventories (1,836) 646 Accounts Payable 14,382 20,670 Accrued Taxes Payable 23,946 23,872 Other Liabilities 4,603 (1,532) Other, Net 2,815 (698) Changes in Components of Working Capital Associated with Investing and Financing Activities 10,306 8,832 Net Operating Cash Inflows 397,288 290,271 Investing Cash Flows Additions to Oil and Gas Properties (230,516) (140,213) Exploration Costs (25,996) (17,458) Dry Hole Costs (10,027) (6,620) Proceeds from Sales of Assets 5,954 7,320 Changes in Components of Working Capital Associated with Investing Activities (11,892) (8,860) Other, Net (11,032) (5,479) Net Investing Cash Outflows (283,509) (171,310) Financing Cash Flows Long-Term Debt Repayments (23,050) (100,924) Dividends Paid (8,461) (7,241) Treasury Stock Purchased - (21,295) Proceeds from Stock Options Exercised 8,775 7,456 Other, Net 231 28 Net Financing Cash Outflows (22,505) (121,976) Increase (Decrease) in Cash and Cash Equivalents 91,274 (3,015) Cash and Cash Equivalents at Beginning of Period 4,443 9,848 Cash and Cash Equivalents at End of Period $ 95,717 $ 6,833
EOG RESOURCES, INC. Quantitative Reconciliation of Adjusted Net Income Available to Common (Non-GAAP) to Net Income Available to Common (GAAP) (Unaudited; in thousands, except per share amounts) The following chart adjusts reported quarters ended March 31 net income available to common to reflect actual cash realized from previously disclosed oil and gas hedges and to eliminate the mark-to-market loss from these previously disclosed oil and gas hedges and the after tax impact of the cumulative effect of change in accounting principle. EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who adjust reported company earnings to match realizations to production settlement months and exclude the impact of one- time items. EOG management uses this information for comparative purposes within the industry.
Quarter Ended March 31 2004 2003 Reported Net Income Available to Common $ 98,095 $126,667 Mark-to-Market (MTM) Commodity Derivative Contracts Impact Total Losses 44,455 45,221 Realized Losses (2,342) (27,929) Subtotal 42,113 17,292 After Tax MTM Impact 27,100 11,127 Impact of One-Time Items Add: Cumulative Effect of Change in Accounting Principle, Net of Income Tax - 7,131 Adjusted Non-GAAP Net Income Available to Common $125,195 $144,925 Adjusted Non-GAAP Net Income Per Share Available to Common Basic $ 1.08 $ 1.27 Diluted $ 1.06 $ 1.25 Average Number of Shares Outstanding Basic 115,645 114,441 Diluted 117,621 116,224
EOG RESOURCES, INC. Quantitative Reconciliation of Discretionary Cash Flow Available to Common (Non-GAAP) to Net Operating Cash Inflows (GAAP) (Unaudited; in thousands) The following chart reconciles quarters ended March 31 net operating cash inflows to discretionary cash flow available to common. EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who adjust operating cash inflows for changes in components of working capital, other liabilities and preferred stock dividends. EOG management uses this information for comparative purposes within the industry.
Quarter Ended March 31 2004 2003 Net Operating Cash Inflows $397,288 $290,271 Adjustments Changes in Components of Working Capital and Other Liabilities Accounts Receivable 8,404 111,034 Inventories 1,836 (646) Accounts Payable (14,382) (20,670) Accrued Taxes Payable (23,946) (23,872) Other Liabilities (4,603) 1,532 Other, Net (2,815) 698 Changes in Components of Working Capital Associated with Investing and Financing Activities (10,306) (8,832) Preferred Dividends (2,758) (2,758) Discretionary Cash Flow Available to Common $348,718 $346,757
EOG RESOURCES, INC. Quantitative Reconciliation of Free Cash Flow (Non-GAAP) to Net Operating Cash Inflows (GAAP) (Unaudited; in thousands) The following chart reconciles quarter ended March 31, 2004 net operating cash inflows to free cash flow. EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who use free cash flow as a measure of corporate financial flexibility and as a valuation parameter. EOG management uses this information for comparative purposes within the industry.
Quarter Ended March 31, 2004 Net Operating Cash Inflows $ 397,288 Net Investing Cash Outflows (283,509) Dividends Paid (8,461) Proceeds from Stock Options Exercised 8,775 Financing Other, Net 231 Free Cash Flow $ 114,324