EX-99 2 ex-99.txt PRESS RELEASE 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 STRONG THIRD QUARTER 2004 RESULTS . 12 Percent Production Growth . Increases 2004 Production Growth Target to 9.5 Percent FOR IMMEDIATE RELEASE: Tuesday, October 26, 2004 HOUSTON - EOG Resources, Inc. (EOG) today reported third quarter 2004 net income available to common of $169.6 million, or $1.42 per share. This compares to third quarter 2003 net income available to common of $114.7 million, or $0.99 per share. The results for third quarter 2004 included a previously disclosed $22.7 million ($14.6 million after tax, or $0.12 per share) gain on the mark-to-market of financial commodity price transactions. During the quarter, the net cash outflow from the settlement of financial commodity price transactions was $32.3 million ($20.9 million after tax, or $0.18 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 $134.1 million, or $1.12 per share. Similarly, EOG's third quarter 2003 results included a $23.6 million ($15.2 million after tax, or $0.13 per share) gain on the mark-to-market of financial commodity price transactions and net cash outflow from the settlement of financial commodity price transactions and premium payments associated with certain natural gas financial collar contracts of $10.0 million ($6.5 million after tax, or $0.06 per share). Reflecting these items, third quarter 2003 adjusted non-GAAP net income available to common was $93.0 million, or $0.80 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 Total company production increased 12 percent as compared to the third quarter last year. Production from the United States and Canada increased over 7 percent while production from Trinidad and the U.K. North Sea increased 38 percent. Based on third quarter operating results, EOG increased its 2004 total production growth target from the previous 9.0 percent to 9.5 percent. In the United States, the most significant increases came from the Rocky Mountain and South Texas areas. Natural gas production increased in the Rockies from successful drilling results in Wyoming's Moxa Arch and Utah's Uinta Basin. EOG also reported increased oil production from the horizontal Bakken oil play in Montana. EOG continues to report drilling success from the deep Wilcox Trend in South Texas. The Buck Hamilton #10 in Duval County, in which EOG has a 65 percent working interest, is currently producing 24 million cubic feet per day (MMcfd), gross, of natural gas. In the Lobo/Roleta Trend in Webb County, the Slator Ranch L-1 logged 100 feet of net pay and tested at 8 MMcfd. EOG has a 100 percent working interest in the well. In San Patricio County, EOG is currently completing the Bell Farms #2. The well encountered 290 feet of net pay and is expected to produce approximately 8 MMcfd of natural gas and 600 barrels of condensate per day, gross. EOG has a 77.5 percent working interest in the well. In northeastern Louisiana, the Davis Brothers 20-1 well, in which EOG has a 50 percent working interest, was drilled to 16,000 feet in Bienville Parish. The well encountered over 450 feet of pay and is currently producing natural gas at a stable rate of approximately 4 MMcfd, gross. EOG plans to add a second rig in the area to drill two additional wells in the play prior to year-end. "We are steadily increasing production from the key areas we highlighted at our recent analyst conference," said Mark G. Papa, Chairman and Chief Executive Officer. "Based on results to date, EOG is well positioned to meet its three-year production growth target of 34 percent through 2006." Another significant operating area for EOG is the Barnett Shale Play in Central Texas where the company's land holdings have increased to approximately 345,000 net acres, all in the non-core area. During the third quarter, pipeline restrictions in Johnson County were alleviated, allowing EOG to produce natural gas at a current rate of 17 MMcfd, net. The targeted year-end exit rate from the Barnett Shale is 30 to 40 MMcfd, net. A recent well, the Fricks #3H, went to sales at an initial rate of 5.8 MMcfd of natural gas, gross. EOG has a 87.5 percent working interest in the well. Production results reflect continued improvement in well enhancements and completion technology. After recently increasing its drilling activities in the Barnett Shale Play from one to four rigs, EOG plans to drill approximately 90 wells in the play during 2005. "Our well results in the Barnett Shale continue to improve. The production rate and expected reserves of the Fricks completion indicate it may be one of the better wells that the industry has drilled in Johnson County, which is the focus of our current drilling activity," said Papa. Outside of the United States and Canada, production increased from both Trinidad and the U.K. North Sea. In Trinidad, the Nitro 2000 Ammonia Plant was commissioned during the third quarter, reaching full plant capacity during August. EOG is supplying natural gas to the plant at an average rate of 50 MMcfd, net, from the U(a) Block. In the U.K. North Sea, the Valkyrie well came on-line in August and is producing 19 MMcfd of natural gas, net, representing EOG's first production from this recently added international venue. Production from a second well, the Arthur #1, is expected in early December. Capital Structure At September 30, 2004, EOG's total debt outstanding was $1,063 million and cash on the balance sheet was $82 million. The company's debt-to-total capitalization ratio was 28 percent at September 30, 2004, down from 33 percent at December 31, 2003. Conference Call Scheduled for October 27, 2004 EOG's third quarter 2004 conference call will be available via live audio webcast at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) Wednesday, October 27, 2004. To listen to this webcast, log on to www.eogresources.com. The webcast will be archived on EOG's website through November 10, 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 United States, Canada, offshore Trinidad and, to a lesser extent, the U.K. 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 availability and cost of drilling rigs, experienced drilling crews and tubular steel; the availability of pipeline transportation capacity; the extent to which EOG can replicate on its other Barnett Shale acreage the results of its most recent Barnett Shale wells; the results of wells yet to be drilled that are necessary to test whether substantial Barnett Shale acreage positions in Erath, Somervell, Hood, Jack, Palo Pinto and Hill Counties, Texas, contain suitable drilling prospects; whether EOG is successful in its efforts to more densely develop its acreage in the Barnett Shale and other production areas; 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 Nine Months Ended September 30 Ended September 30 2004 2003 2004 2003 Net Operating Revenues $ 594.2 $ 458.7 $ 1,577.6 $ 1,348.1 Net Income Available to Common $ 169.6 $ 114.7 $ 409.8 $ 347.4 Net Income Per Share Available to Common Basic $ 1.44 $ 1.00 $ 3.52 $ 3.03 Diluted $ 1.42 $ 0.99 $ 3.45 $ 2.99 Average Number of Shares Outstanding Basic 117.4 114.6 116.5 114.5 Diluted 119.7 116.4 118.7 116.3
SUMMARY INCOME STATEMENTS (Unaudited; in thousands)
Quarter Nine Months Ended September 30 Ended September 30 2004 2003 2004 2003 Net Operating Revenues Natural Gas $448,131 $365,064 $1,296,052 $1,176,798 Crude Oil, Condensate and Natural Gas Liquids 123,379 67,664 316,238 204,643 Gains (Losses) on Mark-to-Market Commodity Derivative Contracts 22,743 23,628 (36,275) (37,346) Other, Net (23) 2,368 1,556 4,052 Total 594,230 458,724 1,577,571 1,348,147 Operating Expenses Lease and Well 69,027 54,431 198,976 156,390 Exploration Costs 21,874 17,812 67,466 57,409 Dry Hole Costs 21,114 8,876 50,205 18,932 Impairments 17,930 26,117 51,289 63,548 Depreciation, Depletion and Amortization 130,257 110,438 360,278 320,578 General and Administrative 29,576 26,379 80,861 71,734 Taxes Other Than Income 29,952 21,359 95,824 63,247 Total 319,730 265,412 904,899 751,838 Operating Income 274,500 193,312 672,672 596,309 Other Income, Net 3,953 1,924 2,649 4,756 Income Before Interest Expense and Income Taxes 278,453 195,236 675,321 601,065 Interest Expense, Net 16,110 15,632 48,209 44,757 Income Before Income Taxes 262,343 179,604 627,112 556,308 Income Tax Provision 90,033 62,185 209,012 193,542 Net Income Before Cumulative Effect of Change in Accounting Principle 172,310 117,419 418,100 362,766 Cumulative Effect of Change in Accounting Principle, Net of Income Tax - - - (7,131) Net Income 172,310 117,419 418,100 355,635 Preferred Stock Dividends 2,758 2,758 8,274 8,274 Net Income Available to Common $169,552 $114,661 $ 409,826 $ 347,361
EOG RESOURCES, INC. OPERATING HIGHLIGHTS (Unaudited)
Quarter Nine Months Ended September 30 Ended September 30 2004 2003 2004 2003 Wellhead Volumes and Prices Natural Gas Volumes (MMcf/d) United States 623 644 620 641 Canada 211 152 204 154 United States & Canada 834 796 824 795 Trinidad 203 155 173 152 United Kingdom 8 - 3 - Total 1,045 951 1,000 947 Average Natural Gas Prices ($/Mcf) United States $ 5.57 $ 4.78 $ 5.55 $ 5.25 Canada 4.99 4.47 5.00 4.80 United States & Canada Composite 5.42 4.72 5.41 5.16 Trinidad 1.50 1.34 1.46 1.33 United Kingdom 5.30 - 5.30 - Composite 4.66 4.17 4.73 4.54 Crude Oil and Condensate Volumes (MBD) United States 21.0 18.0 20.7 17.9 Canada 2.7 2.3 2.6 2.2 United States & Canada 23.7 20.3 23.3 20.1 Trinidad 4.0 2.5 3.2 2.4 Total 27.7 22.8 26.5 22.5 Average Crude Oil and Condensate Prices ($/Bbl) United States $ 43.30 $ 29.43 $ 38.57 $ 30.22 Canada 40.17 28.11 35.89 28.86 United States & Canada Composite 42.94 29.28 38.26 30.07 Trinidad 42.06 26.80 38.19 28.75 Composite 42.81 29.01 38.26 29.93 Natural Gas Liquids Volumes (MBD) United States 4.4 2.9 4.7 3.0 Canada 0.9 0.8 0.7 0.6 Total 5.3 3.7 5.4 3.6 Average Natural Gas Liquids Prices ($/Bbl) United States $ 30.07 $ 20.53 $ 26.09 $ 21.16 Canada 23.58 18.23 21.65 18.80 Composite 29.02 20.06 25.52 20.76 Natural Gas Equivalent Volumes (MMcfe/d) United States 775 770 772 766 Canada 233 170 224 172 United States & Canada 1,008 940 996 938 Trinidad 227 170 192 166 United Kingdom 8 - 3 - Total 1,243 1,110 1,191 1,104 Total Bcfe Deliveries 114.4 102.1 326.5 301.5
EOG RESOURCES, INC. SUMMARY BALANCE SHEETS (In thousands, except share data)
September 30, December 31, 2004 2003 (Unaudited) ASSETS Current Assets Cash and Cash Equivalents $ 81,908 $ 4,443 Accounts Receivable, Net 350,170 295,118 Inventories 30,739 21,922 Deferred Income Taxes 22,560 31,548 Other 72,302 42,983 Total 557,679 396,014 Oil and Gas Properties (Successful Efforts Method) 9,069,633 8,189,062 Less: Accumulated Depreciation, Depletion and Amortization (4,311,597) (3,940,145) Net Oil and Gas Properties 4,758,036 4,248,917 Other Assets 108,882 104,084 Total Assets $ 5,424,597 $ 4,749,015 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts Payable $ 339,303 $ 282,379 Accrued Taxes Payable 59,168 33,276 Dividends Payable 7,497 6,175 Liabilities from Price Risk Management Activities 4,736 37,779 Deferred Income Taxes 66,746 73,611 Other 46,978 43,299 Total 524,428 476,519 Long-Term Debt 1,062,972 1,108,872 Other Liabilities 195,482 171,115 Deferred Income Taxes 915,803 769,128 Shareholders' Equity Preferred Stock, $.01 Par, 10,000,000 Shares Authorized: Series B, 100,000 Shares Issued, Cumulative, $100,000 Liquidation Preference 98,767 98,589 Series D, 500 Shares Issued, Cumulative, $50,000 Liquidation Preference 49,962 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 15,586 1,625 Unearned Compensation (32,555) (23,473) Accumulated Other Comprehensive Income 100,194 73,934 Retained Earnings 2,509,851 2,121,214 Common Stock Held in Treasury, 6,363,820 shares at September 30, 2004 and 8,819,600 shares at December 31, 2003 (217,140) (299,582) Total Shareholders' Equity 2,725,912 2,223,381 Total Liabilities and Shareholders' Equity $ 5,424,597 $ 4,749,015
EOG RESOURCES, INC. SUMMARY STATEMENTS OF CASH FLOWS (Unaudited; in thousands)
Quarter Nine Months Ended September 30 Ended September 30 2004 2003 2004 2003 Cash Flows from Operating Activities Reconciliation of Net Income to Net Cash Provided by Operating Activities: Net Income $ 172,310 $ 117,419 $ 418,100 $ 355,635 Items Not Requiring Cash Depreciation, Depletion and Amortization 130,257 110,438 360,278 320,578 Impairments 17,930 26,117 51,289 63,548 Deferred Income Taxes 74,000 43,456 158,216 123,431 Cumulative Effect of Change in Accounting Principle - - - 7,131 Other, Net 257 2,798 13,546 6,763 Exploration Costs 21,874 17,812 67,466 57,409 Dry Hole Costs 21,114 8,876 50,205 18,932 Mark-to-market Commodity Derivative Contracts Total (Gains) Losses (22,743) (23,628) 36,275 37,346 Realized Losses (32,297) (8,611) (70,507) (47,700) Collar Premium - (1,365) - (1,365) Tax Benefits From Stock Options Exercised 6,938 2,223 20,730 7,025 Other, Net 1,065 (605) (208) 2,894 Changes in Components of Working Capital and Other Liabilities Accounts Receivable 5,106 28,515 (55,352) (15,905) Inventories (486) (1,816) (8,817) (1,860) Accounts Payable 20,942 25,675 58,113 50,028 Accrued Taxes Payable 5,069 15,960 619 32,769 Other Liabilities 3,309 2,934 3,566 1,783 Other, Net 2,935 10,175 (531) 18,074 Changes in Components of Working Capital Associated with Investing and Financing Activities (34,676) (15,133) (17,940) (22,064) Net Cash Provided by Operating Activities 392,904 361,240 1,085,048 1,014,452 Investing Cash Flows Additions to Oil and Gas Properties (356,925) (239,779) (891,465) (564,825) Exploration Costs (21,874) (17,812) (67,466) (57,409) Dry Hole Costs (21,114) (8,876) (50,205) (18,932) Proceeds from Sales of Assets 3,009 2,611 12,771 12,361 Changes in Components of Working Capital Associated with Investing Activities 33,354 15,344 17,366 22,223 Other, Net (1,183) (71,645) (14,322) (70,366) Net Cash Used in Investing Activities (364,733) (320,157) (993,321) (676,948) Financing Cash Flows Net Commercial Paper and Line of Credit Borrowings (Repayments) 77,150 - (20,900) (134,310) Long-Term Debt Borrowings - - 150,000 - Long-Term Debt Repayments (100,000) - (175,000) - Dividends Paid (9,729) (8,398) (27,828) (22,878) Treasury Stock Purchased - - - (21,295) Proceeds from Stock Options Exercised 17,289 2,987 60,479 17,717 Other, Net 1,188 (2,150) (1,013) (2,097) Net Cash Used in Financing Activities (14,102) (7,561) (14,262) (162,863) Increase in Cash and Cash Equivalents 14,069 33,522 77,465 174,641 Cash and Cash Equivalents at Beginning of Period 67,839 150,967 4,443 9,848 Cash and Cash Equivalents at End of Period $ 81,908 $ 184,489 $ 81,908 $ 184,489
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 third quarter and nine months ended September 30 net income available to common to reflect actual cash realized from previously disclosed oil and gas hedges, to eliminate the mark-to-market gain or loss from these previously disclosed oil and gas hedges and to eliminate the after tax impact of the cumulative effect of change in accounting principle and the tax benefit related to the Alberta (Canada) corporate tax rate reduction. 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 Nine Months Ended September 30 Ended September 30 2004 2003 2004 2003 Reported Net Income Available to Common $169,552 $114,661 $409,826 $347,361 Mark-to-Market (MTM) Commodity Derivative Contracts Impact Total (Gains) Losses (22,743) (23,628) 36,275 37,346 Realized Losses (32,297) (8,611) (70,507) (47,700) Collar Premium - (1,365) - (1,365) Subtotal (55,040) (33,604) (34,232) (11,719) After Tax MTM Impact (35,418) (21,624) (22,028) (7,541) Impact of One-Time Items Add: Cumulative Effect of Change in Accounting Principle, Net of Income Tax - - - 7,131 Less: 2004 Tax Benefit related to the Canadian Tax Rate Reduction - - (5,335) - Adjusted Non-GAAP Net Income Available to Common $134,134 $ 93,037 $382,463 $346,951 Adjusted Non-GAAP Net Income Per Share Available to Common Basic $ 1.14 $ 0.81 $ 3.28 $ 3.03 Diluted $ 1.12 $ 0.80 $ 3.22 $ 2.98 Average Number of Shares Outstanding Basic 117,411 114,616 116,485 114,489 Diluted 119,677 116,370 118,710 116,284
EOG RESOURCES, INC. Quantitative Reconciliation of Discretionary Cash Flow Available to Common (Non-GAAP) to Net Cash Provided by Operating Activities (GAAP) (Unaudited; in thousands) The following chart reconciles third quarter and nine months ended September 30 net cash provided by operating activities 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 net cash provided by operating activities 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 Nine Months Ended September 30 Ended September 30 2004 2003 2004 2003 Net Cash Provided by Operating Activities $ 392,904 $ 361,240 $1,085,048 $1,014,452 Adjustments Changes in Components of Working Capital and Other Liabilities Accounts Receivable (5,106) (28,515) 55,352 15,905 Inventories 486 1,816 8,817 1,860 Accounts Payable (20,942) (25,675) (58,113) (50,028) Accrued Taxes Payable (5,069) (15,960) (619) (32,769) Other Liabilities (3,309) (2,934) (3,566) (1,783) Other, Net (2,935) (10,175) 531 (18,074) Changes in Components of Working Capital Associated with Investing and Financing Activities 34,676 15,133 17,940 22,064 Preferred Dividends (2,758) (2,758) (8,274) (8,274) Discretionary Cash Flow Available to Common $ 387,947 $ 292,172 $1,097,116 $ 943,353