EX-99 2 exh99-1.htm 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 SECOND QUARTER 2005 RESULTS
AND INCREASES 2005 PRODUCTION GROWTH TARGET

 - Achieves 20 Percent Organic Production Growth

- Increases Full Year 2005 Production Growth Target to 15.5 Percent

- Maintains 2006 Production Growth Target at 8 Percent

 

FOR IMMEDIATE RELEASE: Tuesday, July 26, 2005

HOUSTON - EOG Resources, Inc. (EOG) today reported second quarter 2005 net income available to common of $247.6 million, or $1.02 per share. This compares to second quarter 2004 net income available to common of $142.2 million, or $0.60* per share.

The results for the second quarter 2005 included an adjustment to revenue of $19.3 million ($8.7 million after tax, or $0.04 per share) related to an amended gas sales agreement. Adjusting for this item, second quarter non-GAAP net income available to common was $238.9 million, or $0.98 per share. Last year's second quarter results included a tax benefit of $5.3 million ($0.02* per share) from the reduction in the corporate tax rate in Alberta, Canada and a $14.6 million ($9.4 million after tax, or $0.04* per share) loss on the mark-to-market of financial commodity price transactions. The net cash outflow from the settlement of financial commodity price transactions was $35.9 million ($23.2 million after tax, or $0.10* per share). Reflecting these items, second quarter 2004 adjusted non-GAAP net income available to common was $123.1 million, or $0.52* per share. (Please refer to the table below for the reconciliation of adjusted non-GAAP net income available to common to net income available to common.)

*Second quarter 2004 per share amounts are restated for the two-for-one stock split effective March 1, 2005.

Operational Highlights

In the second quarter, total company production increased 20 percent versus the second quarter 2004 with significant increases in all four of EOG's producing areas: the U.S., Canada, Trinidad and the United Kingdom North Sea. Natural gas production rose 21 percent overall led by increases of 32 percent from Trinidad, 16 percent from Canada and 14 percent from the U.S.

U.S. gas production was higher than the prior year period as a result of successful drilling predominantly in the Barnett Shale, South Texas, East Texas/North Louisiana, Mid Continent and Rocky Mountain areas.

"Because production results exceeded our original expectations for the first half of the year, we are increasing EOG's 2005 full year production growth target from 13.5 to 15.5 percent. Essentially all of this is organic," said Mark G. Papa, Chairman and Chief Executive Officer. "Our 2004 to 2006 three year compounded production growth target now increases from 35 percent to 38 percent, while the 2006 target remains at eight percent. In North America, we are seeing contributions from both the Barnett and our extensive assets outside that play."

In the Barnett Shale, EOG has accumulated approximately 490,000 acres. During the second quarter, additional wells drilled to the west of Johnson County, in Hood and Jack Counties, continued to confirm the acreage is natural gas and not oil productive. EOG currently has nine rigs in the Barnett Shale Play, eight of which are operating in Johnson County and one in Hood County. The company's plan is to pursue a steady drilling program for at least the next six years.

In Trinidad and Tobago, EOG will supply 60 MMcfd, net of natural gas to the M5000 Methanol Plant, which is on schedule to begin full production during August. EOG also announced it signed the Block 4(a) production sharing contract at the beginning of July that adds 102,000 additional net acres to the company's position off the southeast coast of the country. EOG has a 90 percent working interest in the block and has secured a rig to commence drilling an exploration prospect in December that will target natural gas reserves at 8,400 feet.

In the United Kingdom North Sea, the Arthur 2 well commenced production in late July increasing total natural gas production from the discovery to 39 MMcfd, net. #9;

Conference Call Scheduled for July 27, 2005

EOG's second quarter 2005 conference call will be available via live audio webcast at 9:30 a.m. Central Time (10:30 a.m. Eastern Time) Wednesday, July 27, 2005. To listen, log on to www.eogresources.com. The webcast will be archived on EOG's website through August 10, 2005.

EOG Resources, Inc. is one of the largest independent (non-integrated) oil and natural gas companies in the United States with proved reserves in the United States, Canada, offshore Trinidad and 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. 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 replace or increase reserves or to increase production, 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, 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, terms and timing of governmental and other permits and rights of way; the availability of pipeline transportation capacity; the extent to which EOG can replicate on its other Barnett Shale acreage outside of Johnson and Parker Counties, Texas, the results of its most recent Barnett Shale wells; 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 Annual Report on Form 10-K for fiscal year ended December 31, 2004, 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 or from the SEC's website at www.sec.gov. In addition, reconciliation and calculation 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   Six Months  
            Ended June 30   Ended June 30  
              2005   2004   2005   2004  
Net Operating Revenues          $ 783.9   $ 519.0   $ 1,472.1   $ 983.3  
Net Income Available to Common          $ 247.6   $ 142.2   $ 448.4   $ 240.3  
Net Income Per Share Available to Common                                 
  Basic         $ 1.04   $ 0.61 * $ 1.89   $ 1.04 *
  Diluted         $ 1.02   $ 0.60 * $ 1.85   $ 1.02 *
Average Number of Shares Outstanding                                 
  Basic           238.3     232.8 *   237.8     232.1 *
  Diluted           243.4     237.4 *   242.8     236.5 *
                                   
                                   
SUMMARY INCOME STATEMENTS
(Unaudited; in thousands)
                       
            Quarter   Six Months  
            Ended June 30   Ended June 30  
            2005   2004   2005   2004  
Net Operating Revenues                                 
  Wellhead Natural Gas         $ 625,564   $ 430,134   $ 1,168,670   $ 847,005  
  Wellhead Crude Oil, Condensate and Natural Gas Liquids           157,307     102,401     301,843     192,859  
  Losses on Mark-to-Market Commodity Derivative Contracts           -     (14,563)     (940)     (59,018)  
  Other, Net           1,053     1,049     2,507     2,495  
 

     Total 

           783,924     519,021     1,472,080     983,341  
Operating Expenses                                 
  Lease and Well, including Transportation           86,851     65,532     169,726     129,949  
  Exploration Costs           27,994     19,596     62,810     45,592  
  Dry Hole Costs           22,537     19,064     37,119     29,091  
  Impairments           24,231     15,711     36,403     33,359  
  Depreciation, Depletion and Amortization           159,896     116,224     312,912     230,021  
  General and Administrative           30,113     26,370     58,800     51,285  
  Taxes Other Than Income           37,613     29,788     79,526     65,872  
 

     Total 

           389,235     292,285     757,296     585,169  
Operating Income             394,689     226,736     714,784     398,172  
                                   
Other Income (Expense), Net            6,874     1,425     12,339     (1,304)  
                                   
Income Before Interest Expense and Income Taxes            401,563     228,161     727,123     396,868  
                                   
Interest Expense, Net            14,687     15,416     28,644     32,099  
                                   
Income Before Income Taxes            386,876     212,745     698,479     364,769  
                                   
Income Tax Provision            137,420     67,808     246,320     118,979  
                                   
Net Income             249,456     144,937     452,159     245,790  
                                   
Preferred Stock Dividends            1,858     2,758     3,716     5,516  
                                   
Net Income Available to Common          $ 247,598   $ 142,179   $ 448,443   $ 240,274  
                                   
* Restated for 2-for-1 stock split effective March 1, 2005.                                 
                                   

 

EOG RESOURCES, INC.
OPERATING HIGHLIGHTS
(Unaudited)
                                 
          Quarter   Six Months
            Ended June 30   Ended June 30
            2005   2004   2005   2004
Wellhead Volumes and Prices                               
Natural Gas Volumes (MMcf/d)                               
  United States           706     619     698     618
  Canada           228     197     231     201
 

     United States & Canada 

           934     816     929     819
  Trinidad           214     162     209     158
  United Kingdom           34     -     34     -
 

     Total

           1,182     978     1,172     977
                                 
Average Natural Gas Prices ($/Mcf)                               
  United States         $ 6.64   $ 5.67   $ 6.31   $ 5.54
  Canada           6.02     5.04     5.85     5.01
 

     United States & Canada Composite

           6.49     5.52     6.20     5.41
  Trinidad           2.92 (1)   1.36     2.35 (2)   1.42
  United Kingdom           5.54     -     6.10     -
 

     Composite 

           5.82     4.83     5.51     4.77
                                 
Crude Oil and Condensate Volumes (MBD)                               
  United States           21.7     21.0     22.1     20.5
  Canada           2.5     2.6     2.5     2.6
 

     United States & Canada  

           24.2     23.6     24.6     23.1
  Trinidad           4.2     3.1     4.1     2.8
  United Kingdom           0.1     -     0.2     -
 

     Total 

           28.5     26.7     28.9     25.9
                                 
Average Crude Oil and Condensate Prices ($/Bbl)                               
  United States         $ 51.03   $ 37.39   $ 49.90   $ 36.11
  Canada           46.58     35.59     45.68     33.63
 

     United States & Canada  Composite

           50.58     37.19     49.47     35.83
  Trinidad           53.05     37.69     49.22     35.52
  United Kingdom           49.10     -     43.93     -
 

     Composite

           50.93     37.25     49.41     35.80
                                 
Natural Gas Liquids Volumes (MBD)                               
  United States           7.9     5.0     6.7     4.9
  Canada           1.2     0.6     1.3     0.6
 

     Total

           9.1     5.6     8.0     5.5
                                 
Average Natural Gas Liquids Prices ($/Bbl)                               
  United States         $ 30.51   $ 23.78   $ 30.01   $ 24.24
  Canada           30.52     20.35     28.80     20.25
 

     Composite

           30.51     23.40     29.81     23.80
                                 
Natural Gas Equivalent Volumes (MMcfe/d)                               
  United States           885     775     870     771
  Canada           249     216     254     219
 

     United States & Canada  

           1,134     991     1,124     990
  Trinidad           238     181     235     175
  United Kingdom           35     -     35     -
 

     Total

           1,407     1,172     1,394     1,165
                                 
Total Bcfe Deliveries            128.1     106.6     252.3     212.1
                                 
(1) Includes $0.99 per Mcf as a result of a revenue adjustment related to an amended Trinidad take-or-pay contract.                               
(2) Includes $0.51 per Mcf as a result of a revenue adjustment related to an amended Trinidad take-or-pay contract.                               
                                 

 

  EOG RESOURCES, INC.
  SUMMARY BALANCE SHEETS
  (Unaudited; in thousands, except share data)
   
                 
            June 30,   December 31,
            2005   2004
                 
  ASSETS
Current Assets               
  Cash and Cash Equivalents         $ 282,701   $ 20,980
  Accounts Receivable, Net         450,606   447,742
  Inventories         52,188   40,037
  Assets from Price Risk Management Activities         -   10,747
  Deferred Income Taxes         26,644   22,227
  Other         54,366   45,070
       Total         866,505   586,803
                 
Oil and Gas Properties (Successful Efforts Method)          10,193,805   9,599,276
  Less: Accumulated Depreciation, Depletion and Amortization        (4,738,768)   (4,497,673)
     Net Oil and Gas Properties         5,455,037   5,101,603
Other Assets          106,115   110,517
Total Assets          $ 6,427,657   $ 5,798,923
                 
  LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities               
  Accounts Payable         $ 439,532   $ 424,581
  Accrued Taxes Payable         65,059   51,116
  Dividends Payable         9,831   7,394
  Deferred Income Taxes         52,350   103,933
  Other         38,000   45,180
       Total         604,772   632,204
                 
                 
Long-Term Debt          1,117,097   1,077,622
Other Liabilities          248,137   241,319
Deferred Income Taxes          1,058,229   902,354
                 
Shareholders' Equity               
  Preferred Stock, $0.01 Par, 10,000,000 Shares Authorized:             
 

     Series B, 100,000 Shares Issued, Cumulative,     

              
 

       $100,000,000 Liquidation Preference

         98,944   98,826
  Common Stock, $0.01 Par, 640,000,000 Shares Authorized and             
 

   249,460,000* Shares Issued

         202,495   201,247
  Additional Paid In Capital         38,391   21,047
  Unearned Compensation         (34,263)   (29,861)
  Accumulated Other Comprehensive Income         124,685   148,015
  Retained Earnings         3,136,135   2,706,845
  Common Stock Held in Treasury, 9,552,169 shares at              
 

   June 30, 2005 and 11,605,112* shares at December 31, 2004

        (166,965)   (200,695)
 

       Total Shareholders' Equity

         3,399,422   2,945,424
Total Liabilities and Shareholders' Equity          $ 6,427,657   $ 5,798,923
                 
                 
* Restated for 2-for-1 stock split effective March 1, 2005.               
                 

 

  EOG RESOURCES, INC.
  SUMMARY STATEMENTS OF CASH FLOWS
  (Unaudited; in thousands)
   
               
          Six Months  
            Ended June 30,  
            2005   2004  
Cash Flows from Operating Activities                 
Reconciliation of Net Income to Net Cash Provided by Operating Activities:                 
  Net Income         $ 452,159   $ 245,790  
  Items Not Requiring Cash                
       Depreciation, Depletion and Amortization         312,912   230,021  
       Impairments         36,403   33,359  
       Deferred Income Taxes         109,278   84,216  
       Other, Net         5,333   11,277  
  Dry Hole Costs         37,119   29,091  
  Mark-to-Market Commodity Derivative Contracts                
       Total Losses         940   59,018  
       Realized Gains (Losses)         9,806   (38,211)  
  Tax Benefits From Stock Options Exercised         18,309   13,792  
  Other, Net         (5,323)   (1,273)  
  Changes in Components of Working Capital and Other Liabilities                
       Accounts Receivable         (5,081)   (62,082)  
       Inventories         (12,185)   (8,368)  
       Accounts Payable         16,934   41,515  
       Accrued Taxes Payable         5,200   1,329  
       Other Liabilities         (5,324)   921  
       Other, Net         (10,917)   (10,339)  
  Changes in Components of Working Capital Associated with                
  Investing and Financing Activities         19,842   14,402  
Net Cash Provided by Operating Activities          985,405   644,458  
                   
Investing Cash Flows                 
  Additions to Oil and Gas Properties         (762,347)   (563,631)  
  Proceeds from Sales of Assets         31,578   9,762  
  Changes in Components of Working Capital Associated with                
  Investing Activities         (19,950)   (15,150)  
  Other, Net         (16,111)   (12,920)  
Net Cash Used in Investing Activities          (766,830)   (581,939)  
                   
Financing Cash Flows                 
  Net Commercial Paper and Line of Credit Borrowings (Repayments)         39,475   (98,050)  
  Long-Term Debt Borrowings         -   150,000  
  Long-Term Debt Repayments         -   (75,000)  
  Dividends Paid         (20,220)   (18,957)  
  Proceeds from Stock Options Exercised         24,372   42,294  
  Other, Net         108   (784)  
Net Cash Provided by (Used in) Financing Activities          43,735   (497)  
                   
Effect of Exchange Rate Changes on Cash          (589)   1,374  
                   
Increase in Cash and Cash Equivalents          261,721   63,396  
Cash and Cash Equivalents at Beginning of Period          20,980   4,443  
Cash and Cash Equivalents at End of Period          $ 282,701   $ 67,839  
                   

 

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 three-month and six-month periods ended June 30 reported net income available to common to reflect actual cash realized from oil and gas hedges by eliminating the unrealized mark-to-market gains or losses from these transactions, to eliminate the revenue related to an amended gas sales agreement recorded in the second quarter of 2005 and to eliminate a tax benefit related to the Alberta (Canada) corporate tax rate reduction recorded in the second quarter of 2004. 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 make certain other adjustments. EOG management uses this information for comparative purposes within the industry.  
                               
                             
        Quarter   Six Months  
      Ended June 30,   Ended June 30,  
        2005   2004   2005   2004  
                               
Reported Net Income Available to Common      $ 247,598   $ 142,179   $ 448,443   $ 240,274  
                               
Mark-to-Market (MTM) Commodity Derivative Contracts Impact                             
  Total Losses       -     14,563     940     59,018  
  Realized Gains (Losses)       -     (35,869)     9,806     (38,211)  
  Subtotal       -     (21,306)     10,746     20,807  
                               
  After Tax MTM Impact       -     (13,710)     6,915     13,389  
                               
Less: Revenue related to an amended gas sales agreement,                              
  net of tax       (8,672)     -     (8,672)     -  
Less: Tax benefit related to the Alberta (Canada) corporate tax                               
  rate reduction       -     (5,335)     -     (5,335)  
                               
                               
                               
Adjusted Non-GAAP Net Income Available to Common       $ 238,926   $ 123,134   $ 446,686   $ 248,328  
                               
Adjusted Non-GAAP Net Income Per Share Available to Common                             
  Basic     $ 1.00   $ 0.53 * $ 1.88   $ 1.07 *
  Diluted     $ 0.98   $ 0.52 * $ 1.84   $ 1.05 *
                               
Average Number of Shares Outstanding                             
  Basic       238,252     232,776 *   237,752     232,103 *
  Diluted       243,414     237,417 *   242,771     236,455 *
                               
* Restated for 2-for-1 stock split effective March 1, 2005.                             
                               

 

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 three-month and six-month periods ended June 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     Six Months
      Ended June 30     Ended June 30
      2005   2004     2005     2004
Net Cash Provided by Operating Activities   $ 503,566   $ 279,012   $ 985,405   $ 644,458
                           
Adjustments                        
  Exploration Costs    27,994     19,596     62,810     45,592
  Changes in Components of Working Capital and Other Liabilities                       
    Accounts Receivable   10,599     52,922     5,081     62,082
    Inventories   3,484     6,519     12,185     8,368
    Accounts Payable   (43,286)     (27,936)     (16,934)     (41,515)
    Accrued Taxes Payable   36,606     20,765     (5,200)     (1,329)
    Other Liabilities   8,992     (1,292)     5,324     (921)
    Other, Net   4,458     16,436     10,917     10,339
  Changes in Components of Working Capital Associated                       
    with Investing and Financing Activities   5,878     (4,826)     (19,842)     (14,402)
  Preferred Dividends    (1,858)     (2,758)     (3,716)     (5,516)
                           
Discretionary Cash Flow Available to Common   $ 556,433   $ 358,438   $ 1,036,030   $ 707,156