11. Risk Management Activities

Commodity Price Risks. EOG engages in price risk management activities from time to time. These activities are intended to manage EOG's exposure to fluctuations in prices for crude oil and natural gas. EOG utilizes financial commodity derivative instruments, primarily price swap, option, swaption, collar and basis swap contracts, as a means to manage this price risk. In addition to financial transactions, from time to time EOG is a party to various physical commodity contracts for the sale of hydrocarbons that cover varying periods of time and have varying pricing provisions. These physical commodity contracts qualify for the normal purchases and normal sales exception and, therefore, are not subject to hedge accounting or mark-to-market accounting. The financial impact of physical commodity contracts is included in revenues at the time of settlement, which in turn affects average realized hydrocarbon prices.

During 2013, 2012 and 2011, EOG elected not to designate any of its financial commodity derivative contracts as accounting hedges and, accordingly, accounted for these financial commodity derivative contracts using the mark-to-market accounting method. Under this accounting method, changes in the fair value of outstanding financial instruments are recognized as gains or losses in the period of change and are recorded as Gains (Losses) on Mark-to-Market Commodity Derivative Contracts on the Consolidated Statements of Income and Comprehensive Income. The related cash flow impact is reflected in Cash Flows from Operating Activities. During 2013, EOG recognized net losses on the mark-to-market of financial commodity derivative contracts of $166 million, which included net cash received from settlements of commodity derivative contracts of $116 million. During 2012 and 2011, EOG recognized net gains on the mark-to-market of financial commodity derivative contracts of $394 million and $626 million, respectively, which included net cash received from settlements of commodity derivative contracts of $711 million and $181 million, respectively.

Commodity Derivative Contracts. Presented below is a comprehensive summary of EOG's crude oil derivative contracts at December 31, 2013, with notional volumes expressed in barrels per day (Bbld) and prices expressed in dollars per barrel ($/Bbl)

Crude Oil Derivative Contracts
	Volume (Bbld)		Weighted Average Price ($/Bbl)
2014 ⁽¹⁾
January 2014		156,000	$	96.30
February 1, 2014 through March 31, 2014		171,000		96.35
April 1, 2014 through June 30, 2014		161,000		96.33
July 1, 2014 through December 31, 2014		64,000		95.18

(1)

EOG has entered into crude oil derivative contracts which give counterparties the option to extend certain current derivative contracts for additional six-month and nine-month periods. Options covering a notional volume of 10,000 Bbld are exercisable on or about March 31, 2014. If the counterparties exercise all such options, the notional volume of EOG's existing crude oil derivative contracts will increase by 10,000 Bbld at an average price of $96.60 per barrel for each month during the period April 1, 2014 through December 31, 2014. Options covering a notional volume of 118,000 Bbld are exercisable on or about June 30, 2014. If the counterparties exercise all such options, the notional volume of EOG's existing crude oil derivative contracts will increase by 118,000 Bbld at an average price of $96.64 per barrel for each month during the period July 1, 2014 through December 31, 2014. Options covering a notional volume of 69,000 Bbld are exercisable on or about December 31, 2014. If the counterparties exercise all such options, the notional volume of EOG's existing crude oil derivative contracts will increase by 69,000 Bbld at an average price of $95.20 per barrel for each month during the period January 1, 2015 through June 30, 2015.

Presented below is a comprehensive summary of EOG's natural gas derivative contracts at December 31, 2013, with notional volumes expressed in million British thermal units (MMBtu) per day (MMBtud) and prices expressed in dollars per MMBtu ($/MMBtu).

Natural Gas Derivative Contracts
	Volume (MMBtud)		Weighted Average Price ($/MMBtu)
2014 ⁽¹⁾
January 2014 (closed)		230,000		$	4.51
February 1, 2014 through December 31, 2014		205,000		$	4.52

(1)

EOG has entered into natural gas derivative contracts which give counterparties the option of entering into derivative contracts at future dates. All such options are exercisable monthly up until the settlement date of each monthly contract. If the counterparties exercise all such options, the notional volume of EOG's existing natural gas derivative contracts will increase by 355,000 MMBtud at an average price of $4.63 per MMBtu for each month during the period February 1, 2014 through December 31, 2014.

Foreign Currency Exchange Rate Derivative. EOG is party to a foreign currency aggregate swap with multiple banks to eliminate any exchange rate impacts that may result from the 4.75% Subsidiary Debt issued by one of EOG's Canadian subsidiaries. The foreign currency swap agreement expires on March 15, 2014. EOG accounts for the foreign currency swap transaction using the hedge accounting method. Changes in the fair value of the foreign currency swap do not impact Net Income. The after-tax net impact from the foreign currency swap for the years ended December 31, 2013 and 2012 resulted in increases in Other Comprehensive Income (Loss) (OCI) of $2 million and $1 million, respectively, and for the year ended December 31, 2011 resulted in a decrease in OCI of $1 million.

Interest Rate Derivative. EOG is a party to an interest rate swap with a counterparty bank. The interest rate swap was entered into in order to mitigate EOG's exposure to volatility in interest rates related to the Floating Rate Notes. The interest rate swap has a notional amount of $350 million. EOG accounts for the interest rate swap transaction using the hedge accounting method. Changes in the fair value of the interest rate swap do not impact Net Income. The after-tax impact from the interest rate swap resulted in an increase in OCI of $2 million for the year ended December 31, 2013, and reductions in OCI of $0.1 million and $3 million for the years ended December 31, 2012 and 2011, respectively. On February 3, 2014, the interest rate swap was settled in conjunction with the maturity and repayment of the Floating Rate Notes.

The following table sets forth the amounts and classification of EOG's outstanding derivative financial instruments at December 31, 2013 and 2012, respectively. Certain amounts may be presented on a net basis on the consolidated financial statements when such amounts are with the same counterparty and subject to a master netting arrangement (in millions):

		Fair Value at December 31,
Description	Location on Balance Sheet	2013		2012

Asset Derivatives
Crude oil and natural gas derivative contracts -
Current portion	Assets from Price Risk Management Activities ⁽¹⁾	$	8	$	166

Liability Derivatives
Crude oil and natural gas derivative contracts -
Current portion	Liabilities from Price Risk Management Activities ⁽²⁾	$	127	$	8
Noncurrent portion	Other Liabilities ⁽³⁾	$	-	$	13

Foreign currency swap -
Current portion	Current Liabilities - Other	$	40	$	-
Noncurrent portion	Other Liabilities	$	-	$	55

Interest rate swap -
Current portion	Current Liabilities - Other	$	1	$	-
Noncurrent portion	Other Liabilities	$	-	$	4

(1)	The current portion of Assets from Price Risk Management Activities consists of gross assets of $18 million, partially offset by gross liabilities of $10 million, at December 31, 2013 and gross assets of $271 million, partially offset by gross liabilities of $105 million, at December 31, 2012.

(2)

The current portion of Liabilities from Price Risk Management Activities consists of gross liabilities of $137 million, partially offset by gross assets of $10 million, at December 31, 2013 and gross liabilities of $113 million, partially offset by gross assets of $105 million, at December 31, 2012.

(3)	The noncurrent portion of Liabilities from Price Risk Management Activities consists of gross liabilities of $13 million at December 31, 2012.

Credit Risk. Notional contract amounts are used to express the magnitude of commodity price, foreign currency and interest rate swap agreements. The amounts potentially subject to credit risk, in the event of nonperformance by the counterparties, are equal to the fair value of such contracts (see Note 12). EOG evaluates its exposure to significant counterparties on an ongoing basis, including those arising from physical and financial transactions. In some instances, EOG requires collateral, parent guarantees or letters of credit to minimize credit risk. At December 31, 2013, EOG's net accounts receivable balance related to United States, Canada, Argentina and United Kingdom hydrocarbon sales include three receivable balances, each of which accounted for more that 10% of the total balance. The receivables were due from two petroleum refinery companies and one multinational oil and gas company. The related amounts were collected during early 2014. At December 31, 2012, EOG's net accounts receivable balance related to United States, Canada and United Kingdom hydrocarbon sales include one receivable balance which constituted 26% of the total balance. The receivable was due from a United States petroleum marketing company. The related amount was collected during early 2013. In 2013 and 2012, all natural gas from EOG's Trinidad operations was sold to the National Gas Company of Trinidad and Tobago and all natural gas from EOG's China operations was sold to Petrochina Company Limited.

All of EOG's outstanding derivative instruments are covered by International Swap Dealers Association Master Agreements (ISDAs) with counterparties. The ISDAs may contain provisions that require EOG, if it is the party in a net liability position, to post collateral when the amount of the net liability exceeds the threshold level specified for EOG's then-current credit ratings. In addition, the ISDAs may also provide that as a result of certain circumstances, including certain events that cause EOG's credit ratings to become materially weaker than its then-current ratings, the counterparty may require all outstanding derivatives under the ISDA to be settled immediately. See Note 12 for the aggregate fair value of all derivative instruments that were in a net liability position at December 31, 2013 and 2012. EOG had no collateral posted and held no collateral at December 31, 2013, and had no collateral posted and held $6 million of collateral at December 31, 2012.

Substantially all of EOG's accounts receivable at December 31, 2013 and 2012 resulted from hydrocarbon 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 or other credit enhancements from a customer or joint interest owner, EOG typically analyzes the entity's net worth, cash flows, earnings and credit ratings. Receivables are generally not collateralized. During the three-year period ended December 31, 2013, credit losses incurred on receivables by EOG have been immaterial.