Risk Management Activities

3 Months Ended

Mar. 31, 2014

Risk Management Activities [Abstract]

Risk Management Activities [Text Block]

12. Risk Management Activities

Commodity Price Risk.  As more fully discussed in Note 11 to the Consolidated Financial Statements included in EOG's 2013 Annual Report, 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 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.  EOG has not designated any of its financial commodity derivative contracts as accounting hedges and, accordingly, accounts for financial commodity derivative contracts using the mark-to-market accounting method.  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.

Commodity Derivative Contracts.  Presented below is a comprehensive summary of EOG's crude oil derivative contracts at March 31, 2014, with notional volumes expressed in barrels per day (Bbld) and prices expressed in dollars per barrel ($/Bbl).

Crude Oil Derivative Contracts
			Weighted
	Volume		Average Price
	(Bbld)		($/Bbl)
2014 (1)
January 2014 (closed)		156,000	$	96.30
February 2014 (closed)		171,000		96.35
March 2014 (closed)		181,000		96.55
April 1, 2014 through May 31, 2014		181,000		96.55
June 2014		171,000		96.35
July 1, 2014 through December 31, 2014		74,000		95.37
2015 (2)		-	$	-

(1) EOG has entered into crude oil derivative contracts which give counterparties the option to extend certain current derivative contracts for additional three-month and six-month periods.  Options covering a notional volume of 10,000 Bbld are exercisable on or about May 30, 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 $100.00 per barrel for each month during the period June 1, 2014 through August 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.

(2) EOG has entered into crude oil derivative contracts which give counterparties the option to extend certain current derivative contracts for additional six-month periods.  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 March 31, 2014, 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
			Weighted
	Volume		Average Price
	(MMBtud)		($/MMBtu)
2014 (1)
January 2014 (closed)		230,000	$	4.51
February 2014 (closed)		710,000		4.57
March 2014 (closed)		810,000		4.60
April 2014 (closed)		465,000		4.52
May 1, 2014 through December 31, 2014		330,000		4.55
2015 (2)
January 1, 2015 through December 31, 2015		175,000	$	4.51

(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 480,000 MMBtud at an average price of $4.63 per MMBtu for each month during the period May 1, 2014 through December 31, 2014.

(2) 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 175,000 MMBtud at an average price of $4.51 per MMBtu for each month during the period January 1, 2015 through December 31, 2015.

Foreign Currency Exchange Rate Derivative.  EOG was party to a foreign currency aggregate swap with multiple banks to eliminate any exchange rate impacts that may have resulted from the Subsidiary Debt issued by one of EOG's Canadian subsidiaries.  The foreign currency swap expired and was settled contemporaneously with the repayment upon maturity of the Subsidiary Debt on March 17, 2014 (see Note 10).

Interest Rate Derivative.  EOG was 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 its $350 million principal amount of Floating Rate Notes.  The interest rate swap expired and was settled contemporaneously with the repayment upon maturity of the Floating Rate Notes on February 3, 2014 (see Note 10).

The following table sets forth the amounts and classification of EOG's outstanding derivative financial instruments at March 31, 2014 and December 31, 2013.  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
			March 31,		December 31,
Description	Location on Balance Sheet		2014		2013
Asset Derivatives
Crude oil and natural gas derivative contracts -
Current portion	Assets from Price Risk Management Activities (1)	$	-	$	8
Noncurrent portion	Other Assets (2)	$	12	$	-
Liability Derivatives
Crude oil and natural gas derivative contracts -
Current portion	Liabilities from Price Risk Management Activities (3)	$	227	$	127
Noncurrent portion	Other Liabilities (4)	$	-	$	-
Foreign currency swap -
Current portion	Current Liabilities - Other	$	-	$	40
Interest rate swap -
Current portion	Current Liabilities - Other	$	-	$	1

(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.

(2) The noncurrent portion of Assets from Price Risk Management Activities consists of gross assets of $21 million, partially offset by gross liabilities of $9 million at March 31, 2014.

(3) The current portion of Liabilities from Price Risk Management Activities consists of gross liabilities of $227 million at March 31, 2014 and gross liabilities of $137 million, partially offset by gross assets of $10 million at December 31, 2013.

(4) The noncurrent portion of Liabilities from Price Risk Management Activities consists of gross liabilities of $9 million, offset by gross assets of $9 million at March 31, 2014.

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 ISDAs to be settled immediately.  See Note 11 for the aggregate fair value of all derivative instruments that were in a net liability position at March 31, 2014 and December 31, 2013.  EOG had no collateral posted and held no collateral at March 31, 2014 and December 31, 2013.