Risk Management Activities

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Risk Management Activities

12.  Risk Management Activities

CommodityPrice Risks.  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. 

During 2014, 2013 and 2012, 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 2014, 2013 and 2012, EOG recognized net gains (losses) on the mark-to-market of financial commodity derivative contracts of $834 million, $(166) million and $394 million, respectively, which included cash received from settlements of crude oil and natural gas derivative contracts of $34 million, $116 million and $711 million, respectively.

Commodity Derivative Contracts.  Presented below is a comprehensive summary of EOG's crude oil derivative contracts at December 31, 2014, 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)
2015 (1)
January 1, 2015 through June 30, 2015	47,000	$	91.22
July 1, 2015 through December 31, 2015	10,000	89.98

(1) 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 37,000 Bbld are exercisable on June 30, 2015.  If the counterparties exercise all such options, the notional volume of EOG's existing crude oil derivative contracts will increase by 37,000 Bbld at an average price of $91.56 per barrel for each month during the period July 1, 2015 through December 31, 2015.

Presented below is a comprehensive summary of EOG's natural gas derivative contracts at December 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
	Volume (MMBtud)	Weighted  Average Price ($/MMBtu)
2015 (1)
January 2015 (closed)	235,000	$	4.47
February 2015	235,000	4.47
March 2015	225,000	4.48
April 2015	195,000	4.49
May 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 175,000 MMBtud at an average price of $4.51 per MMBtu for each month during the period February 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.  The foreign currency swap agreement expired and was settled contemporaneously with the repayment upon maturity of the Subsidiary Debt on March 17, 2014 (see Note 2).

Interest Rate Derivative.  EOG was 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 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 2).

The following table sets forth the amounts and classification of EOG's outstanding derivative financial instruments at December 31, 2014 and 2013, 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	2014		2013
Asset Derivatives
Crude oil and natural gas derivative contracts -
Current portion	Assets from Price Risk Management Activities (1)	$	465	$	8
Liability Derivatives
Crude oil and natural gas derivative contracts -
Current portion	Liabilities from Price Risk Management Activities (2)	$	—	$	127
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 $477 million, partially offset by gross liabilities of $12 million, at December 31, 2014 and gross assets of $18 million, partially offset by gross liabilities of $10 million, at December 31, 2013.

(2) The current portion of Liabilities from Price Risk Management Activities consists of gross liabilities of $12 million, offset by gross assets of $12 million, at December 31, 2014 and gross liabilities of $137 million, partially offset by gross assets of $10 million, at December 31, 2013.

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 13).  EOG evaluates its exposure to significant counterparties on an ongoing basis, including those arising from physical and financial transactions.  In some instances, EOG renegotiates payment terms and/or requires collateral, parent guarantees or letters of credit to minimize credit risk.  At December 31, 2014, EOG's net accounts receivable balance related to United States, Canada, Argentina and United Kingdom hydrocarbon sales included two receivable balances, each of which accounted for more than 10% of the total balance.  The receivables were due from two petroleum refinery companies.  The related amounts were collected during early 2015.  At December 31, 2013, EOG's net accounts receivable balance related to United States, Canada, Argentina and United Kingdom hydrocarbon sales included three receivable balances, each of which accounted for more than 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. In 2014 and 2013, all natural gas from EOG's Trinidad operations was sold to the National Gas Company of Trinidad and Tobago and its subsidiary, 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 13 for the aggregate fair value of all derivative instruments that were in a net liability position at December 31, 2014 and 2013.  EOG had no collateral posted and held $278 million of collateral at December 31, 2014, and had no collateral posted and held no collateral at December 31, 2013.

Substantially all of EOG's accounts receivable at December 31, 2014 and 2013 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, 2014, credit losses incurred on receivables by EOG have been immaterial.