EOG Resources Reports First Quarter 2006 Results
HOUSTON, May 4 /PRNewswire-FirstCall/ — EOG Resources, Inc. (EOG) today reported first quarter 2006 net income available to common of $424.8 million, or $1.73 per share. This compares to first quarter 2005 net income available to common of $200.8 million, or $0.83 per share.
The results for the first quarter 2006 included a previously disclosed $107.0 million ($68.8 million after tax, or $0.28 per share) gain on the mark- to-market of financial commodity price transactions. During the quarter, the net cash realized related to financial commodity contracts was $30.1 million ($19.3 million after tax, or $0.08 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 $375.3 million, or $1.53 per share. Last year’s first quarter results included a $0.9 million ($0.6 million after tax, or less than $0.01 per share) loss on the mark-to-market of financial commodity price transactions. The net cash inflow from the settlement of financial commodity price transactions was $9.8 million ($6.4 million after tax, or $0.03 per share). Reflecting these items, first quarter 2005 adjusted non-GAAP net income available to common was $207.8 million, or $0.86 per share. (Please refer to the attached tables for the reconciliation of adjusted non-GAAP net income available to common to net income available to common.)
Operational Highlights
United States natural gas production increased 10 percent over the first quarter 2005 with particularly strong performance from EOG’s Rocky Mountain, North Louisiana and Fort Worth operations.
In the Rocky Mountains’ Uinta Basin in western Utah, natural gas production increased from ongoing drilling success and development activity in the Mesaverde. EOG plans to drill more than 170 wells this year in the Uinta, the majority on its 64,000 net acre position in the Natural Buttes/Chapita Wells areas of the basin. The company has more than doubled its drilling activity from three rigs that were operating in January to the current seven rig program.
In North Louisiana, EOG is participating in several high potential prospects in the Expanded Cotton Valley Play. EOG has a 50 percent working interest in the Marr 24 No. 1, which began natural gas production in February at an initial rate of 7.8 million cubic feet per day (MMcfd), gross. With its partners, EOG is running four rigs across the play.
Also in the Expanded Cotton Valley Play on trend with the prolific Vernon Field, EOG reported a natural gas discovery on the Eros prospect. Drilled to 14,000 feet, the Spillers No.18-1, in which EOG has a 50 percent working interest, encountered significant natural gas pay. Three separate zones were completed, each testing at rates between 3 and 9 MMcfd, gross. A fourth zone remains to be completed. EOG plans to pursue immediate development of the estimated 100 to 200 net billion cubic feet natural gas discovery. Another high impact prospect will be tested in this region later in the year.
EOG reported excellent drilling results from Johnson County in the Fort Worth Basin. In eastern Johnson County, EOG completed the Raam No. 2H, which began flowing to sales in mid-April at 9 MMcfd of natural gas. EOG has a 100 percent working interest in the well, which was drilled as a 500 foot offset location to the previously announced discovery, the Raam No. 1H. In western Johnson County, the Clements No. 1H, in which EOG has a 100 percent working interest, tested at 5 MMcfd of natural gas.
“EOG’s first quarter natural gas production from the Fort Worth Basin Barnett Shale Play exceeded our expectations. Across our operations, we added multiple wells at strong production rates that contributed to EOG’s robust first quarter U.S. natural gas production growth,” said Mark G. Papa, Chairman and Chief Executive Officer.
Capital Structure
During the first quarter, EOG further reduced long-term debt outstanding to $933 million at March 31, 2006. At quarter end, cash on the balance sheet was $821 million for net debt of $112 million. (Please refer to the attached tables for the reconciliation of non-GAAP net debt to current and long-term debt.) The company’s debt-to-total capitalization ratio was 16 percent at March 31, 2006, down from 19 percent at December 31, 2005.
“EOG continues to execute its game plan to consistently deliver high organic growth, with low debt and a vigorous rate of return,” said Papa.
Conference Call Scheduled for May 5, 2006
An updated investor presentation and reconciliation schedules will be posted to the EOG website prior to the conference call.
EOG’s first quarter 2006 conference call will be available via live audio webcast at 9 a.m. Central Daylight Time (10 a.m. Eastern Daylight Time) Friday, May 5, 2006. To listen, log on to http://www.eogresources.com/ . The webcast will be archived on EOG’s website through Friday, May 19, 2006.
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, materials and equipment used in well completions, 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 economically develop its Barnett Shale acreage outside of Johnson County, Texas; 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; weather; and financial market conditions. In light of these risks, uncertainties and assumptions, the events anticipated by EOG’s forward-looking statements might not occur. Forward-looking statements speak only as of the date made and EOG undertakes no obligation 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, 2005, 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 http://www.sec.gov/ .
EOG RESOURCES, INC. FINANCIAL REPORT (Unaudited; in millions, except per share data) Quarter Ended March 31 2006 2005 Net Operating Revenues $1,084.5 $688.2 Net Income Available to Common $424.8 $200.8 Net Income Per Share Available to Common Basic $1.76 $0.85 Diluted $1.73 $0.83 Average Number of Shares Outstanding Basic 241.1 237.3 Diluted 245.9 242.1 SUMMARY INCOME STATEMENTS (Unaudited; in thousands) Quarter Ended March 31 2006 2005 Net Operating Revenues Wellhead Natural Gas $789,061 $543,106 Wellhead Crude Oil, Condensate and Natural Gas Liquids 184,718 144,536 Gains (Losses) on Mark-to-Market Commodity Derivative Contracts 107,024 (940) Other, Net 3,733 1,454 Total 1,084,536 688,156 Operating Expenses Lease and Well 87,484 65,768 Transportation Costs 28,096 17,107 Exploration Costs 39,392 34,816 Dry Hole Costs 10,726 14,582 Impairments 22,773 12,172 Depreciation, Depletion and Amortization 177,652 153,016 General and Administrative 36,291 28,687 Taxes Other Than Income 53,694 41,913 Total 456,108 368,061 Operating Income 628,428 320,095 Other Income, Net 14,556 5,465 Income Before Interest Expense and Income Taxes 642,984 325,560 Interest Expense, Net 13,153 13,957 Income Before Income Taxes 629,831 311,603 Income Tax Provision 203,124 108,900 Net Income 426,707 202,703 Preferred Stock Dividends 1,858 1,858 Net Income Available to Common $424,849 $200,845 EOG RESOURCES, INC. OPERATING HIGHLIGHTS (Unaudited) Quarter Ended March 31 2006 2005 Wellhead Volumes and Prices Natural Gas Volumes (MMcfd) United States 758 689 Canada 229 234 United States & Canada 987 923 Trinidad 283 205 United Kingdom 34 35 Total 1,304 1,163 Average Natural Gas Prices ($/Mcf) United States $7.77 $5.97 Canada 7.87 5.69 United States & Canada Composite 7.79 5.90 Trinidad 2.44 1.74 United Kingdom 11.56 6.65 Composite 6.72 5.19 Crude Oil and Condensate Volumes (MBbld) United States 21.0 22.5 Canada 2.6 2.5 United States & Canada 23.6 25.0 Trinidad 5.4 4.1 United Kingdom 0.2 0.2 Total 29.2 29.3 Average Crude Oil and Condensate Prices ($/Bbl) United States $60.42 $48.79 Canada 51.95 44.79 United States & Canada Composite 59.48 48.39 Trinidad 61.79 45.38 United Kingdom 57.86 39.74 Composite 59.90 47.91 Natural Gas Liquids Volumes (MBbld) United States 7.3 5.5 Canada 0.7 1.5 Total 8.0 7.0 Average Natural Gas Liquids Prices ($/Bbl) United States $37.19 $29.28 Canada 42.77 27.47 Composite 37.69 28.89 Natural Gas Equivalent Volumes (MMcfed) United States 927 857 Canada 249 258 United States & Canada 1,176 1,115 Trinidad 316 230 United Kingdom 35 36 Total 1,527 1,381 Total Bcfe Deliveries 137.5 124.3 EOG RESOURCES, INC. SUMMARY BALANCE SHEETS (Unaudited; in thousands, except share data) March 31, December 31, 2006 2005 ASSETS Current Assets Cash and Cash Equivalents $821,327 $643,811 Accounts Receivable, Net 627,667 762,207 Inventories 76,638 63,215 Assets from Price Risk Management Activities 88,385 11,415 Deferred Income Taxes — 24,376 Other 50,741 58,214 Total 1,664,758 1,563,238 Oil and Gas Properties (Successful Efforts Method) 11,742,417 11,173,389 Less: Accumulated Depreciation, Depletion and Amortization (5,269,596) (5,086,210) Net Oil and Gas Properties 6,472,821 6,087,179 Other Assets 105,811 102,903 Total Assets $8,243,390 $7,753,320 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts Payable $673,914 $679,548 Accrued Taxes Payable 169,360 140,902 Dividends Payable 14,760 9,912 Deferred Income Taxes 36,228 164,659 Current Portion of Long-Term Debt 124,075 126,075 Other 49,188 50,945 Total 1,067,525 1,172,041 Long-Term Debt 808,667 858,992 Other Liabilities 289,850 283,407 Deferred Income Taxes 1,333,988 1,122,588 Shareholders’ Equity Preferred Stock, $0.01 Par, 10,000,000 Shares Authorized: Series B, 100,000 Shares Issued, Cumulative, $100,000,000 Liquidation Preference 99,121 99,062 Common Stock, $0.01 Par, 640,000,000 Shares Authorized and 249,460,000 Shares Issued 202,495 202,495 Additional Paid In Capital 60,905 84,705 Unearned Compensation — (36,246) Accumulated Other Comprehensive Income 175,743 177,137 Retained Earnings 4,330,772 3,920,483 Common Stock Held in Treasury, 6,864,234 Shares at March 31, 2006 and 7,385,862 Shares at December 31, 2005 (125,676) (131,344) Total Shareholders’ Equity 4,743,360 4,316,292 Total Liabilities and Shareholders’ Equity $8,243,390 $7,753,320 EOG RESOURCES, INC. SUMMARY STATEMENTS OF CASH FLOWS (Unaudited; in thousands) Quarter Ended March 31 2006 2005 Cash Flows from Operating Activities Reconciliation of Net Income to Net Cash Provided by Operating Activities: Net Income $426,707 $202,703 Items Not Requiring Cash Depreciation, Depletion and Amortization 177,652 153,016 Impairments 22,773 12,172 Stock-Based Compensation Expenses 9,003 2,719 Deferred Income Taxes 106,326 44,928 Other, Net (4,444) (1,462) Dry Hole Costs 10,726 14,582 Mark-to-Market Commodity Derivative Contracts Total (Gains) Losses (107,024) 940 Realized Gains 30,054 9,807 Tax Benefits From Stock Options Exercised — 9,348 Other, Net 4,299 (2,113) Changes in Components of Working Capital and Other Liabilities Accounts Receivable 135,150 5,518 Inventories (13,370) (8,701) Accounts Payable (9,535) (26,352) Accrued Taxes Payable 29,298 41,807 Other Liabilities 5,429 3,666 Other, Net (3,090) (6,459) Changes in Components of Working Capital Associated with Investing and Financing Activities (33,187) 25,720 Net Cash Provided by Operating Activities 786,767 481,839 Investing Cash Flows Additions to Oil and Gas Properties (589,048) (363,760) Proceeds from Sales of Assets 2,741 19,752 Changes in Components of Working Capital Associated with Investing Activities 33,288 (25,671) Other, Net (5,253) (7,394) Net Cash Used in Investing Activities (558,272) (377,073) Financing Cash Flows Net Commercial Paper and Line of Credit Borrowings — 42,175 Long-Term Debt Repayments (52,325) — Dividends Paid (11,432) (8,880) Excess Tax Benefits from Stock-Based Compensation Expenses 7,177 — Proceeds from Stock Options Exercised 6,129 14,264 Changes in Components of Working Capital Associated with Financing Activities (101) (49) Net Cash (Used in) Provided by Financing Activities (50,552) 47,510 Effect of Exchange Rate Changes on Cash (427) 129 Increase in Cash and Cash Equivalents 177,516 152,405 Cash and Cash Equivalents at Beginning of Period 643,811 20,980 Cash and Cash Equivalents at End of Period $821,327 $173,385 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 data)
The following chart adjusts first quarter reported Net Income Available to Common to reflect actual cash realized from previously disclosed gas hedges by eliminating the unrealized mark-to-market gains or losses from these transactions. 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. EOG management uses this information for comparative purposes within the industry.
Quarter Ended March 31 2006 2005 Reported Net Income Available to Common $424,849 $200,845 Mark-to-Market (MTM) Commodity Derivative Contracts Impact Total (Gains) Losses (107,024) 940 Realized Gains 30,054 9,807 Subtotal (76,970) 10,747 After Tax MTM Impact (49,530) 6,916 Adjusted Non-GAAP Net Income Available to Common $375,319 $207,761 Adjusted Non-GAAP Net Income Per Share Available to Common Basic $1.56 $0.88 Diluted $1.53 $0.86 Average Number of Shares Outstanding Basic 241,118 237,293 Diluted 245,923 242,114 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 periods ended March 31 Net Cash Provided by Operating Activities (GAAP) to Discretionary Cash Flow Available to Common (Non-GAAP). 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 Exploration Costs, Changes in Components of Working Capital, Other Liabilities and Preferred Stock Dividends. EOG management uses this information for comparative purposes within the industry.
Quarter Ended March 31 2006 2005 Net Cash Provided by Operating Activities (GAAP) $786,767 $481,839 Adjustments Exploration Costs 39,392 34,816 Changes in Components of Working Capital and Other Liabilities Accounts Receivable (135,150) (5,518) Inventories 13,370 8,701 Accounts Payable 9,535 26,352 Accrued Taxes Payable (29,298) (41,807) Other Liabilities (5,429) (3,666) Other, Net 3,090 6,459 Changes in Components of Working Capital Associated with Investing and Financing Activities 33,187 (25,720) Preferred Stock Dividends (1,858) (1,858) Discretionary Cash Flow Available to Common (Non-GAAP) $713,606 $479,598 EOG RESOURCES, INC. QUANTITATIVE RECONCILIATION OF NET DEBT (NON-GAAP) AS USED IN THE CALCULATION OF THE NET DEBT-TO-TOTAL CAPITALIZATION RATIO TO CURRENT AND LONG-TERM DEBT (GAAP) (Unaudited; in millions, except ratio data)
The following chart reconciles Current and Long-Term Debt (GAAP) to Net Debt (Non-GAAP) as used in the Net Debt-to-Total Capitalization ratio calculation. EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who utilize Net Debt in their Net Debt-to-Total Capitalization calculation. EOG management uses this information for comparative purposes within the industry.
December 31, March 31, 2005 2006 Total Shareholders’ Equity – (a) $4,316 $4,743 Current and Long-Term Debt 985 933 Less: Cash (644) (821) Net Debt (Non-GAAP) – (b) 341 112 Total Capitalization (Non-GAAP) – (a) + (b) $4,657 $4,855 Net Debt-to-Total Capitalization – (b) / [(a) + (b)] 7% 2%
EOG Resources, Inc.
CONTACT: investors, Maire A. Baldwin, +1-713-651-6EOG, or+1-713-651-6364, or media and investors, Elizabeth M. Ivers, +1-713-651-7132,both of EOG Resources, Inc.
Web site: http://www.eogresources.com/