Exploration & Production | Quarterly / Earnings Reports | Production | Third Quarter (3Q) Update
EOG: Strong Drilling Results Lift U.S. Oil Production 29%
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EOG Resources, Inc. reported third quarter 2014 net income of $1,103.6 million, or $2.01 per share. This compares to third quarter 2013 net income of $462.5 million, or $0.85 per share.
Highlights:
- Increases 2014 Full-Year Crude Oil and Condensate Production Growth Goal to 31 Percent from 29 Percent
- Raises 2014 Total Production Growth Target to 16.5 Percent from 14 Percent
- Reports 29 Percent Increase in U.S. Crude Oil and Condensate Production and 17 Percent Growth in Total Company Production Year-Over-Year
- Confirms Prolific, Highly Over-Pressured Crude Oil Window on Delaware Basin Wolfcamp Acreage
- Realizes Strong Drilling Results from Eagle Ford, Emerging Delaware Basin and Rockies Crude Oil Plays
Operational Highlights
EOG is increasing its full year 2014 crude oil and condensate production growth target to 31 percent from 29 percent and total production growth target to 16.5 percent from 14 percent, as it continues to improve well productivity in its key domestic crude oil plays.
In the third quarter, EOG's U.S. crude oil and condensate production increased 29 percent, compared to the same prior year period. Production gains from the South Texas Eagle Ford, North Dakota Bakken and Delaware Basin led EOG's crude oil production growth. Driven by the Delaware Basin and Eagle Ford, total natural gas liquids (NGLs) production increased 25 percent, and total company natural gas production increased 3 percent, compared to the third quarter 2013. Total company production increased 17 percent.
EOG to Ramp Up Delaware Wolfcamp Drilling Activity
EOG's Eagle Ford Optimizations Yielding Stronger Results
EOG: New Bakken Frac Technology Improving Returns
EOG Hones In on Stacked Plays in the DJ, Powder River Basins
Chairman and Chief Executive Officer William R. "Bill" Thomas commented: "We have added a number of new plays to EOG's portfolio this year, while continuing to improve well productivity in our existing assets. We expect the Eagle Ford, EOG's cornerstone, to drive our production growth for many years. It's important to note that despite the recent pullback in crude oil prices, because of our premier acreage positions and zealous approach to improving completion methods, EOG is positioned to realize ongoing excellent returns in our top plays and continue to be an industry leader in domestic organic production growth."
Oil and Gas Hedging Activity
For the period November 1 through December 31, 2014, EOG has crude oil financial price swap contracts in place for 192,000 Bopd at a weighted average price of $96.15 per barrel. For the period January 1 through December 31, 2015, EOG has crude oil financial price swap contracts in place for an average of 28,350 Bopd at a weighted average price of $91.00 per barrel, excluding unexercised options.
For December 2014, EOG has natural gas financial price swap contracts in place for 330,000 million British thermal units per day (MMBtud) at a weighted average price of $4.55 per million British thermal units (MMBtu), excluding unexercised options.
For the period January 1 through December 31, 2015, EOG has natural gas financial price swap contracts in place for 175,000 MMBtud at a weighted average price of $4.51 per MMBtu, excluding unexercised options.
Financial Results
Adjusted non-GAAP net income for the third quarter 2014 was $720.6 million, or $1.31 per share, and adjusted non-GAAP net income for the same prior year period was $634.3 million, or $1.16 per share.
Consistent with some analysts' practice of matching realizations to settlement months and making certain other adjustments in order to exclude one-time items, adjusted non-GAAP net income for the third quarter 2014 excluded a previously disclosed non-cash net gain of $469.1 million ($301.0 million after-tax, or $0.55 per share) on the mark-to-market of financial commodity derivative contracts. The net cash outflow related to settlements of financial commodity derivative contracts was $68.0 million ($43.6 million after-tax, or $0.08 per share). During the third quarter 2014, the net gains on asset dispositions were $60.3 million ($38.4 million net of tax, or $0.07 per share).
Reflecting the ongoing shift in its asset portfolio, crude oil now accounts for 48 percent of EOG's total production, compared to 42 percent at the end of the third quarter 2013. This highly desirable ratio drove EOG's strong financial metrics for the first nine months of 2014. Discretionary cash flow increased 18 percent and adjusted EBITDAX advanced 19 percent, versus the first nine months of 2013. In addition, adjusted non-GAAP earnings per share increased 34 percent.
Cash Flow and Capital Structure
At September 30, 2014, EOG's total debt outstanding was $5,910 million for a debt-to-total capitalization ratio of 25 percent. Taking into account cash on the balance sheet of $1.5 billion at September 30, 2014, EOG's net debt was $4,429 million for a net debt-to-total capitalization ratio of 20 percent, down from 23 percent at December 31, 2013. (Please refer to the attached tables for the reconciliation of net debt (non-GAAP) to current and long-term debt (GAAP) and the reconciliation of net debt-to-total capitalization ratio (non-GAAP) to debt-to-total capitalization ratio (GAAP).)
Thomas said: "EOG is committed to enhancing long-term shareholder value. We have increased the dividend twice in 2014 because our excellent financial and operational performance drives outstanding returns quarter after quarter."
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