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EOG RESOURCES INC.

(EOG)
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EOG RESOURCES INC : Regulation FD Disclosure (form 8-K)

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07/11/2019 | 04:09pm EDT

Item 7.01 Regulation FD Disclosure.

1. Price Matters Update

Based on EOG Resources, Inc.'s (EOG) tax position, EOG's price sensitivity (exclusive of basis swaps) as of July 11, 2019, for each $1.00 per barrel increase or decrease in wellhead crude oil and condensate price, combined with the estimated change in natural gas liquids price, is approximately $103 million for net income and $134 million for pretax cash flows from operating activities, in each case for the full-year 2019.

Based on EOG's tax position and the portion of EOG's anticipated natural gas volumes for which prices have not (as of July 11, 2019) been determined under long-term marketing contracts, EOG's price sensitivity (as of July 11, 2019) for each $0.10 per thousand cubic feet increase or decrease in wellhead natural gas price is approximately $25 million for net income and $32 million for pretax cash flows from operating activities, in each case for the full-year 2019.

See below for a summary of EOG's financial commodity derivative contracts as of July 11, 2019. For a summary of EOG's financial commodity derivative contracts for the three months ended March 31, 2019, see Note 12 to the Condensed Consolidated Financial Statements included in EOG's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019, filed on May 2, 2019 (Quarterly Report on Form 10-Q).

II. Price Risk Management

With the objective of enhancing the certainty of future revenues, from time to time EOG enters into U.S. New York Mercantile Exchange (NYMEX) related financial price swap, option, swaption, collar and basis swap contracts. EOG accounts for financial commodity derivative contracts using the mark-to-market accounting method.

For the second quarter of 2019, EOG anticipates a net gain of $177.3 million on the mark-to-market of its financial commodity derivative contracts. During the second quarter of 2019, the net cash received for settlements of financial commodity derivative contracts was $10.4 million.

For the quarter ended June 30, 2019, NYMEX West Texas Intermediate (WTI) crude oil averaged $59.83 per barrel ($/Bbl), and NYMEX natural gas at Henry Hub averaged $2.62 per million British thermal units (MMBtu). EOG's actual realizations for crude oil and natural gas for the quarter ended June 30, 2019, differ from these NYMEX prices due to delivery location, quality and appropriate revenue adjustments.

III. Crude Oil Derivative Contracts

Since filing its Quarterly Report on Form 10-Q, EOG has not entered into additional crude oil derivative contracts.

As noted above, prices received by EOG for its crude oil production generally vary from NYMEX WTI prices due to adjustments for delivery location (basis) and other factors. EOG has entered into crude oil basis swap contracts in order to fix the differential between pricing in Midland, Texas, and Cushing, Oklahoma (Midland Differential). Presented below is a comprehensive summary of EOG's Midland Differential basis swap contracts through July 11, 2019. The weighted average price differential expressed in $/Bbl represents the amount of reduction to Cushing, Oklahoma, prices for the notional volumes expressed in barrels per day (Bbld) covered by the basis swap contracts.

                           Midland Differential Basis Swap Contracts
                                                                            Weighted Average
                                                                Volume     Price Differential
                                                                (Bbld)           ($/Bbl)
  2019
  January 1, 2019 through July 31, 2019 (closed)                20,000     $           1.075
  August 1, 2019 through December 31, 2019                      20,000                 1.075




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EOG has also entered into crude oil basis swap contracts in order to fix the differential between pricing in the U.S. Gulf Coast and Cushing, Oklahoma (Gulf Coast Differential). Presented below is a comprehensive summary of EOG's Gulf Coast Differential basis swap contracts through July 11, 2019. The weighted average price differential expressed in $/Bbl represents the amount of addition to Cushing, Oklahoma, prices for the notional volumes expressed in Bbld covered by the basis swap contracts.

                          Gulf Coast Differential Basis Swap Contracts
                                                                            Weighted Average
                                                                Volume     Price Differential
                                                                (Bbld)           ($/Bbl)
  2019
  January 1, 2019 through July 31, 2019 (closed)                13,000     $           5.572
  August 1, 2019 through December 31, 2019                      13,000                 5.572



Presented below is a comprehensive summary of EOG's crude oil price swap
contracts through July 11, 2019, with notional volumes expressed in Bbld and
prices expressed in $/Bbl.

                                Crude Oil Price Swap Contracts

                                                                Volume     Weighted Average
                                                                (Bbld)       Price ($/Bbl)
  2019
  April 2019 (closed)                                           25,000     $         60.00
  May 1, 2019 through June 30, 2019 (closed)                   150,000               62.50
  July 1, 2019 through December 31, 2019                       150,000               62.50


IV. Natural Gas Derivative Contracts

Since filing its Quarterly Report on Form 10-Q, EOG has not entered into additional natural gas derivative contracts.

Presented below is a comprehensive summary of EOG's natural gas price swap contracts through July 11, 2019, with notional volumes expressed in MMBtu per day (MMBtud) and prices expressed in dollars per MMBtu ($/MMBtu).

                                Natural Gas Price Swap Contracts

                                                                 Volume      Weighted Average
                                                                (MMBtud)      Price ($/MMBtu)
  2019
  April 1, 2019 through July 31, 2019 (closed)                  250,000     $            2.90
  August 1, 2019 through October 31, 2019                       250,000                  2.90





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V. Forward-Looking Statements

Information Regarding Forward-Looking Statements

This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, including, among others, statements and projections regarding EOG's future financial position, operations, performance, business strategy, returns, budgets, reserves, levels of production, capital expenditures, costs and asset sales, statements regarding future commodity prices and statements regarding the plans and objectives of EOG's management for future operations, are forward-looking statements. EOG typically uses words such as "expect," "anticipate," "estimate," "project," "strategy," "intend," "plan," "target," "aims," "goal," "may," "will," "should" and "believe" or the negative of those terms or other variations or comparable terminology to identify its forward-looking statements. In particular, statements, express or implied, concerning EOG's future operating results and returns or EOG's ability to replace or increase reserves, increase production, generate returns, replace or increase drilling locations, reduce or otherwise control operating costs and capital expenditures, generate cash flows, pay down or refinance indebtedness or pay and/or increase dividends are forward-looking statements. Forward-looking statements are not guarantees of performance. Although EOG believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Moreover, EOG's forward-looking statements may be affected by known, unknown or currently unforeseen risks, events or circumstances that may be outside EOG's control. Important factors that could cause EOG's actual results to differ materially from the expectations reflected in EOG's forward-looking statements include, among others:

•         the timing, extent and duration of changes in prices for, supplies of,
          and demand for, crude oil and condensate, natural gas liquids, natural
          gas and related commodities;


•         the extent to which EOG is successful in its efforts to acquire or
          discover additional reserves;


•         the extent to which EOG is successful in its efforts to economically
          develop its acreage in, produce reserves and achieve anticipated
          production levels from, and maximize reserve recovery from, its
          existing and future crude oil and natural gas exploration and
          development projects;


•         the extent to which EOG is successful in its efforts to market its
          crude oil and condensate, natural gas liquids, natural gas and related
          commodity production;


•         the availability, proximity and capacity of, and costs associated with,
          appropriate gathering, processing, compression, storage, transportation
          and refining facilities;


•         the availability, cost, terms and timing of issuance or execution of,
          and competition for, mineral licenses and leases and governmental and
          other permits and rights-of-way, and EOG's ability to retain mineral
          licenses and leases;


•         the impact of, and changes in, government policies, laws and
          regulations, including tax laws and regulations; climate change and
          other environmental, health and safety laws and regulations relating to
          air emissions, disposal of produced water, drilling fluids and other
          wastes, hydraulic fracturing and access to and use of water; laws and
          regulations imposing conditions or restrictions on drilling and
          completion operations and on the transportation of crude oil and
          natural gas; laws and regulations with respect to derivatives and
          hedging activities; and laws and regulations with respect to the import
          and export of crude oil, natural gas and related commodities;


•         EOG's ability to effectively integrate acquired crude oil and natural
          gas properties into its operations, fully identify existing and
          potential problems with respect to such properties and accurately
          estimate reserves, production and costs with respect to such
          properties;


•         the extent to which EOG's third-party-operated crude oil and natural
          gas properties are operated successfully and economically;


•         competition in the oil and gas exploration and production industry for
          the acquisition of licenses, leases and properties, employees and other
          personnel, facilities, equipment, materials and services;


•         the availability and cost of employees and other personnel, facilities,
          equipment, materials (such as water and tubulars) and services;


•         the accuracy of reserve estimates, which by their nature involve the
          exercise of professional judgment and may therefore be imprecise;


•         weather, including its impact on crude oil and natural gas demand, and
          weather-related delays in drilling and in the installation and
          operation (by EOG or third parties) of production, gathering,
          processing, refining, compression, storage and transportation
          facilities;


•         the ability of EOG's customers and other contractual counterparties to
          satisfy their obligations to EOG and, related thereto, to access the
          credit and capital markets to obtain financing needed to satisfy their
          obligations to EOG;


•         EOG's ability to access the commercial paper market and other credit
          and capital markets to obtain financing on terms it deems acceptable,
          if at all, and to otherwise satisfy its capital expenditure
          requirements;


•         the extent to which EOG is successful in its completion of planned
          asset dispositions;



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• the extent and effect of any hedging activities engaged in by EOG;


•         the timing and extent of changes in foreign currency exchange rates,
          interest rates, inflation rates, global and domestic financial market
          conditions and global and domestic general economic conditions;


•         geopolitical factors and political conditions and developments around
          the world (such as the imposition of tariffs or trade or other economic
          sanctions, political instability and armed conflict), including in the
          areas in which EOG operates;


•         the use of competing energy sources and the development of alternative
          energy sources;


•         the extent to which EOG incurs uninsured losses and liabilities or
          losses and liabilities in excess of its insurance coverage;

• acts of war and terrorism and responses to these acts;

• physical, electronic and cybersecurity breaches; and


•         the other factors described under ITEM 1A, Risk Factors, on pages 13
          through 22 of EOG's Annual Report on Form 10-K for the fiscal year
          ended December 31, 2018, and any updates to those factors set forth in
          EOG's subsequent Quarterly Reports on Form 10-Q or Current Reports on
          Form 8-K.


In light of these risks, uncertainties and assumptions, the events anticipated by EOG's forward-looking statements may not occur, and, if any of such events do, we may not have anticipated the timing of their occurrence or the duration or extent of their impact on our actual results. Accordingly, you should not place any undue reliance on any of EOG's forward-looking statements. EOG's forward-looking statements speak only as of the date made, and EOG undertakes no obligation, other than as required by applicable law, to update or revise its forward-looking statements, whether as a result of new information, subsequent events, anticipated or unanticipated circumstances or otherwise.





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© Edgar Online, source Glimpses

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