EOG RESOURCES, INC. Overview
EOG Resources, Inc. , together with its subsidiaries (collectively, EOG), is one of the largest independent (non-integrated) crude oil and natural gas companies inthe United States with proved reserves inthe United States ,Trinidad andChina . EOG operates under a consistent business and operational strategy that focuses predominantly on maximizing the rate of return on investment of capital by controlling operating and capital costs and maximizing reserve recoveries. Each prospective drilling location is evaluated by its estimated rate of return. This strategy is intended to enhance the generation of cash flow and earnings from each unit of production on a cost-effective basis, allowing EOG to deliver long-term production growth while maintaining a strong balance sheet. EOG implements its strategy primarily by emphasizing the drilling of internally generated prospects in order to find and develop low-cost reserves. Maintaining the lowest possible operating cost structure that is consistent with efficient, safe and environmentally responsible operations is also an important goal in the implementation of EOG's strategy. Recent Developments. The COVID-19 pandemic and the measures being taken to address and limit the spread of the virus have adversely affected the economies and financial markets of the world, resulting in an economic downturn that has negatively impacted, and may continue to negatively impact, global demand and prices for crude oil and condensate, natural gas liquids (NGLs) and natural gas. See PART II, ITEM 1A, "Risk Factors" below, for further discussion. In earlyMarch 2020 , due to the failure of the members of theOrganization of the Petroleum Exporting Countries andRussia (OPEC+) to reach an agreement on individual crude oil production limits,Saudi Arabia unilaterally reduced the sales price of its crude oil and announced that it would increase its crude oil production. The combination of these actions and the effects of the COVID-19 pandemic on crude oil demand, resulted in lower commodity prices in March andApril 2020 . InApril 2020 , the members of OPEC+ reached an agreement to cut production beginning inMay 2020 and extending throughApril 2022 with the quantity of the production cuts decreasing over time. In May andJune 2020 , crude oil prices recovered, but remain significantly below average prices in 2019 as a result of the rebalancing of crude oil supply from the actions of OPEC+ and the continuing effect of the COVID-19 pandemic on global demand. In response to the current commodity price environment, EOG updated its 2020 capital and operating plan to reduce activity across its operating areas and decrease its total anticipated 2020 capital expenditures. EOG also elected to reduce its 2020 crude oil production, including delaying initial production from new wells and shutting-in or otherwise curtailing existing production. As a result, EOG expects its full-year 2020 total crude oil production to be lower than its full-year 2019 total crude oil production. See "2020 Capital and Operating Plan" below for further discussion. Commodity Prices. As a result of the many uncertainties associated with (i) the world economic environment, (ii) the COVID-19 pandemic and its continuing effect on the economies and financial markets of the world and (iii) any future actions by the members of OPEC+, and the effect of these uncertainties on worldwide supplies of, and demand for, crude oil and condensate, NGLs and natural gas, EOG is unable to predict what changes may occur in crude oil and condensate, NGLs, and natural gas prices in the future. However, prices for crude oil and condensate, NGLs and natural gas have historically been volatile, and this volatility is expected to continue. The market prices of crude oil and condensate, NGLs and natural gas during the remainder of 2020 will impact the amount of cash generated from EOG's operating activities, which will in turn impact EOG's financial position and results of operations. For the first six months of 2020, the averageU.S. New York Mercantile Exchange (NYMEX) crude oil and condensate and natural gas prices were$36.97 per barrel and$1.85 per million British thermal units (MMBtu), respectively, both representing decreases of 36% from the average NYMEX prices for the same period in 2019. Market prices for NGLs are influenced by the components extracted, including ethane, propane and butane and natural gasoline, among others, and the respective market pricing for each component. -23- --------------------------------------------------------------------------------United States . EOG's efforts to identify plays with large reserve potential have proven to be successful. EOG has placed an emphasis on applying its horizontal drilling and completion expertise to unconventional crude oil and liquids-rich reservoirs, EOG continues to drill numerous wells in large acreage plays, which in the aggregate have contributed substantially to, and are expected to continue to contribute substantially to, EOG's crude oil and liquids-rich natural gas production. During the first six months of 2020, EOG continued to focus on increasing drilling, completion and operating efficiencies gained in prior years. In addition, EOG continued to evaluate certain potential crude oil and liquids-rich natural gas exploration and development prospects and to look for opportunities to add drilling inventory through leasehold acquisitions, farm-ins, exchanges or tactical acquisitions. On a volumetric basis, as calculated using the ratio of 1.0 barrel of crude oil and condensate or NGLs to 6.0 thousand cubic feet of natural gas, crude oil and condensate and NGL production accounted for approximately 76% and 77% of EOG'sUnited States production during the first six months of 2020 and 2019, respectively. During the first six months of 2020, EOG's drilling and completion activities occurred primarily in the Eagle Ford play,Delaware Basin play andRocky Mountain area. EOG's major producing areas inthe United States are inNew Mexico andTexas . In the second quarter of 2020, EOG delayed initial production from most newly-completed wells and shut in some existing production.Trinidad . InTrinidad , EOG continues to deliver natural gas under existing supply contracts. Several fields in theSouth East Coast Consortium (SECC) Block, Modified U(a) Block, Block 4(a), Modified U(b) Block, the Banyan Field and the Sercan Area have been developed and are producing natural gas which is sold to theNational Gas Company ofTrinidad and Tobago Limited and its subsidiary, and crude oil and condensate which is sold toHeritage Petroleum Company Limited . In the first half of 2020, EOG completed the drilling of one net exploratory well and was in the process of drilling and completing a second well on a different block as ofJune 30, 2020 . Subsequent to the second quarter of 2020, it was announced that one of the exploratory wells found commercial quantities of proved reserves. During the remainder of 2020, EOG plans to drill two additional net wells, continue its evaluation of the remaining exploratory well and begin formulating development plans. Other International. In theSichuan Basin ,Sichuan Province ,China , EOG continues to work closely with its partner, PetroChina, under the Production Sharing Contract and other related agreements, to ensure uninterrupted production in order to reach the level allowed by pipeline capacity. All natural gas produced from the Baijaochang Field is sold under a long-term contract to PetroChina.
In
EOG continues to evaluate other select crude oil and natural gas opportunities outsidethe United States , primarily by pursuing exploitation opportunities in countries where indigenous crude oil and natural gas reserves have been identified.
Management continues to believe EOG has one of the strongest prospect inventories in EOG's history. When it fits EOG's strategy, EOG will make acquisitions that bolster existing drilling programs or offer incremental exploration and/or production opportunities.
2020 Capital and Operating Plan. Total anticipated 2020 capital expenditures are estimated to range from approximately$3.4 billion to$3.6 billion , including facilities and gathering, processing and other expenditures, and excluding acquisitions and non-cash transactions. The updated 2020 capital and operating plan represents a reduction in total anticipated capital expenditures compared to the original 2020 capital and operating plan and, as a result, EOG expects its full-year 2020 total crude oil production to be lower than its full-year 2019 total crude oil production. EOG's 2020 capital expenditures will continue to be focused on drilling operations in its high rate-of-return plays as well as targeted infrastructure, exploration and environmental projects that support the long-term value of EOG. EOG remains flexible and will continue to evaluate its 2020 capital and operating plan. EOG expects to continue monitoring market conditions in the second half of the year and adjust its production volumes accordingly, with the anticipation of increasing production as prices improve. EOG will also continue to exercise financial flexibility with a goal toward preserving liquidity while supporting its dividend. Capital Structure. One of management's key strategies is to maintain a strong balance sheet with a consistently below average debt-to-total capitalization ratio as compared to those in EOG's peer group. EOG's debt-to-total capitalization ratio was 22% atJune 30, 2020 and 19% atDecember 31, 2019 . As used in this calculation, total capitalization represents the sum of total current and long-term debt and total stockholders' equity. -24- -------------------------------------------------------------------------------- AtJune 30, 2020 , EOG maintained a strong financial and liquidity position, including$2.4 billion of cash and cash equivalents and$2.0 billion of availability under its senior unsecured revolving credit facility. EOG's cash and cash equivalents as ofJune 30, 2020 included$62 million of collateral deposits from counterparties in anticipation of future settlements of financial commodity derivative contracts.
On
OnApril 14, 2020 , EOG closed on its offering of$750 million aggregate principal amount of its 4.375% Senior Notes due 2030 and$750 million aggregate principal amount of its 4.950% Senior Notes due 2050 (together, the Notes). EOG received net proceeds of approximately$1.48 billion from the issuance of the Notes, which were used to repay the 4.40% Senior Notes due 2020 when they matured onJune 1, 2020 (see below), and have also been used (and will continue to be used) for general corporate purposes, including the funding of capital expenditures. Additionally, onJune 1, 2020 , EOG repaid, with cash on hand, the$500 million aggregate principal amount of its 4.40% Senior Notes due 2020 that matured on that date. EOG believes it has significant flexibility and availability with respect to financing alternatives, including borrowings under its commercial paper program, bank borrowings, borrowings under its senior unsecured revolving credit facility, joint development agreements and similar agreements and equity and debt offerings. -25-
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Results of Operations
The following review of operations for the three months and six months ended
Three Months Ended
Operating Revenues. During the second quarter of 2020, operating revenues
decreased $3,595 million , or 77%, to $1,103 million from $4,698 million for the
same period of 2019. Total wellhead revenues, which are revenues generated from
sales of EOG's production of crude oil and condensate, NGLs and natural gas, for
the second quarter of 2020 decreased $2,135 million , or 72%, to $850 million
from $2,985 million for the same period of 2019. EOG recognized net losses on
the mark-to-market of financial commodity derivative contracts of $126 million
for the second quarter of 2020 compared to net gains of $177 million for the
same period of 2019. Gathering, processing and marketing revenues for the second
quarter of 2020 decreased $1,138 million , or 76%, to $363 million from $1,501
million for the same period of 2019. Net gains on asset dispositions were $13
million for the second quarter of 2020 compared to net gains of $8 million for
the same period of 2019.
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Wellhead volume and price statistics for the three-month periods ended
Three Months Ended
June 30,
2020 2019
Crude Oil and Condensate Volumes (MBbld) (1)
United States 330.9 454.9
Trinidad 0.1 0.6
Other International (2) 0.1 0.2
Total 331.1 455.7
Average Crude Oil and Condensate Prices ($/Bbl) (3)
United States $ 20.40 $ 61.01
Trinidad 0.60 49.56
Other International (2) 48.78 55.07
Composite 20.40 60.99
Natural Gas Liquids Volumes (MBbld) (1)
United States 101.2 131.1
Other International (2) - -
Total 101.2 131.1
Average Natural Gas Liquids Prices ($/Bbl) (3)
United States $ 10.20 $ 15.63
Other International (2) - -
Composite 10.20 15.63
Natural Gas Volumes (MMcfd) (1)
United States 939 1,047
Trinidad 174 273
Other International (2) 34 36
Total 1,147 1,356
Average Natural Gas Prices ($/Mcf) (3)
United States $ 1.11 $ 1.98
Trinidad 2.13 2.69
Other International (2) 4.36 4.25
Composite 1.36 2.19
Crude Oil Equivalent Volumes (MBoed) (4)
United States 588.5 760.4
Trinidad 29.2 46.1
Other International (2) 5.7 6.3
Total 623.4 812.8
Total MMBoe (4) 56.7 74.0
(1)Thousand barrels per day or million cubic feet per day, as applicable.
(2)Other International includes EOG's China and Canada operations.
(3)Dollars per barrel or per thousand cubic feet, as applicable. Excludes the
impact of financial commodity derivative instruments (see Note 12 to the
Condensed Consolidated Financial Statements).
(4)Thousand barrels of oil equivalent per day or million barrels of oil
equivalent, as applicable; includes crude oil and condensate, NGLs and natural
gas. Crude oil equivalent volumes are determined using a ratio of 1.0 barrel of
crude oil and condensate or NGLs to 6.0 thousand cubic feet of natural gas.
MMBoe is calculated by multiplying the MBoed amount by the number of days in the
period and then dividing that amount by one thousand.
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Wellhead crude oil and condensate revenues for the second quarter of 2020
decreased $1,914 million , or 76%, to $615 million from $2,529 million for the
same period of 2019. The decrease was due to a lower composite average price
($1,223 million ) and a decrease of 125 MBbld, or 27%, in wellhead crude oil and
condensate production ($691 million ). Decreased production was primarily in the
Eagle Ford, the Rocky Mountain area and the Permian Basin . EOG's composite
wellhead crude oil and condensate price for the second quarter of 2020 decreased
67% to $20.40 per barrel compared to $60.99 per barrel for the same period of
2019.
NGL revenues for the second quarter of 2020 decreased $92 million , or 50%,
to $94 million from $186 million for the same period of 2019 due to a lower
composite average price ($50 million ) and a decrease of 30 MBbld, or 23%, in NGL
deliveries ($42 million ). Decreased production was primarily in the Eagle Ford,
the Permian Basin and the Rocky Mountain area. EOG's composite NGL price for the
second quarter of 2020 decreased 35% to $10.20 per barrel compared to $15.63 per
barrel for the same period of 2019.
Wellhead natural gas revenues for the second quarter of 2020 decreased $128
million , or 47%, to $142 million from $270 million for the same period of 2019.
The decrease was due to a lower average composite price ($86 million ) and a
decrease in natural gas deliveries ($42 million ). Natural gas deliveries for the
second quarter of 2020 decreased 209 MMcfd, or 15%, compared to the same period
of 2019 due primarily to lower natural gas volumes in Trinidad , the Rocky
Mountain area and the Marcellus Shale . EOG's composite wellhead natural gas
price for the second quarter of 2020 decreased 38% to $1.36 per Mcf compared to
$2.19 per Mcf for the same period of 2019.
During the second quarter of 2020, EOG recognized net losses on the
mark-to-market of financial commodity derivative contracts of $126 million
compared to net gains of $177 million for the same period of 2019. During the
second quarter of 2020, net cash received from settlements of financial
commodity derivative contracts was $639 million compared to net cash received of
$10 million for the same period of 2019.
Gathering, processing and marketing revenues are revenues generated from
sales of third-party crude oil, NGLs and natural gas, as well as fees associated
with gathering third-party natural gas and revenues from sales of EOG-owned
sand. Purchases and sales of third-party crude oil and natural gas may be
utilized in order to balance firm transportation capacity with production in
certain areas and to utilize excess capacity at EOG-owned facilities. EOG sells
sand in order to balance the timing of firm purchase agreements with completion
operations and to utilize excess capacity at EOG-owned facilities. Marketing
costs represent the costs to purchase third-party crude oil, natural gas and
sand and the associated transportation costs, as well as costs associated with
EOG-owned sand sold to third parties.
Gathering, processing and marketing revenues less marketing costs for the
second quarter of 2020 decreased $82 million as compared to the same period of
2019 primarily due to lower margins on crude oil marketing activities. The
margin on crude oil marketing activities for the second quarter of 2020 was
negatively impacted by the decision early in the second quarter of 2020 to
reduce commodity price volatility by selling May and June 2020 deliveries under
fixed price arrangements.
-28--------------------------------------------------------------------------------- Operating and Other Expenses. For the second quarter of 2020, operating expenses of$2,190 million were$1,377 million lower than the$3,567 million incurred during the second quarter of 2019. The following table presents the costs per barrel of oil equivalent (Boe) for the three-month periods endedJune 30, 2020 and 2019: Three Months Ended June 30, 2020 2019 Lease and Well$ 4.32 $ 4.70 Transportation Costs 2.67 2.35 Depreciation, Depletion and Amortization (DD&A) - Oil and Gas Properties 11.84 12.55 Other Property, Plant and Equipment 0.62 0.39 General and Administrative (G&A) 2.32 1.65 Interest Expense, Net 0.96 0.67 Total (1)$ 22.73 $ 22.31
(1)Total excludes gathering and processing costs, exploration costs, dry hole costs, impairments, marketing costs and taxes other than income.
The primary factors impacting the cost components of per-unit rates of lease and well, transportation, DD&A, G &A and net interest expense for the three months endedJune 30, 2020 , compared to the same period of 2019, are set forth below. See "Operating Revenues" above for a discussion of wellhead volumes. Lease and well expenses include expenses for EOG-operated properties, as well as expenses billed to EOG from other operators where EOG is not the operator of a property. Lease and well expenses can be divided into the following categories: costs to operate and maintain crude oil and natural gas wells, the cost of workovers and lease and well administrative expenses. Operating and maintenance costs include, among other things, pumping services, salt water disposal, equipment repair and maintenance, compression expense, lease upkeep and fuel and power. Workovers are operations to restore or maintain production from existing wells. Each of these categories of costs individually fluctuates from time to time as EOG attempts to maintain and increase production while maintaining efficient, safe and environmentally responsible operations. EOG continues to increase its operating activities by drilling new wells in existing and new areas. Operating and maintenance costs within these existing and new areas, as well as the costs of services charged to EOG by vendors, fluctuate over time. Lease and well expenses of$245 million for the second quarter of 2020 decreased$102 million from$347 million for the same prior year period primarily due to decreased operating and maintenance costs ($50 million ) and decreased workover expenditures ($44 million ), both inthe United States , and decreased operating and maintenance costs inCanada ($8 million ). Transportation costs represent costs associated with the delivery of hydrocarbon products from the lease to a downstream point of sale. Transportation costs include transportation fees, the cost of compression (the cost of compressing natural gas to meet pipeline pressure requirements), the cost of dehydration (the cost associated with removing water from natural gas to meet pipeline requirements), gathering fees and fuel costs. Transportation costs of$152 million for the second quarter of 2020 decreased$22 million from$174 million for the same prior year period primarily due to decreased transportation costs in theRocky Mountain area ($14 million ),Eagle Ford ($10 million ) andBarnett Shale ($7 million ), partially offset by increased transportation costs in thePermian Basin ($8 million ) andSouth Texas ($3 million ). -29-
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DD&A of the cost of proved oil and gas properties is calculated using the
unit-of-production method. EOG's DD&A rate and expense are the composite of
numerous individual DD&A group calculations. There are several factors that can
impact EOG's composite DD&A rate and expense, such as field production profiles,
drilling or acquisition of new wells, disposition of existing wells and reserve
revisions (upward or downward) primarily related to well performance, economic
factors and impairments. Changes to these factors may cause EOG's composite DD&A
rate and expense to fluctuate from period to period. DD&A of the cost of other
property, plant and equipment is generally calculated using the straight-line
depreciation method over the useful lives of the assets.
DD&A expenses for the second quarter of 2020 decreased $250 million to $707
million from $957 million for the same prior year period. DD&A expenses
associated with oil and gas properties for the second quarter of 2020 were $256
million lower than the same prior year period. The decrease primarily reflects
decreased production in the United States ($202 million ) and in Trinidad ($8
million ) and lower unit rates in the United States ($47 million ). Unit rates in
the United States decreased primarily due to upward reserve revisions and
reserves added at lower costs as a result of increased efficiencies. DD&A
expenses associated with other property, plant and equipment for the second
quarter of 2020 were $6 million higher than the same prior year period primarily
due to an increase in expense related to gathering and storage assets and
equipment.
G&A expenses of $132 million for the second quarter of 2020 increased $10
million from $122 million for the same prior year period primarily due to idle
equipment and termination fees ($26 million ) and increased information system
costs ($2 million ), partially offset by a decrease in professional and other
services ($11 million ) and employee-related costs ($5 million ).
Exploration costs of
Interest expense, net of$54 million for the second quarter of 2020 increased$4 million compared to the same prior year period primarily due to the issuance of the Notes inApril 2020 ($15 million ), partially offset by repayment inJune 2019 of the$900 million aggregate principal amount of 5.625% Senior Notes due 2019 ($9 million ). Gathering and processing costs represent operating and maintenance expenses and administrative expenses associated with operating EOG's gathering and processing assets as well as natural gas processing fees and certain NGL fractionation fees paid to third parties. EOG pays third parties to process the majority of its natural gas production to extract NGLs. Gathering and processing costs decreased$16 million to$97 million for the second quarter of 2020 compared to$113 million for the same prior year period primarily due to decreased operating costs ($8 million ) and decreased gathering and processing fees ($6 million ), both in the Eagle Ford. Impairments include: amortization of unproved oil and gas property costs as well as impairments of proved oil and gas properties; other property, plant and equipment; and other assets. Unproved properties with acquisition costs that are not individually significant are aggregated, and the portion of such costs estimated to be nonproductive is amortized over the remaining lease term. Unproved properties with individually significant acquisition costs are reviewed individually for impairment. When circumstances indicate that a proved property may be impaired, EOG compares expected undiscounted future cash flows at a DD&A group level to the unamortized capitalized cost of the asset. If the expected undiscounted future cash flows, based on EOG's estimates of (and assumptions regarding) future crude oil and natural gas prices, operating costs, development expenditures, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is generally calculated by using the Income Approach described in the Fair Value Measurement Topic of theFinancial Accounting Standards Board's Accounting Standards Codification. In certain instances, EOG utilizes accepted offers from third-party purchasers as the basis for determining fair value. Impairments of$305 million for the second quarter of 2020 were$193 million higher than impairments for the same prior year period primarily due to the impairments of sand and crude-by-rail assets inthe United States ($219 million ), of proved properties as a result of the decision to exit theHorn River Basin inCanada ($19 million ) and increased amortization of unproved property costs inthe United States ($14 million ), partially offset by lower impairments of other assets inthe United States ($60 million ). EOG recorded impairments of proved properties, other property, plant and equipment and other assets of$245 million and$65 million for the second quarters of 2020 and 2019, respectively. -30- -------------------------------------------------------------------------------- Taxes other than income include severance/production taxes, ad valorem/property taxes, payroll taxes, franchise taxes and other miscellaneous taxes. Severance/production taxes are generally determined based on wellhead revenues, and ad valorem/property taxes are generally determined based on the valuation of the underlying assets. Taxes other than income for the second quarter of 2020 decreased$124 million to$80 million (9.4% of wellhead revenues) from$204 million (6.8% of wellhead revenues) for the same prior year period. The decrease in taxes other than income was primarily due to decreased severance/production taxes ($119 million ) and decreased ad valorem/property taxes ($8 million ), partially offset by a decrease in credits available to EOG in the second quarter of 2020 for state incentive severance tax rate reductions ($4 million ), all inthe United States . Other income (expense), net for the second quarter of 2020 decreased$13 million compared to the same prior year period primarily due to an increase in deferred compensation expense ($7 million ) and decrease in interest income ($5 million ). In response to the economic impacts of the COVID-19 pandemic, the President ofthe United States signed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) into law onMarch 27, 2020 . The CARES Act provides economic support to individuals and businesses through enhanced loan programs, expanded unemployment benefits, and certain payroll and income tax relief, among other provisions. The primary tax benefit of the CARES Act for EOG was the acceleration of approximately$150 million of additional refundable alternative minimum tax (AMT) credits into tax year 2019. These credits originated from AMT paid by EOG in years prior to 2018 and were reflected as a deferred tax asset and a non-current receivable as ofDecember 31, 2019 since they had been expected to either offset future current tax liabilities or be refunded on a declining balance schedule through 2021. As a result of the CARES Act, EOG has reclassified these credits from a non-current receivable in Other Assets to a current receivable in Income Taxes Receivable on the Condensed Consolidated Balance Sheet atJune 30, 2020 . The$150 million of additional refundable AMT credits were received inJuly 2020 . EOG recognized an income tax benefit of$236 million for the second quarter of 2020 compared to an income tax provision of$242 million for the second quarter of 2019, primarily due to decreased pretax income. The net effective tax rate for the second quarter of 2020 decreased to 21% from 22% in 2019.
Six Months Ended
Operating Revenues. During the first six months of 2020, operating revenues
decreased $2,935 million , or 34%, to $5,821 million from $8,756 million for the
same period of 2019. Total wellhead revenues for the first six months of 2020
decreased $2,453 million , or 43%, to $3,286 million from $5,739 million for the
same period of 2019. During the first six months of 2020, EOG recognized net
gains on the mark-to-market of financial commodity derivative contracts of
$1,079 million compared to net gains of $157 million for the same period of
2019. Gathering, processing and marketing revenues for the first six months of
2020 decreased $1,386 million , or 50%, to $1,401 million from $2,787 million for
the same period of 2019. Net gains on asset dispositions were $30 million for
the first six months of 2020 compared to net gains of $4 million for the same
period of 2019.
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Wellhead volume and price statistics for the six-month periods ended
Six Months Ended
June 30,
2020 2019
Crude Oil and Condensate Volumes (MBbld) United States 406.8 445.1 Trinidad 0.3 0.7 Other International 0.1 - Total 407.2 445.8 Average Crude Oil and Condensate Prices ($/Bbl) (1) United States$ 36.17 $ 58.63 Trinidad 27.75 46.62 Other International 53.41 57.78 Composite 36.16 58.61 Natural Gas Liquids Volumes (MBbld) United States 131.2 125.4 Other International - - Total 131.2 125.4 Average Natural Gas Liquids Prices ($/Bbl) (1) United States$ 10.65 $ 17.84 Other International - - Composite 10.65 17.84 Natural Gas Volumes (MMcfd) United States 1,039 1,025 Trinidad 188 270 Other International 35 37 Total 1,262 1,332 Average Natural Gas Prices ($/Mcf) (1) United States$ 1.32 $ 2.37 Trinidad 2.15 2.80 Other International 4.34 4.31 Composite 1.53 2.51 Crude Oil Equivalent Volumes (MBoed) United States 711.1 741.3 Trinidad 31.6 45.6 Other International 6.1 6.4 Total 748.8 793.3 Total MMBoe 136.3 143.6
(1) Excludes the impact of financial commodity derivative instruments (see Note 12 to the Condensed Consolidated Financial Statements).
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Wellhead crude oil and condensate revenues for the first six months of 2020
decreased $2,049 million , or 43%, to $2,680 million from $4,729 million for the
same period of 2019 due to a lower composite average price ($1,663 million ) and
a decrease of 39 MBbld, or 9%, in wellhead crude oil and condensate production
($386 million ). Decreased production was primarily due to decreases in the Eagle
Ford and the Rocky Mountain area, partially offset by increased production in
the Permian Basin . EOG's composite wellhead crude oil and condensate price for
the first six months of 2020 decreased 38% to $36.16 per barrel compared to
$58.61 per barrel for the same period of 2019.
NGL revenues for the first six months of 2020 decreased $151 million , or
37%, to $254 million from $405 million for the same period of 2019 due to a
lower composite average price ($172 million ), partially offset by an increase of
6 MBbld, or 5%, in NGL deliveries ($21 million ). Increased production was
primarily in the Permian Basin . EOG's composite NGL price for the first six
months of 2020 decreased 40% to $10.65 per barrel compared to $17.84 per barrel
for the same period of 2019.
Wellhead natural gas revenues for the first six months of 2020 decreased
$254 million , or 42%, to $351 million from $605 million for the same period of
2019. The decrease was due to a lower composite wellhead natural gas price ($225
million ) and a decrease in natural gas deliveries ($29 million ). Natural gas
deliveries for the first six months of 2020 decreased 70 MMcfd, or 5%, compared
to the same period of 2019 due primarily to lower natural gas volumes in
Trinidad , the Rocky Mountain area and the Marcellus Shale , partially offset by
higher deliveries in South Texas and increased production of associated natural
gas from the Permian Basin . EOG's composite wellhead natural gas price for the
first six months of 2020 decreased 39% to $1.53 per Mcf compared to $2.51 per
Mcf for the same period of 2019.
During the first six months of 2020, EOG recognized net gains on the
mark-to-market of financial commodity derivative contracts of $1,079 million
compared to net gains of $157 million for the same period of 2019. During the
first six months of 2020, net cash received from settlements of financial
commodity derivative contracts was $724 million compared to net cash received
for settlements of financial commodity derivative contracts of $31 million for
the same period of 2019.
Gathering, processing and marketing revenues less marketing costs for the
first six months of 2020 decreased $168 million as compared to the same period
of 2019 primarily due to lower margins on crude oil marketing activities,
partially offset by higher margins on natural gas marketing activities. The
margin on crude oil marketing activities for the first six months of 2020 was
negatively impacted by the decline in price on crude oil in inventory awaiting
delivery to customers and the decision early in the second quarter of 2020 to
reduce commodity price volatility by selling May and June 2020 deliveries under
fixed price arrangements.
Operating and Other Expenses. For the first six months of 2020, operating
expenses of
Six Months Ended
June 30,
2020 2019
Lease and Well $ 4.22 $ 4.76
Transportation Costs 2.64 2.44
DD&A -
Oil and Gas Properties 12.03 12.40
Other Property, Plant and Equipment 0.49 0.39
G&A 1.81 1.59
Interest Expense, Net 0.73 0.73
Total (1) $ 21.92 $ 22.31 (1)Total excludes gathering and processing costs, exploration costs, dry hole costs, impairments, marketing costs and taxes other than income.
The primary factors impacting the cost components of per-unit rates of lease
and well, transportation, DD&A, G &A and net interest expense for the six months
ended June 30, 2020 , compared to the same period of 2019 are set forth below.
See "Operating Revenues" above for a discussion of wellhead volumes.
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Lease and well expenses of $575 million for the first six months of 2020
decreased $109 million from $684 million for the same prior year period
primarily due to decreased workover expenditures ($54 million ) and decreased
operating and maintenance costs ($50 million ), both in the United States , and
decreased operating and maintenance costs in Canada ($14 million ), partially
offset by increased lease and well administrative expenses in the United States
($13 million ).
Transportation costs of $360 million for the first six months of 2020
increased $9 million from $351 million for the same prior year period primarily
due to increased transportation costs in the Permian Basin ($43 million ) and
South Texas ($8 million ), partially offset by decreased transportation costs in
the Barnett Shale ($17 million ), Rocky Mountain area ($10 million ), Eagle Ford
($10 million ) and Marcellus Shale ($2 million ).
DD&A expenses for the first six months of 2020 decreased $130 million to $1,707
million from $1,837 million for the same prior year period. DD&A expenses
associated with oil and gas properties for the first six months of 2020 were
$141 million lower than the same prior year period. The decrease primarily
reflects lower unit rates in the United States ($71 million ) and decreased
production in the United States ($61 million ) and in Trinidad ($12 million ).
Unit rates in the United States decreased primarily due to upward reserve
revisions and reserves added at lower costs as a result of increased
efficiencies. DD&A expenses associated with other property, plant and equipment
for the first six months of 2020 were $11 million higher than the same prior
year period primarily due to an increase in expense related to gathering and
storage assets and equipment.
G&A expenses of $246 million for the first six months of 2020 increased $18
million from $228 million for the same prior year period primarily due to idle
equipment and termination fees ($26 million ) and increased information system
costs ($5 million ), partially offset by a decrease in professional and other
services ($8 million ) and employee-related costs ($7 million ).
Interest expense, net of $99 million for the first six months of 2020
decreased $6 million compared to the same prior year period primarily due to
repayment in June 2019 of the $900 million aggregate principal amount of 5.625%
Senior Notes due 2019 ($21 million ), partially offset by the issuance of the
Notes in April 2020 ($15 million ).
Impairments of $1,878 million for the first six months of 2020 were $1,694
million higher than impairments for the same prior year period primarily due to
increased impairments of proved properties and other assets, primarily related
to legacy and non-core natural gas, crude oil and combo plays in the United
States ($1,374 million ), sand and crude-by-rail assets in the United States
($219 million ), as a result of the decision to exit the Horn River Basin in
Canada ($79 million ) and increased amortization of unproved property costs in
the United States ($23 million ). EOG recorded impairments of proved properties,
other property, plant and equipment and other assets of $1,761 million and $91
million for the first six months of 2020 and 2019, respectively.
Taxes other than income for the first six months of 2020 decreased $159 million
to $238 million (7.2% of wellhead revenues) from $397 million (6.9% of wellhead
revenues) for the same prior year period. The decrease in taxes other than
income was primarily due to decreased severance/production taxes ($128 million ),
decreased ad valorem/property taxes ($27 million ) and an increase in credits
available to EOG in the first six months of 2020 for state incentive severance
tax rate reductions ($5 million ), all in the United States .
EOG recognized an income tax benefit of $215 million for the first six months of
2020 compared to an income tax provision of $433 million for the first six
months of 2019, primarily due to decreased pretax income. The net effective tax
rate for the first six months of 2020 decreased to 19% from 23% in the first six
months of 2019. The lower effective tax rate is mostly due to EOG's foreign
operations, primarily related to increased losses in Canada , which have not been
tax effected due to valuation allowances.
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--------------------------------------------------------------------------------Capital Resources and Liquidity
Cash Flow. The primary sources of cash for EOG during the six months ended
June 30, 2020 , were funds generated from operations, net proceeds from the
issuance of long-term debt and net cash received from settlements of commodity
derivative contracts. The primary uses of cash were exploration and development
expenditures; funds used in operations; long-term debt repayments; dividend
payments to stockholders; and other property, plant and equipment expenditures.
During the first six months of 2020, EOG's cash balance increased $389 million
to $2,417 million from $2,028 million at December 31, 2019 .
Net cash provided by operating activities of $2,673 million for the first
six months of 2020 decreased $1,621 million compared to the same period of 2019
primarily due to a decrease in wellhead revenues ($2,453 million ), a decrease in
net cash received relating to income taxes ($255 million ) and a decrease in
gathering, processing and marketing revenues less marketing costs ($168
million ), partially offset by an increase in net cash received for settlements
of commodity derivative contracts ($692 million ), a decrease in cash operating
expenses ($239 million ) and a favorable change in working capital ($95 million ).
Net cash used in investing activities of $2,376 million for the first six
months of 2020 decreased by $1,147 million compared to the same period of 2019
due to a decrease in additions to oil and gas properties ($1,456 million ) and an
increase in proceeds from the sale of assets ($26 million ), partially offset by
an unfavorable change in components of working capital associated with investing
activities ($304 million ) and an increase in additions to other property, plant
and equipment ($30 million ).
Net cash provided by financing activities of $92 million for the first six
months of 2020 included net proceeds from the issuance of long-term debt ($1,484
million ). Net cash used in financing activities for the first six months of 2020
included repayments of long-term debt ($1,000 million ) and cash dividend
payments ($384 million ). Net cash used in financing activities of $1,166 million
for the first six months of 2019 included repayments of long-term debt ($900
million ) and cash dividend payments ($255 million ).
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Total Expenditures. For the year 2020, EOG's updated budget for exploration and
development and other property, plant and equipment expenditures is estimated to
range from approximately $3.4 billion to $3.6 billion , excluding acquisitions
and non-cash transactions. The table below sets out components of total
expenditures for the six-month periods ended June 30, 2020 and 2019 (in
millions):
Six Months Ended
June 30,
2020 2019
Expenditure Category
Capital
Exploration and Development Drilling $ 1,694 $ 2,692
Facilities 210 338
Leasehold Acquisitions (1) 75 145
Property Acquisitions (2) 51 322
Capitalized Interest 17 18
Subtotal 2,047 3,515
Exploration Costs 67 69
Dry Hole Costs - 4
Exploration and Development Expenditures 2,114 3,588
Asset Retirement Costs 25 60
Total Exploration and Development Expenditures 2,139 3,648 Other Property, Plant and Equipment (3)
221 117
Total Expenditures $ 2,360 $ 3,765
(1) Leasehold acquisitions included $48 million and $54 million for the
six-month periods ended June 30, 2020 and 2019, respectively, related to
non-cash property exchanges.
(2) Property acquisitions included $7 million and $18 million for the six-month
periods ended June 30, 2020 and 2019, respectively, related to non-cash property
exchanges.
(3) Other property, plant and equipment included $73 million of non-cash
additions for the six-month period ended June 30, 2020 made in connection with a
finance lease transaction.
Exploration and development expenditures of $2,114 million for the first six
months of 2020 were $1,474 million lower than the same period of 2019 primarily
due to decreased exploration and development drilling expenditures in the United
States ($1,021 million ) and Other International ($9 million ), decreased property
acquisitions ($271 million ), decreased facilities expenditures ($128 million )
and decreased leasehold acquisitions ($70 million ), partially offset by
increased exploration and development drilling expenditures in Trinidad ($31
million ). Exploration and development expenditures for the first six months of
2020 of $2,114 million consisted of $1,840 million in development drilling and
facilities, $206 million in exploration, $51 million in property acquisitions
and $17 million in capitalized interest. Exploration and development
expenditures for the first six months of 2019 of $3,588 million consisted of
$3,010 million in development drilling and facilities, $322 million in property
acquisitions, $238 million in exploration and $18 million in capitalized
interest.
The level of exploration and development expenditures, including acquisitions,
will vary in future periods depending on energy market conditions and other
economic factors. EOG believes it has significant flexibility and availability
with respect to financing alternatives and the ability to adjust its exploration
and development expenditure budget as circumstances warrant. While EOG has
certain continuing commitments associated with expenditure plans related to its
operations, such commitments are not expected to be material when considered in
relation to the total financial capacity of EOG.
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Commodity Derivative Transactions. As more fully discussed in Note 12 to the
Consolidated Financial Statements included in EOG's Annual Report on Form 10-K
for the year ended December 31, 2019 , filed on February 27, 2020 , 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, NGLs 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. 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 Condensed Consolidated
Statements of Income (Loss) and Comprehensive Income (Loss). The related cash
flow impact is reflected in Cash Flows from Operating Activities on the
Condensed Consolidated Statements of Cash Flows.
The total fair value of EOG's commodity derivative contracts was reflected on
the Condensed Consolidated Balance Sheets at June 30, 2020 , as a net asset of
$209 million .
Crude Oil Derivative Contracts. Prices received by EOG for its crude oil
production generally vary from NYMEX West Texas Intermediate (WTI) prices due to
adjustments for delivery location (basis) and other factors. EOG has entered
into crude oil basis swap contracts in order to fix the differential between
Intercontinental Exchange (ICE) Brent pricing and pricing in Cushing, Oklahoma
(ICE Brent Differential). Presented below is a comprehensive summary of EOG's
ICE Brent Differential basis swap contracts through July 30, 2020 . The weighted
average price differential expressed in dollars per barrel ($/Bbl) represents
the amount of addition to Cushing, Oklahoma , prices for the notional volumes
expressed in barrels per day (Bbld) covered by the basis swap contracts.
ICE Brent Differential Basis Swap Contracts
Weighted Average
Price Differential
Volume (Bbld) ($/Bbl)
2020
May 2020 (closed) 10,000 $ 4.92
EOG has also entered into crude oil basis swap contracts in order to fix the
differential between pricing in Houston, Texas , and Cushing, Oklahoma (Houston
Differential). Presented below is a comprehensive summary of EOG's Houston
Differential basis swap contracts through July 30, 2020 . The weighted average
price differential expressed in $/Bbl represents the amount of addition to
Cushing, Oklahoma , prices for the notional volumes expressed in Bbld covered by
the basis swap contracts.
Houston Differential Basis Swap Contracts
Weighted Average
Price Differential
Volume (Bbld) ($/Bbl)
2020
May 2020 (closed) 10,000 $ 1.55
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EOG has also entered into crude oil swaps in order to fix the differential
in pricing between the NYMEX calendar month average and the physical crude oil
delivery month (Roll Differential). Presented below is a comprehensive summary
of EOG's Roll Differential swap contracts through July 30, 2020 . The weighted
average price differential expressed in $/Bbl represents the amount of net
addition (reduction) to delivery month prices for the notional volumes expressed
in Bbld covered by the swap contracts.
Roll Differential Swap Contracts
Weighted Average
Price Differential
Volume (Bbld) ($/Bbl)
2020
February 1, 2020 through June 30, 2020 (closed) 10,000 $ 0.70
July 1, 2020 through August 31, 2020 (closed) 88,000 (1.16)
September 2020 88,000 (1.16)
October 1, 2020 through December 31, 2020 66,000 (1.16)
In May 2020 , EOG entered into crude oil Roll Differential swap contracts for
the period from July 1, 2020 through September 30, 2020 , with notional volumes
of 22,000 Bbld at a weighted average price differential of $(0.43) per Bbl, and
for the period from October 1, 2020 through December 31, 2020 , with notional
volumes of 44,000 Bbld at a weighted average price differential of $(0.73) per
Bbl. These contracts partially offset certain outstanding Roll Differential swap
contracts for the same time periods and volumes at a weighted average price
differential of $(1.16) per Bbl. EOG expects to pay net cash of $3.2 million for
the settlement of these contracts. The offsetting contracts were excluded from
the above table.
Presented below is a comprehensive summary of EOG's crude oil NYMEX WTI
price swap contracts through
Crude Oil NYMEX WTI Price Swap Contracts
Weighted Average
Volume (Bbld) Price ($/Bbl)
2020
January 1, 2020 through March 31, 2020 (closed) 200,000 $ 59.33
April 1, 2020 through May 31, 2020 (closed) 265,000 51.36
In April and May 2020 , EOG entered into crude oil NYMEX WTI price swap
contracts for the period from June 1, 2020 through June 30, 2020 , with notional
volumes of 265,000 Bbld at a weighted average price of $33.80 per Bbl, for the
period from July 1, 2020 through July 31, 2020 , with notional volumes of 254,000
Bbld at a weighted average price of $33.75 per Bbl, for the period from August
1, 2020 through September 30, 2020 , with notional volumes of 154,000 Bbld at a
weighted average price of $34.18 per Bbl and for the period from October 1, 2020
through December 31, 2020 , with notional volumes of 47,000 Bbld at a weighted
average price of $30.04 per Bbl. These contracts offset the remaining NYMEX WTI
price swap contracts for the same time periods and volumes at a weighted average
price of $51.36 per Bbl for the period from June 1, 2020 through June 30, 2020 ,
$42.36 per Bbl for the period from July 1, 2020 through July 31, 2020 , $50.42
per Bbl for the period from August 1, 2020 through September 30, 2020 and $31.00
per Bbl for the period from October 1, 2020 through December 31, 2020 . EOG
expects to receive net cash of $364.0 million for the settlement of these
contracts. The offsetting contracts were excluded from the above table.
-38-
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Presented below is a comprehensive summary of EOG's crude oil ICE Brent
price swap contracts through
Crude Oil ICE Brent Price Swap Contracts
Volume (Bbld) Weighted Average Price ($/Bbl)
2020
April 2020 (closed) 75,000 $ 25.66
May 2020 (closed) 35,000 26.53
NGLs Derivative Contracts. Presented below is a comprehensive summary of
EOG's
Mont Belvieu Propane Price Swap Contracts
Weighted Average
Volume (Bbld) Price ($/Bbl)
2020
January 1, 2020 through February 29, 2020 (closed) 4,000 $ 21.34
March 1, 2020 through April 30, 2020 (closed) 25,000 17.92
In April and May 2020 , EOG entered into Mont Belvieu propane price swap
contracts for the period from May 1, 2020 through December 31, 2020 , with
notional volumes of 25,000 Bbld at a weighted average price of $16.41 per Bbl.
These contracts offset the remaining Mont Belvieu propane price swap contracts
for the same time period with notional volumes of 25,000 Bbld at a weighted
average price of $17.92 per Bbl. EOG expects to receive net cash of $9.2 million
for the settlement of these contracts. The offsetting contracts were excluded
from the above table.
Natural Gas Derivative Contracts. Presented below is a comprehensive summary
of EOG's natural gas price swap contracts through July 30, 2020 , with notional
volumes expressed in million British thermal units (MMBtu) per day (MMBtud) and
prices expressed in dollars per MMBtu ($/MMBtu).
Natural Gas Price Swap Contracts
Weighted Average
Volume (MMBtud) Price ($/MMBtu)
2021
January 1, 2021 through December 31, 2021 50,000 $ 2.75
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EOG has entered into natural gas collar contracts, which establish ceiling
and floor prices for the sale of notional volumes of natural gas as specified in
the collar contracts. The collars require that EOG pay the difference between
the ceiling price and the NYMEX Henry Hub natural gas price for the contract
month (Henry Hub Index Price) in the event the Henry Hub Index Price is above
the ceiling price. The collars grant EOG the right to receive the difference
between the floor price and the Henry Hub Index Price in the event the Henry Hub
Index Price is below the floor price. In March 2020 , EOG executed the early
termination provision granting EOG the right to terminate certain 2020 natural
gas collar contracts with notional volumes of 250,000 MMBtud at a weighted
average ceiling price of $2.50 per MMBtu and a weighted average floor price of
$2.00 per MMBtu for the period from April 1, 2020 through July 31, 2020 . The net
cash EOG received for settling these contracts was $7.8 million . Presented below
is a comprehensive summary of EOG's natural gas collar contracts through July
30, 2020 , with notional volumes expressed in MMBtud and prices expressed in
$/MMBtu.
Natural Gas Collar Contracts
Weighted Average Price ($/MMBtu)
Volume (MMBtud) Ceiling Price Floor Price
2020
April 1, 2020 through July 31, 2020 (closed) 250,000 $ 2.50 $ 2.00
In April 2020 , EOG entered into natural gas collar contracts for the period
from August 1, 2020 through October 31, 2020 , with notional volumes of 250,000
MMBtud at a ceiling price of $2.50 per MMBtu and a floor price of $2.00 per
MMBtu. These contracts offset the remaining natural gas collar contracts for the
same time period with notional volumes of 250,000 MMBtud at a ceiling price of
$2.50 per MMBtu and a floor price of $2.00 per MMBtu. EOG expects to receive net
cash of $1.1 million for the settlement of these contracts. The offsetting
contracts were excluded from the above table.
Prices received by EOG for its natural gas production generally vary from
NYMEX Henry Hub prices due to adjustments for delivery location (basis) and
other factors. EOG has entered into natural gas basis swap contracts in order to
fix the differential between pricing in the Rocky Mountain area and NYMEX Henry
Hub prices (Rockies Differential). Presented below is a comprehensive summary of
EOG's Rockies Differential basis swap contracts through July 30, 2020 . The
weighted average price differential expressed in $/MMBtu represents the amount
of reduction to NYMEX Henry Hub prices for the notional volumes expressed in
MMBtud covered by the basis swap contracts.
Rockies Differential Basis Swap Contracts
Weighted Average
Price Differential
Volume (MMBtud) ($/MMBtu)
2020
January 1, 2020 through July 31, 2020 (closed) 30,000 $ 0.55
August 1, 2020 through December 31, 2020 30,000 0.55
EOG has also entered into natural gas basis swap contracts in order to fix
the differential between pricing at the Houston Ship Channel (HSC) and NYMEX
Henry Hub prices (HSC Differential). In March 2020 , EOG executed the early
termination provision granting EOG the right to terminate certain 2020 HSC
Differential basis swaps with notional volumes of 60,000 MMBtud at a weighted
average price differential of $0.05 per MMBtu for the period from April 1, 2020
through December 31, 2020 . The net cash EOG paid for settling these contracts
was $0.4 million . Presented below is a comprehensive summary of EOG's HSC
Differential basis swap contracts through July 30, 2020 . The weighted average
price differential expressed in $/MMBtu represents the amount of reduction to
NYMEX Henry Hub prices for the notional volumes expressed in MMBtud covered by
the basis swap contracts.
HSC Differential Basis Swap Contracts
Weighted Average
Price Differential
Volume (MMBtud) ($/MMBtu)
2020
January 1, 2020 through December 31, 2020 (closed) 60,000 $ 0.05
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EOG has also entered into natural gas basis swap contracts in order to fix
the differential between pricing at the Waha Hub in West Texas and NYMEX Henry
Hub prices (Waha Differential). Presented below is a comprehensive summary of
EOG's Waha Differential basis swap contracts through July 30, 2020 . The weighted
average price differential expressed in $/MMBtu represents the amount of
reduction to NYMEX Henry Hub prices for the notional volumes expressed in MMBtud
covered by the basis swap contracts.
Waha Differential Basis Swap Contracts
Weighted Average
Price Differential
Volume (MMBtud) ($/MMBtu)
2020
January 1, 2020 through April 30, 2020 (closed) 50,000 $ 1.40
In April 2020 , EOG entered into Waha Differential basis swap contracts for
the period from May 1, 2020 through December 31, 2020 , with notional volumes of
50,000 MMBtud at a weighted average price differential of $0.43 per MMBtu. These
contracts offset the remaining Waha Differential basis swap contracts for the
same time period with notional volumes of 50,000 MMBtud at a weighted average
price differential of $1.40 per MMBtu. EOG expects to pay net cash of $11.9
million for the settlement of these contracts. The offsetting contracts were
excluded from the above table.
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--------------------------------------------------------------------------------Information Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q 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 (i) economically
develop its acreage in, (ii) produce reserves and achieve anticipated production
levels and rates of return from, (iii) decrease or otherwise control its
drilling, completion, operating and capital costs related to, and (iv) maximize
reserve recovery from, its existing and future crude oil and natural gas
exploration and development projects and associated potential and existing
drilling locations;
•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;
•security threats, including cybersecurity threats and disruptions to our
business and operations from breaches of our information technology systems,
physical breaches of our facilities and other infrastructure or breaches of the
information technology systems, facilities and infrastructure of third parties
with which we transact business;
•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
drilling, completing and operating 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;
-42-
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•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;
•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;
•the duration and economic and financial impact of epidemics, pandemics or other
public health issues, including the COVID-19 pandemic;
•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; and
•the other factors described under ITEM 1A, Risk Factors, on pages 13 through 23
of EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 ,
under ITEM 1A, Risk Factors, on page 37 of EOG's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2020 , and under ITEM 1A, Risk Factors,
in this Quarterly Report on Form 10-Q, 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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PART I. FINANCIAL INFORMATION© Edgar Online, source
