EOG EOG Resources Inc

HOUSTON, Feb. 27, 2020 /PRNewswire/ --

• Increased Common Stock Dividend by 30 Percent to $1.50 Indicated Annual Rate
• Earned $2.7 Billion Net Income in 2019, or $4.71 per Share
• Generated $8.2 Billion Net Cash from Operating Activities and Significant Free Cash Flow
• Exceeded Fourth Quarter and Full-Year 2019 Crude Oil Production Target with Capital Expenditures Below Target
• Lease and Well and DD&A Expense Rates Below Target in Fourth Quarter and Full-Year 2019
• Increased Proved Reserves by 14% and Replaced 253% of 2019 Production at $8.21 per Boe Finding Cost
• $6.3 to $6.7 Billion Capital Program Targets 10-14% Crude Oil Volume Growth in 2020
• 2020 Capital Program and Dividend Funded with Net Cash from Operating Activities at Oil Prices Below $50

EOG Resources, Inc. (EOG) today reported fourth quarter 2019 net income of $637 million, or $1.10 per share, compared with fourth quarter 2018 net income of $893 million, or $1.54 per share. Net cash from operating activities for the fourth quarter 2019 was $1.8 billion. For the full year 2019, EOG reported net income of $2.7 billion, or $4.71 per share, compared with net income of $3.4 billion, or $5.89 per share, for the full year 2018. Net cash from operating activities for the full year 2019 was $8.2 billion.

Adjusted non-GAAP net income for the fourth quarter 2019 was $787 million, or $1.35 per share, compared with adjusted non-GAAP net income of $718 million, or $1.24 per share, for the same prior year period. Adjusted non-GAAP net income for the full year 2019 was $2.9 billion, or $4.98 per share, compared with adjusted non-GAAP net income of $3.2 billion, or $5.54 per share, for the full year 2018.

Increased crude oil production from high-return operating areas and reductions in per-unit operating costs contributed to EOG's strong fourth quarter 2019 financial results. Adjusted earnings per share, discretionary cash flow and adjusted EBITDAX increased in the fourth quarter 2019 compared with the same prior year period, demonstrating EOG's resiliency and ability to overcome declines in commodity prices. Please refer to the attached tables for definitions and the reconciliation of non-GAAP measures to GAAP measures.

Fourth Quarter and Full Year 2019 Operating Review

Capital efficiency improvements from increased well productivity and cost reductions across EOG's premium plays supported strong operating and financial performance in 2019. United States crude oil volumes grew 15 percent to 455,500 barrels of oil per day (Bopd). Total company natural gas liquids production increased 16 percent, while total company natural gas volumes grew 12 percent.

Total crude oil volumes in the fourth quarter 2019 were 468,900 Bopd, which was above the midpoint of the target range and represents an eight percent increase compared with the same prior year period. Natural gas liquids and natural gas volumes increased by 17 percent and 15 percent, respectively, during this same period. EOG incurred total expenditures of $1.5 billion in the fourth quarter. Total cash capital expenditures before acquisitions of $1.4 billion were below the low end of the target range. Please refer to the attached tables for definitions and the reconciliation of non-GAAP measures to GAAP measures.

EOG continued to lower operating costs during the fourth quarter 2019. Lease and well costs declined 13 percent, transportation costs fell five percent and depreciation, depletion and amortization (DD&A) expenses fell six percent, all on a per-unit basis compared with the same prior-year period. The company also continued to implement sustainable efficiency improvements to reduce well costs. The fourth quarter improvements brought full-year 2019 well cost reductions to seven percent, two percentage points ahead of the target.

EOG generated $2.1 billion of discretionary cash flow in the fourth quarter 2019. After considering total cash capital expenditures before acquisitions of $1.4 billion, EOG generated free cash flow during the fourth quarter 2019 of $723 million. For the full year 2019, EOG generated $8.1 billion of discretionary cash flow and incurred total cash capital expenditures before acquisitions of $6.2 billion, resulting in free cash flow of $1.9 billion. Please refer to the attached tables for definitions and the reconciliation of non-GAAP measures to GAAP measures. As is further explained in the attached reconciliation tables, EOG now defines its free cash flow for a period as its discretionary cash flow for such period less its total cash capital expenditures (before acquisitions) for such period (without regards to the dividends paid in such period).  EOG believes this definition of free cash flow is more consistent with that utilized by other companies in the industry. 

"Year after year, EOG keeps getting better, delivering record operating performance in 2019. Significant capital efficiency improvements from strong well productivity and sustainable cost reductions allowed us to deliver higher production with less capital investment than we planned at the beginning of the year," said William R. "Bill" Thomas, Chairman and Chief Executive Officer. "We did this while generating substantial free cash flow, strengthening our financial position and increasing the dividend. This was the third consecutive year since our transition to premium drilling that EOG delivered double-digit returns and production growth along with strong free cash flow."

2020 Capital Plan

The purpose of EOG's annual capital program is to generate high returns on investment and increase the company's business value. Exploration and development expenditures for 2020 are expected to range from $6.3 billion to $6.7 billion, including facilities and gathering, processing and other expenditures, and excluding acquisitions and non-cash exchanges. The disciplined capital program supports growth in crude oil production of 10 to 14 percent in 2020 and funds dividend payments with net cash from operating activities at less than $50 oil.

Due to the decline in crude oil prices, the 2020 capital plan allocates slightly less capital to growing oil production than in 2019. To continue to improve the company, the 2020 plan allocates more capital than in 2019 to fund new high-quality drilling potential and high-return infrastructure to further lower EOG's cost structure and environmental footprint. With the benefit of sustainable cost reductions and operational efficiencies, EOG expects to complete approximately 800 net wells in 2020 compared with 750 net wells in 2019. Activity will remain focused in EOG's highest rate-of-return oil assets in the Delaware Basin, Eagle Ford and Rocky Mountain Area.

"EOG's 2020 capital plan reflects continued improvement in capital efficiency, highlights the resiliency of our business model, and ensures the capital program and dividend payments can be funded at a conservative oil price. Looking to the future, our 2020 plan also invests in new high-return drilling potential and infrastructure development to lower costs and further improve the company," Thomas said. "EOG's sustainable competitive advantages already position us as one of the lowest cost oil producers in the global market and we are poised to extend our cost advantage well into the future."

Dividend Increase

The board of directors declared a dividend of $0.375 per share on EOG's Common Stock, an increase of 30 percent. The dividend will be payable April 30, 2020, to stockholders of record as of April 16, 2020. The indicated annual rate is $1.50 per share.

"EOG's high-return premium drilling program and our low cost structure allow us to continue upholding the commitment we have made to return more cash to shareholders. This latest dividend increase demonstrates the confidence we have in our ability to grow cash flow, generate high returns through our premium well strategy and improve our future inventory with high quality new drilling potential," Thomas said.

Reserves

At year-end 2019, total company net proved reserves were 3,329 million barrels of oil equivalent (MMBoe), a 14 percent increase compared with year-end 2018. Net proved reserve additions from all sources, excluding revisions due to price, replaced 253 percent of EOG's 2019 production at a finding and development cost of $8.21 per barrel of oil equivalent. Revisions due to price decreased net proved reserves by 60 MMBoe and asset divestitures decreased net proved reserves by five MMBoe. For more reserves detail and a reconciliation of non-GAAP measures to GAAP measures please refer to the attached tables.

For the 32nd consecutive year, internal reserves estimates were within five percent of estimates independently prepared by DeGolyer and MacNaughton.

Financial Review

EOG further strengthened its financial position during the fourth quarter 2019. At December 31, 2019, EOG's total debt outstanding was $5.2 billion for a debt-to-total capitalization ratio of 19 percent. Considering cash on the balance sheet at the end of the fourth quarter, EOG's net debt was $3.1 billion for a net debt-to-total capitalization ratio of 13 percent. For definitions and the reconciliation of non-GAAP measures to GAAP measures, please refer to the attached tables.

Fourth Quarter 2019 Results Webcast
Friday, February 28, 2020, 9:00 a.m. Central time (10:00 a.m. Eastern time)
Webcast will be available on EOG's website for one year.
http://investors.eogresources.com/Investors

About EOG

EOG Resources, Inc. (NYSE: EOG) is one of the largest crude oil and natural gas exploration and production companies in the United States with proved reserves in the United States, Trinidad, and China. To learn more visit www.eogresources.com.

Investor Contacts
David Streit  713-571-4902
Neel Panchal  713-571-4884

Media and Investor Contact
Kimberly Ehmer  713-571-4676

This press release may include 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.  Furthermore, this press release and any accompanying disclosures may include or reference certain forward-looking, non-GAAP financial measures, such as free cash flow or discretionary cash flow, and certain related estimates regarding future performance, results and financial position.  Because we provide these measures on a forward-looking basis, we cannot reliably or reasonably predict certain of the necessary components of the most directly comparable forward-looking GAAP measures, such as future impairments and future changes in working capital. Accordingly, we are unable to present a quantitative reconciliation of such forward-looking, non-GAAP financial measures to the respective most directly comparable forward-looking GAAP financial measures. Management believes these forward-looking, non-GAAP measures may be a useful tool for the investment community in comparing EOG's forecasted financial performance to the forecasted financial performance of other companies in the industry.  Any such forward-looking measures and estimates are intended to be illustrative only and are not intended to reflect the results that EOG will necessarily achieve for the period(s) presented; EOG's actual results may differ materially from such measures and estimates.  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 fourth-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 fourth 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;
• ­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 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.

The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose not only "proved" reserves (i.e., quantities of oil and gas that are estimated to be recoverable with a high degree of confidence), but also "probable" reserves (i.e., quantities of oil and gas that are as likely as not to be recovered) as well as "possible" reserves (i.e., additional quantities of oil and gas that might be recovered, but with a lower probability than probable reserves).  Statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any reserve or resource estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include "potential" reserves, "resource potential" and/or other estimated reserves or estimated resources not necessarily calculated in accordance with, or contemplated by, the SEC's latest reserve reporting guidelines.  Investors are urged to consider closely the disclosure in EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, available from EOG at P.O. Box 4362, Houston, Texas 77210-4362 (Attn: Investor Relations). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC's website at www.sec.gov.  In addition, reconciliation and calculation schedules for non-GAAP financial measures can be found on the EOG website at www.eogresources.com.