Item 7.01 Regulation FD Disclosure.
I. Price Matters Update
Based on the tax position of EOG, EOG's price sensitivity (exclusive of basis swaps) as of April 14, 2022, for each $1.00 per barrel increase or decrease in wellhead crude oil and condensate price, combined with the estimated change in NGL price, is approximately $116 million for net income and $148 million for pretax cash flows from operating activities, in each case for the full-year 2022.
Based on EOG's tax position and the portion of EOG's anticipated natural gas volumes for which prices have not (as of April 14, 2022) been determined under long-term marketing contracts, EOG's price sensitivity (exclusive of basis swaps) as of April 14, 2022, for each $0.10 per thousand cubic feet increase or decrease in wellhead natural gas price, is approximately $15 million for net income and $19 million for pretax cash flows from operating activities, in each case for the full-year 2022.
II. Price Risk Management
With the objective of enhancing the certainty of future revenues and cash flows, from time to time EOG enters into 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 first quarter of 2022, EOG anticipates a net loss of $2,820 million on the mark-to-market of its financial commodity derivative contracts. During the first quarter of 2022, the net cash paid for settlements of financial commodity derivative contracts was $296 million.
For the quarter ended March 31, 2022, NYMEX WTI crude oil averaged $94.38 per Bbl, and NYMEX natural gas at Henry Hub averaged $4.91 per MMBtu. EOG's actual realizations for crude oil and natural gas for the quarter ended March 31, 2022, differ from these NYMEX prices due to delivery location (basis), quality and appropriate revenue adjustments. EOG's actual realizations for NGLs are influenced by the components extracted, including ethane, propane, butane and natural gasoline, among others, and the respective market pricing for each component.
In connection with its financial commodity derivative contracts, EOG had $2.5 billion of collateral posted at April 14, 2022. EOG expects this collateral to be applied to the settlement of financial commodity derivative contracts if market prices remain above contract prices. The amount of posted collateral will increase or decrease based on fluctuations in forward NYMEX WTI and Henry Hub prices.
III. Commodity Derivative Transactions
Presented below is a comprehensive summary of EOG's financial commodity derivative contracts as of April 14, 2022. For a summary of EOG's financial commodity derivative contracts as of February 18, 2022, see "Commodity Derivative Transactions" in Item 7., Management's Discussion and Analysis of Financial Condition and Results of Operations, of EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed on February 24, 2022 (Annual Report on Form 10-K). Since filing its Annual Report on Form 10-K, EOG has entered into additional financial commodity derivative contracts.
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| Crude Oil Financial Price Swap Contracts |
| | | | Contracts Sold | | Contracts Purchased |
| Period | | Settlement Index | | Volume (MBbld) | | Weighted Average
Price ($/Bbl) | | Volume (MBbld) | | Weighted Average Price ($/Bbl) |
| | | | | | | | | | |
| January - March 2022 (closed) | | NYMEX WTI | | 140 | | | $ | 65.58 | | | — | | | $ | — | |
| April - June 2022 | | NYMEX WTI | | 140 | | | 65.62 | | | — | | | — | |
| July - September 2022 | | NYMEX WTI | | 140 | | | 65.59 | | | — | | | — | |
October - December 2022 (closed) (1) | | NYMEX WTI | | 39 | | | 66.05 | | | — | | | — | |
| October - December 2022 | | NYMEX WTI | | 101 | | | 65.53 | | | 86 | | | 88.84 | |
| January - March 2023 | | NYMEX WTI | | 150 | | | 67.92 | | | — | | | — | |
| April - June 2023 | | NYMEX WTI | | 120 | | | 67.79 | | | — | | | — | |
| July - September 2023 | | NYMEX WTI | | 100 | | | 70.15 | | | — | | | — | |
| October - December 2023 | | NYMEX WTI | | 69 | | | 69.41 | | | — | | | — | |
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(1) In April 2022, EOG executed the early termination provision granting EOG the right to terminate certain of its October - December 2022 crude oil price swap contracts which were open at that time. EOG paid net cash of $84 million for the settlement of these contracts.
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| Crude Oil Basis Swap Contracts |
| | | | Contracts Sold |
| Period | | Settlement Index | | Volume
(MBbld) | | Weighted Average Price Differential
($/Bbl) |
| | | | | | |
| January - April 2022 (closed) | | NYMEX WTI Roll Differential (1) | | 125 | | | $ | 0.15 | |
| May - December 2022 | | NYMEX WTI Roll Differential (1) | | 125 | | | 0.15 | |
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(1) This settlement index is used to fix the differential in pricing between the NYMEX calendar month average and the physical crude oil delivery month.
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| Natural Gas Financial Price Swap Contracts |
| | | | Contracts Sold |
| Period | | Settlement Index | | Volume
(MMBtud in thousands) | | Weighted Average
Price ($/MMBtu) |
| | | | | | |
| January - April 2022 (closed) | | NYMEX Henry Hub | | 725 | | | $ | 3.57 | |
| May - December 2022 | | NYMEX Henry Hub | | 725 | | | 3.57 | |
| January - December 2023 | | NYMEX Henry Hub | | 725 | | | 3.18 | |
| January - December 2024 | | NYMEX Henry Hub | | 725 | | | 3.07 | |
| January - December 2025 | | NYMEX Henry Hub | | 725 | | | 3.07 | |
| | | | | | | | | | | | | | | | | | | | |
| Natural Gas Basis Swap Contracts |
| | | | Contracts Sold |
| Period | | Settlement Index | | Volume
(MMBtud in thousands) | | Weighted Average Price Differential
($/MMBtu) |
| | | | | | |
| January - April 2022 (closed) | | NYMEX Henry Hub HSC Differential (1) | | 210 | | | $ | (0.01) | |
| May - December 2022 | | NYMEX Henry Hub HSC Differential (1) | | 210 | | | (0.01) | |
| January - December 2023 | | NYMEX Henry Hub HSC Differential (1) | | 135 | | | (0.01) | |
| January - December 2024 | | NYMEX Henry Hub HSC Differential (1) | | 10 | | | 0.00 | |
| January - December 2025 | | NYMEX Henry Hub HSC Differential (1) | | 10 | | | 0.00 | |
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(1) This settlement index is used to fix the differential between pricing at the Houston Ship Channel and NYMEX Henry Hub prices.
IV. 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, goals, returns and rates of return, 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," "ambition," "initiative," "goal," "may," "will," "focused on," "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 and rates of return, replace or increase drilling locations, reduce or otherwise control operating costs and capital expenditures, generate cash flows, pay down or refinance indebtedness, achieve, reach or otherwise meet initiatives, plans, goals, ambitions or targets with respect to emissions, other environmental matters, safety matters or other ESG (environmental/social/governance) matters, 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 (NGLs), 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 production of crude oil and condensate, NGLs and natural gas;
•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, refining, and export facilities;
•the availability, cost, terms and timing of issuance or execution of 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 climate change-related regulations, policies and initiatives (for example, with respect to air emissions); tax laws and regulations (including, but not limited to, carbon tax legislation); environmental, health and safety laws and regulations relating to disposal of produced water, drilling fluids and other wastes, hydraulic fracturing and access to and use of water; laws and regulations affecting the leasing of acreage and permitting for oil and gas drilling and the calculation of royalty payments in respect of oil and gas production; laws and regulations imposing additional permitting and disclosure requirements, additional operating restrictions and 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;
•the impact of climate change-related policies and initiatives at the corporate and/or investor community levels and other potential developments related to climate change, such as (but not limited to) changes in consumer and industrial/commercial behavior, preferences and attitudes with respect to the generation and consumption of energy; increased availability of, and increased consumer and industrial/commercial demand for, competing energy sources (including alternative energy sources); technological advances with respect to the generation, transmission, storage and consumption of energy; alternative fuel requirements; energy conservation measures; decreased demand for, and availability of, services and facilities related to the exploration for, and production of, crude oil, NGLs and natural gas; and negative perceptions of the oil and gas industry and, in turn, reputational risks associated with the exploration for, and production of, crude oil, NGLs and natural gas;
•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, economically and in compliance with applicable laws and regulations;
•competition in the oil and gas exploration and production industry for the acquisition of licenses, leases and properties;
•the availability and cost of, and competition in the oil and gas exploration and production industry for, 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, transportation, and export 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 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 EOG's Annual Report on Form 10-K 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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| Glossary: | |
| $/Bbl | Dollars per barrel |
| $/MMBtu | Dollars per million British Thermal Units |
| Bbl | Barrel |
| EOG | EOG Resources, Inc. |
| HSC | Houston Ship Channel |
| MBbld | Thousand barrels per day |
| MMBtu | Million British Thermal Units |
| MMBtud | Million British Thermal Units per day |
| NGL | Natural Gas Liquids |
| NYMEX | New York Mercantile Exchange |
| WTI | West Texas Intermediate |