HOUSTON, May 8, 2012 /PRNewswire/ --

• Achieves 49 Percent Crude Oil and Condensate Production Increase and 48 Percent Increase in Total Liquids Production Over First Quarter 2011
• Increases 2012 Total Company Liquids Production Target to 33 Percent from 30 Percent
• Reports Strong Year-Over-Year Earnings Per Share, Discretionary Cash Flow and Adjusted EBITDAX Performance
• Delivers Solid Execution in Eagle Ford Operations and Confirms Viability of Downspaced Drilling
• Announces Additional Bakken Infill Drilling Success and Positive Results from Expanded Williston Basin Program
• Commissions St. James, Louisiana, Crude Oil Offloading Facility and Wisconsin Sand Plant

EOG Resources, Inc. (NYSE: EOG) (EOG) today reported first quarter 2012 net income of $324.0 million, or $1.20 per share. This compares to first quarter 2011 net income of $134.0 million, or $0.52 per share.

Consistent with some analysts' practice of matching realizations to settlement months and making certain other adjustments in order to exclude one-time items, adjusted non-GAAP net income for the quarter was $317.5 million, or $1.17 per share. Adjusted non-GAAP net income for the first quarter 2011 was $177.0 million, or $0.68 per share. The results for the first quarter 2012 included a $37.0 million, net of tax ($0.14 per share) impairment of certain North American non-core assets, net gains on asset dispositions of $43.2 million, net of tax ( $0.16 per share) and a previously disclosed non-cash net gain of $134.2 million ($85.9 million after tax, or $0.32 per share) on the mark-to-market of financial commodity contracts. During the quarter, the net cash inflow related to financial commodity contracts was $133.6 million ($85.6 million after tax, or $0.31 per share). (Please refer to the attached tables for the reconciliation of adjusted non-GAAP net income to GAAP net income.)

Delivering on its goals of strong earnings, discretionary cash flow and adjusted EBITDAX growth, EOG posted robust financial metrics for the first quarter 2012 versus the same prior year period. Compared to the first quarter 2011, earnings per share increased 131 percent, discretionary cash flow increased 39 percent and adjusted EBITDAX rose 39 percent. (Please refer to the attached tables for the reconciliation of non-GAAP discretionary cash flow to net cash provided by operating activities (GAAP) and adjusted EBITDAX (non-GAAP) to income before interest expense and income taxes (GAAP).)

"To put it simply, the marked improvement in productivity from individual wells is flowing to EOG's bottom line," said Mark G. Papa, Chairman and Chief Executive Officer. "Our first quarter 2012 performance reflects both our prudent strategy of reinventing EOG as an oil company and underscores our early-mover advantage in prolific new domestic crude oil shale plays where we continue to hone our drilling and completion acumen."

Operational Highlights

Total company crude oil and condensate production increased 49 percent during the first quarter 2012 as compared to the first quarter 2011. United States crude oil and condensate production increased 61 percent driven by outstanding operational results from EOG's big four crude oil and liquids plays: the South Texas Eagle Ford, the North Dakota Bakken, the Fort Worth Barnett Combo and the Permian Basin Wolfcamp and Leonard. Total company natural gas liquids production increased 44 percent due to liquids-rich natural gas from these same four plays in which EOG holds premier acreage positions. Combined, EOG's first quarter 2012 total company liquids production from crude oil, condensate and natural gas liquids increased 48 percent over the same prior year period.

Based on its first quarter 2012 operational results, EOG has raised its 2012 total company liquids production growth target to 33 percent from 30 percent and increased its total company production growth target to 7 percent from 5.5 percent.

Crude Oil and Liquids Activity

In the South Texas Eagle Ford, EOG is pursuing field development on spacing densities of 65 to 90 acres between wells. Production flow rates to date confirm well results equal to, or better than, previous development patterns. Testing is under way to address the viability of further downspacing and possible impact on well reserves and recovery factors.

In Gonzales County, the northeastern part of its Eagle Ford acreage, EOG drilled two new Henkhaus wells offsetting a series of six Henkhaus wells completed in late 2011. The Henkhaus Unit #5H well, drilled with a short lateral offsetting the previously drilled and producing Henkhaus Unit #4H, was turned to sales at 2,775 barrels of oil per day (Bopd) with 438 barrels per day (Bpd) of natural gas liquids (NGLs) and 2.3 million cubic feet per day (MMcfd) of natural gas. The Henkhaus Unit #4H, on-line since mid-December 2011, has produced over 130 thousand barrels of oil equivalent (Mboe). The Henkhaus Unit #12H, drilled offsetting the Henkhaus Unit #5H, began flowing at an initial rate of 3,000 Bopd with 425 Bpd of NGLs and 2.2 MMcfd of natural gas. Drilled on 65-acre spacing between wells, the Lord A Unit #2H and A Unit #3H were completed at 2,448 and 2,562 Bopd with 440 and 400 Bpd of NGLs and 2.3 and 2.1 MMcfd of natural gas, respectively. EOG has 100 percent working interest in these wells. Also in Gonzales County, the Brothers #4H, #5H and #6H began initial production at 3,424, 2,260 and 2,334 Bopd with 370, 233 and 274 Bpd of NGLs and 1.9, 1.2 and 1.4 MMcfd of natural gas, respectively. After 30 days on-line, these wells, in which EOG has 90 percent working interest, were producing 2,046, 1,427 and 1,553 Bopd, respectively.

In Karnes County, the center of EOG's 120-mile long Eagle Ford trend, the Alton Unit #2H, Unit #3H, Unit #4H, Unit #5H and Unit #6H were drilled on 85-acre spacing. The wells, in which EOG has 100 percent working interest, were completed to sales at initial individual production rates ranging from 1,940 to 3,158 Bopd with 206 to 329 Bpd of NGLs and 1.1 to 1.7 MMcfd of natural gas. The Alton Unit #6H had an average 30-day production rate of 1,770 Bopd. In McMullen County, the southwestern part of EOG's acreage, the Thelma-Brite #4H and #6H were completed to sales at rates of 1,697 and 1,902 Bopd each with 96 Bpd of NGLs and 500 thousand cubic feet per day (Mcfd) of natural gas, respectively.

"Our confidence level in the Eagle Ford is very high. Even after we implemented denser well spacing earlier this year, individual well performance remains remarkably strong. In fact, based on ongoing completion refinements, 30-day crude oil production rates from recent wells have increased," Papa said.

In the Williston Basin, EOG posted positive results from its first quarter operations that focused on three distinct areas. In EOG's North Dakota Core Parshall Field, the Wayzetta 156-3329H, 124-3334H and 157-2835H were drilled on 320-acre infill spacing. Completed to sales at rates of 1,393, 992 and 1,083 Bopd with 600, 300 and 300 Mcfd of rich natural gas, respectively, these Mountrail County wells, in which EOG has 51 percent to 61 percent working interest, further confirm the economics and success of infill drilling. Additionally, production from previously drilled 640-acre offset wells in EOG's Core Parshall Field responded positively to the new downspaced completions. In McKenzie County, 25 miles southwest of its Core Parshall Field, EOG identified potential in both the Three Forks and Bakken in the Antelope Extension area where it brought a number of wells to sales. Four Three Forks wells, the Clarks Creek 11-0706H, 13-1806H, 14-1819H and 16-0706H, were completed at initial per well rates ranging from 926 to 3,415 Bopd with 1.2 to 3.0 MMcfd of rich natural gas. In this same area, EOG completed a Bakken well, the Clarks Creek 101-1819H, at 2,320 Bopd with 1.4 MMcfd of rich natural gas. EOG has 100 percent working interest in these five McKenzie County wells. On the Montana/North Dakota border, EOG drilled and completed a series of wells in the Stateline and Diamond Point areas that include the Stateline 03-1522H and the Diamond 02-3625H, both in Roosevelt County, Montana, with production rates exceeding expectations. The wells, in which EOG has 80 percent and 93 percent working interest, respectively, were turned to sales at 994 and 1,097 Bopd and began flowing with 400 and 700 Mcfd of rich natural gas, respectively. On the North Dakota side of the border in Williams County, the Hardscrabble 08-0409H, in which EOG has 39 percent working interest, began production at a rate of 1,693 Bopd with 600 Mcfd of rich natural gas. Recent success in the Montana/North Dakota border areas adds approximately 200 new locations to EOG's extensive Williston Basin crude oil drilling inventory.

EOG is testing several different methods to increase the recovery of oil in place on its Williston Basin acreage. Following encouraging infill drilling results from its Core Parshall Field, EOG plans to test downspaced drilling on certain parts of its Bakken Lite acreage outside the Core area later this year. Additionally, in mid-April EOG commenced two pilot Bakken waterflood projects in its Core Parshall Field to test secondary crude oil recovery methods as another viable way to improve oil recovery.

Another of EOG's key plays, the Fort Worth Barnett Combo, is on track to deliver the second largest contribution to total company liquids growth in 2012. During the first quarter, EOG completed the Ford A Unit #1H, A Unit #2H, B Unit #1H and B Unit #2H with individual maximum crude oil rates ranging from 420 to 700 Bopd with 80 to 184 Bpd of NGLs and 490 to 1,110 Mcfd of natural gas. EOG has approximately 99 percent working interest in these Cooke County wells. Also in Cooke County, the Kirk Unit #1H and Unit #2H had maximum production rates of 500 and 619 Bopd with 170 and 175 Bpd of NGLs and 1,038 and 1,060 Mcfd of natural gas, respectively. EOG has 93 percent working interest in these wells. During the first quarter, EOG also drilled successful step-out wells that expand the prospective area of its Barnett Combo acreage.

In the Permian Basin, EOG has ramped up drilling activity in both the West Texas Wolfcamp and New Mexico Leonard Plays. On the border between Crockett and Irion Counties in West Texas, EOG drilled the University 40 #1303H, #1310H, #1311H and #1312H in the Middle Wolfcamp interval. The wells, in which EOG has 75 percent working interest, were completed to sales at initial individual crude oil rates ranging from 517 to 645 Bopd with NGL production of 40 to 65 Bpd and 210 to 375 Mcfd of natural gas. The Linthicum M#2H in Irion County, in which EOG has 88 percent working interest, was turned to sales at 1,027 Bopd with 137 Bpd of NGLs and 778 Mcfd of natural gas. Based on drilling results to date on its West Texas Wolfcamp acreage, EOG estimates gross per well reserves to be 430 Mboe. In Lea County, New Mexico, EOG reported drilling success from the Leonard Shale with the Caballo 23 Fed #2H, #3H and #5H, which began initial sales at 820, 1,020 and 990 Bopd with 80, 200 and 110 Bpd of NGLs and 460, 1,105 and 600 Mcfd of natural gas, respectively. EOG has 86 percent working interest in the wells.

"During the first quarter, we made progress toward achieving a number of EOG's 2012 operational goals," Papa said. "Production results and very strong 30-day flow rates from our Eagle Ford wells drilled on tighter spacing indicate we are effectively improving our completions. In addition, we expanded our Bakken operations in two different areas and confirmed economic infill drilling on our Core sweet spot acreage. Also, we've rapidly moved into development mode in the West Texas Wolfcamp. The momentum in our operations continues to drive every facet of our exploration and development activities. We are very upbeat about EOG's potential," Papa said.

Since the beginning of 2012, EOG has made additional strides in strategically positioning its marketing and operations. In April, EOG commissioned its crude-by-rail offloading facility at St. James, Louisiana. At this Gulf Coast sales point, EOG has the flexibility to market its Bakken, Eagle Ford and Permian crude oil production at Light Louisiana Sweet oil-indexed prices, which currently are trading at a premium to West Texas Intermediate. In addition, EOG's Wisconsin sand plant is in full operation. With the addition of this sand, EOG has the capacity to meet the requirements for the majority of its domestic well completions this year and beyond. Self-sourced sand is expected to generate significant operational cost savings.

Natural Gas Activity

Consistent with EOG's previously announced projections and pessimistic short-term view of the current natural gas price environment, its North American natural gas production declined by 9 percent in the first quarter 2012 compared to the same period 2011.  

Hedging Activity

EOG has hedged approximately 28 percent of its North American crude oil production for 2012. For the period May 1 to June 30, 2012, EOG has crude oil financial price swap contracts in place for 52,000 barrels a day at a weighted average price of $105.80 per barrel, excluding unexercised options. For the period July 1 to December 31, 2012, EOG has crude oil financial price swap contracts in place for an average of 38,000 barrels a day at a weighted average price of $106.74 per barrel, excluding unexercised options.

EOG has hedged approximately 45 percent of its North American natural gas production for 2012. For the period June 1 through December 31, 2012, EOG has natural gas financial price swap contracts in place for 525,000 million British thermal units per day (MMBtud) at a weighted average price of $5.44 per million British thermal units (MMBtu), excluding unexercised options. For each of the years 2013 and 2014, EOG has natural gas financial price swap contracts in place for 150,000 MMBtud at a weighted average price of $4.79 per MMBtu, excluding unexercised options. (For a comprehensive summary of crude oil and natural gas derivative contracts, please refer to the attached tables.)               

Capital Structure

Through May 1, cash proceeds from asset sales were approximately $565 million. At March 31, 2012, EOG's total debt outstanding was $5,011 million for a debt-to-total capitalization ratio of 28 percent. Taking into account cash on the balance sheet of $294 million at the end of the first quarter, EOG's net debt was $4,717 million for a net debt-to-total capitalization ratio of 27 percent. (Please refer to the attached tables for the reconciliation of net debt (non-GAAP) to long-term debt (GAAP) and the reconciliation of net debt-to-total capitalization ratio (non-GAAP) to debt-to-total capitalization ratio (GAAP).)

"EOG made a strong start out of the gates for 2012. Based on first quarter performance in our big four plays, we've increased EOG's 2012 total company liquids production growth target to 33 percent and total company production growth target to 7 percent. In the first quarter, 85 percent of EOG's North American wellhead revenues emanated from liquids, driven by crude oil. With strong natural gas hedges in place for the remainder of the year, we are well positioned to realize our plan for 2012 while maintaining a strong balance sheet," Papa said.

Conference Call Scheduled for May 9, 2012

EOG's first quarter 2012 results conference call will be available via live audio webcast at 8 a.m. Central time (9 a.m. Eastern time) on Wednesday, May 9, 2012. To listen, log on to www.eogresources.com. The webcast will be archived on EOG's website through May 23, 2012.

EOG Resources, Inc. is one of the largest independent (non-integrated) crude oil and natural gas companies in the United States with proved reserves in the United States, Canada, Trinidad, the United Kingdom and China. EOG Resources, Inc. is listed on the New York Stock Exchange and is traded under the ticker symbol "EOG."

This press release 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 and costs 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," "goal," "may," "will" 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 income or cash flows or pay 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 and unknown 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 and extent of changes in prices for, 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 can optimize reserve recovery and economically develop its plays utilizing horizontal and vertical drilling, advanced completion technologies and hydraulic fracturing;
• the extent to which EOG is successful in its efforts to economically develop its acreage in, and to produce reserves and achieve anticipated production levels from, its existing and future crude oil and natural gas exploration and development projects, given the risks and uncertainties and capital expenditure requirements inherent in drilling, completing and operating crude oil and natural gas wells and the potential for interruptions of development and production, whether involuntary or intentional as a result of market or other conditions;
• the extent to which EOG is successful in its efforts to market its crude oil, natural gas and related commodity production;
• the availability, proximity and capacity of, and costs associated with, gathering, processing, compression and transportation 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;
• the impact of, and changes in, government policies, laws and regulations, including tax laws and regulations, environmental laws and regulations relating to air emissions, waste disposal, hydraulic fracturing and access to and use of water, laws and regulations imposing conditions and restrictions on drilling and completion operations and laws and regulations with respect to derivatives and hedging activities;
• EOG's ability to effectively integrate acquired crude oil and natural gas properties into its operations, fully identify existing and potential problems with respect to such properties and accurately estimate reserves, production and costs with respect to such properties;
• the extent to which EOG's third-party-operated crude oil and natural gas properties are operated successfully and economically;
• competition in the oil and gas exploration and production industry for employees and other personnel, equipment, materials and services and, related thereto, the availability and cost of employees and other personnel, equipment, materials 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 of production, gathering, processing, compression 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 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;
• political developments around the world, 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 15 through 23 of EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2011 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 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.

Effective January 1, 2010, 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).  As noted above, statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any reserve estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include "potential" reserves and/or other estimated reserves 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, 2011, 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.   

 

 

 

 

 

 

 

 

 

 

 

 

 

SOURCE EOG Resources, Inc.