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EOG RESOURCES INC Annual Report, Year Ended Dec 31, 2004

Filing Date
Filed February 25, 2005
Period End
December 31, 2004
Security
EOG
In the record · 2016–202610-K1110-Q328-K137

EOG filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 137 current reports (8-K) between 2016 and 2026.

  1. FY2016 annual report10-K · Feb ’17Feb ’17
  2. Material agreement8-K · Jul ’19Jul ’19
  3. Leadership change8-K · Sep ’21Sep ’21
  4. Leadership change8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed February 25, 2005. Cited figures are marked; the original filing is the authoritative source.

EOG Resources' 2004 Form 10-K shows a company at a high point of operating momentum: net income available to common rose 47% to $614 milliona ($5.15 diluted EPS) on revenue of $2.27 billion, driven mainly by higher commodity prices and production growth.

Wellhead natural gas production averaged 1,036 MMcf/d (up 8%) and total production reached 1,233 MMcfe/d, while the composite natural gas price rose 10% to $4.86b/Mcf and crude oil rose 34% to $40.22/Bbl. Proved reserves grew 8% to 5.6 Tcfe, with the Barnett Shale in Texas emerging as a major new growth driver, now at roughly 400,000 net acres. Balance sheet strength improved meaningfully.

The debt-to-total-capitalization ratio fell to 27% from 33%, long-term debt was reduced slightly to $1.08 billionc, and $50 million of Series D preferred stock was redeemed. Management plans a 2005 exploration and development budget of about $1.6 billion, which it expects to fund primarily from operating cash flow. Operating cash flow of $1.44 billion covered 2004 capital spending of $1.5 billion.

Investors should weigh several items. EOG is primarily a natural gas producer, so earnings are highly sensitive to gas prices; management estimates that each $0.10d/Mcf change in wellhead gas price moves net income by about $21 million on an unhedged basis. The company also announced a two-for-one stock split effective March 1, 2005, a 33% increase in the quarterly dividend, and expanded international commitments in Trinidad and the North Sea, along with Canadian currency exposure and equity investments in Trinidadian ammonia plants.

02—Key points

Key Highlights

  1. Net income available to common of $614 million (+47% YoY); diluted EPS of $5.15 versus $3.60 in 2003, pre-split.
  2. Total operating revenues of $2.27 billion (+30%), with wellhead revenues up 27% to $2.30 billion on higher prices and volumes.
  3. Total production of 1,233 MMcfe/d (+10%), led by Canada (+27%) and Trinidad (+25%), and reserves up 8% to 5.6 Tcfe.
  4. Debt-to-total-capitalization improved to 27% from 33%; $50 million Series D preferred stock redeemed and $31 million of debt paid down.
  5. 2005 exploration and development budget of approximately $1.6 billion, excluding acquisitions, expected to be funded mainly from operating cash flow.
  6. Barnett Shale (Fort Worth Basin) expansion to about 400,000 net acres and 30 MMcfe/d of net production by December 2004, with 90 horizontal wells planned for 2005.
  7. Two-for-one stock split effective March 1, 2005, and a 33% increase in the quarterly dividend to $0.04 per post-split share.

03—Questions

Frequently Asked Questions

  1. How did EOG perform financially in 2004?

    EOG had a record earnings year. Net income available to common reached $614 million, up 47% from $419 million in 2003, on revenue of $2.27 billion. The gains came mainly from higher natural gas and crude oil prices combined with higher production. Operating income rose to $979 million from $697 million.

  2. What is driving EOG's production growth?

    Production rose to 1,233 MMcfe/d from 1,117 MMcfe/d. Canada increased by 27% after late-2003 acquisitions and an active shallow gas drilling program, and Trinidad grew 25% with the Parula and U(a) blocks and new ammonia-plant gas contracts. In the United States, the Barnett Shale, Rocky Mountain, and South Texas programs are the main growth areas, with the Barnett Shale ramping rapidly.

  3. How exposed is EOG to commodity price changes?

    Very exposed, since EOG is mainly a natural gas producer. On an unhedged basis for 2005, each $0.10/Mcf change in average wellhead gas price changes net income and operating cash flow by about $21 million, and each $1.00/Bbl change in crude oil price changes them by about $6.5 million. EOG held only small 2005 gas collars covering January through March 2005, and it had no swaps or collars beyond March 2005.

  4. What are the risks in EOG's international operations?

    About 25% of reserves are in Trinidad and 1% in the UK North Sea. Risks include expropriation, changes in taxes and royalties, renegotiation of government contracts, political instability, currency exposure (especially the Canadian dollar), and dependence on Trinidadian take-or-pay gas contracts. Trinidad gas prices are increasingly tied to ammonia and methanol prices. EOG also holds equity stakes in Trinidadian ammonia plants, which carry non-recourse project debt and limited deficiency-funding obligations.

  5. What do the stock split and dividend increase mean for shareholders?

    The two-for-one stock split takes effect March 1, 2005, for holders of record on February 15, 2005, which doubles the share count without changing total equity value. The quarterly dividend was raised 33%, from $0.06 to $0.08 pre-split, or from $0.03 to $0.04 post-split. Management said it intends to keep paying quarterly cash dividends, though future amounts depend on financial condition, cash flow, and investment opportunities.

04—Continue

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