10-QPeriod: Q1 FY2014

EOG RESOURCES INC Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 6, 2014For Securities:EOG

Summary

EOG Resources Inc. (EOG) reported strong financial performance for the first quarter of 2014, with net income increasing to $660.9 million ($1.21 per diluted share) from $494.7 million ($0.91 per diluted share) in the prior year period. This growth was driven by a significant increase in net operating revenues, up 22% to $4.08 billion, primarily fueled by higher crude oil and condensate production, which rose 42%. The company's strategic focus on liquids-rich unconventional plays, particularly in the Eagle Ford, Bakken, and Permian Basin, continues to pay off. Despite increased operating expenses and higher impairments, EOG demonstrated robust operational execution and solid cash flow generation. Net cash provided by operating activities significantly increased year-over-year, underscoring the company's ability to convert revenue growth into operating cash. EOG also maintained a strong balance sheet with a debt-to-total capitalization ratio below industry averages, and successfully issued $500 million in senior notes to fund general corporate purposes and capital expenditures. The company's outlook remains positive, with a substantial capital expenditure budget for 2014 focused on developing its extensive resource base.

Financial Highlights

46 data points
Beta

Revenue

$4.08B

Net Income

$660.93M

16.2% Net Margin

EPS (Diluted)

$1.21

Total Assets

$32.14B

Cash & Equivalents

$1.67B

Free Cash Flow

$2.27B

Financial Statements
Beta
Revenue$4.08B
Operating Expenses$3.00B
Operating Income$1.08B
Interest Expense$50.15M
Net Income$660.93M
EPS (Basic)$1.22
EPS (Diluted)$1.21
Shares Outstanding (Basic)542.28M
Shares Outstanding (Diluted)548.07M

Key Highlights

  • 1Net income rose 34% to $660.9 million ($1.21/share) in Q1 2014 compared to $494.7 million ($0.91/share) in Q1 2013.
  • 2Net operating revenues increased 22% to $4.08 billion, driven by a 42% surge in crude oil and condensate volumes and a 20% increase in NGL prices.
  • 3Composite average wellhead crude oil and condensate prices decreased slightly to $100.25/bbl from $105.61/bbl, while natural gas prices saw a significant increase to $4.58/Mcf from $3.32/Mcf.
  • 4Operating expenses increased by $476 million, with lease and well expenses and transportation costs seeing notable rises, partly due to increased operating activity.
  • 5Impairments more than doubled to $113.4 million, primarily due to higher impairments of proved properties.
  • 6Net cash provided by operating activities saw a substantial increase of $843 million, reaching $2.27 billion.
  • 7EOG issued $500 million in 2.45% Senior Notes due 2020 to fund general corporate purposes and capital expenditures.

Frequently Asked Questions

EOG's revenue growth was primarily driven by a significant increase in crude oil and condensate volumes, up 42% year-over-year, and a 20% increase in average realized prices for Natural Gas Liquids (NGLs). Higher average realized prices for natural gas also contributed positively. This growth was largely attributed to increased production from key U.S. shale plays like the Eagle Ford, Bakken, and Permian Basin.

Operating expenses increased in the first quarter of 2014, with higher lease and well costs and transportation expenses reflecting increased activity. The company also reported a significant increase in impairments, particularly for proved properties. Despite these increased costs, EOG's strong revenue growth and improved operating efficiencies led to a substantial increase in net income and robust cash flow generation.

EOG has budgeted between $8.1 billion and $8.3 billion for exploration and development expenditures in 2014, with a primary focus on crude oil and liquids-rich drilling activity in the United States. The company finances its operations and capital program through cash generated from operations, existing credit facilities, and debt offerings. In March 2014, EOG successfully issued $500 million in senior notes to support these efforts.

EOG uses commodity derivative contracts primarily to manage exposure to price fluctuations. These contracts are accounted for using the mark-to-market method. In the first quarter of 2014, EOG recognized net losses of $156 million on these derivative contracts, compared to losses of $105 million in the prior year period. The net cash impact from derivative settlements was a payment of $34 million, versus a receipt of $67 million in the prior year.