10-QPeriod: Q1 FY2018

EOG RESOURCES INC Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 3, 2018For Securities:EOG

Summary

EOG Resources Inc. reported a significant increase in financial performance for the first quarter of 2018 compared to the same period in 2017. This growth was primarily driven by strong increases in crude oil and condensate, natural gas liquids, and natural gas revenues, reflecting higher commodity prices and increased production volumes. The company's operating income surged, leading to a substantial rise in net income and earnings per share. Key operational highlights include increased drilling and completion efficiencies and a strategic focus on cost control. Despite a challenging commodity price environment in some areas, EOG demonstrated robust operational execution. The company also maintained a strong balance sheet with a below-average debt-to-total capitalization ratio, indicating prudent financial management. Investors should note the company's significant capital expenditure plans for 2018, primarily focused on U.S. crude oil activities, signaling continued investment in growth.

Financial Highlights

45 data points
Beta

Revenue

$3.68B

Net Income

$638.59M

17.3% Net Margin

EPS (Diluted)

$1.10

Total Assets

$30.74B

Cash & Equivalents

$816.09M

Free Cash Flow

$1.55B

Financial Statements
Beta
Revenue$3.68B
Operating Expenses$2.81B
Operating Income$874.59M
Interest Expense$61.96M
Net Income$638.59M
EPS (Basic)$1.11
EPS (Diluted)$1.10
Shares Outstanding (Basic)575.77M
Shares Outstanding (Diluted)579.73M

Key Highlights

  • 1Net income increased dramatically to $638.6 million ($1.10 per diluted share) in Q1 2018 from $28.5 million ($0.05 per diluted share) in Q1 2017.
  • 2Total operating revenues grew by 41% to $3,681.2 million in Q1 2018, driven by strong performance in crude oil, natural gas liquids, and natural gas sales.
  • 3Wellhead revenues increased by 45% to $2,622 million, with crude oil and condensate production up 15% and prices up 28% year-over-year.
  • 4The company reported a significant increase in net cash provided by operating activities, up to $1,552.2 million in Q1 2018 from $898.0 million in Q1 2017.
  • 5Capital expenditures for exploration and development were $1,411 million in Q1 2018, an increase from $970 million in Q1 2017, reflecting continued investment in growth.
  • 6EOG maintained a strong balance sheet with a debt-to-total capitalization ratio of 28% at the end of Q1 2018.
  • 7Average crude oil and condensate prices increased significantly to $64.27 per barrel in Q1 2018 from $50.34 per barrel in Q1 2017.

Frequently Asked Questions

The primary drivers were significantly higher wellhead revenues, resulting from both increased production volumes and higher commodity prices for crude oil, natural gas liquids, and natural gas. Additionally, favorable changes in derivative contract mark-to-market adjustments and increased gathering, processing, and marketing revenues contributed to the improved performance.

EOG Resources focused on increasing drilling and completion efficiencies and controlling operating costs. While overall operating expenses increased due to higher production and activity levels, the company saw a decrease in its per-unit Depreciation, Depletion, and Amortization (DD&A) rate due to upward reserve revisions and adding reserves at a lower cost. Lease and well expenses saw a modest increase, largely in line with increased operating activities in the U.S.

EOG Resources anticipates total capital expenditures for 2018 to range between $5.4 billion and $5.8 billion, excluding acquisitions. The majority of these expenditures will be allocated to U.S. crude oil activities, indicating a continued focus on developing its domestic unconventional resource plays.

EOG Resources utilizes financial commodity derivative instruments, primarily swaps, options, and collars, to manage its exposure to fluctuations in crude oil and natural gas prices. These instruments are accounted for using the mark-to-market method, with changes in fair value recognized in earnings. The company also actively manages basis differentials through specific swap contracts for regions like Midland and the U.S. Gulf Coast.