What were the primary drivers of EOG Resources' improved financial performance in the second quarter of 2018 compared to the prior year?

The significant improvement in EOG Resources' financial performance was primarily driven by a substantial increase in commodity prices, particularly for crude oil and natural gas liquids. This was coupled with an increase in production volumes, especially in the United States, which led to higher operating revenues and, consequently, a substantial rise in net income.

How did the company's hedging strategy impact its financial results?

EOG Resources accounts for its commodity derivative contracts using the mark-to-market method and does not designate them as accounting hedges. In the second quarter of 2018, the company recognized net losses of $186 million on these contracts, compared to net gains of $9 million in the prior year period. For the first half of 2018, net losses were $246 million versus net gains of $71 million in the prior year. This indicates that the market-to-market accounting of derivatives had a negative impact on reported earnings during these periods.

What is EOG Resources' outlook on capital expenditures and its financial strategy?

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 focused on U.S. crude oil activities. The company's strategy remains focused on maintaining a strong balance sheet with a consistently below-average debt-to-total capitalization ratio, maximizing return on investment through cost control, and enhancing shareholder returns, as demonstrated by the recent dividend increase.

Did EOG Resources adopt any new accounting standards that affected its financial reporting?

Yes, EOG Resources adopted new accounting standards related to Revenue From Contracts With Customers (ASU 2014-09) effective January 1, 2018. This adoption resulted in reclassifications of certain natural gas processing fees from revenue to gathering and processing costs. While this change impacted the presentation of revenues and expenses, it had no impact on operating income, net income, or cash flows. The company also noted its ongoing assessment of the new Leases standard (ASC 842), which is effective for periods beginning after December 31, 2018.

EOG 10-Q Quarterly Report Q2 FY2018 — Revenue, Net Income, EPS

Summary

EOG Resources Inc. reported robust financial results for the second quarter and the first half of 2018, driven by significant increases in crude oil, natural gas liquids (NGLs), and natural gas prices. Total operating revenues surged by 62% year-over-year for the quarter and 52% for the first half. Net income experienced a substantial increase, reaching $696.7 million for the quarter and $1.34 billion for the first half, a dramatic improvement from the prior year periods. This performance was underpinned by strong production growth, particularly in the United States, and a favorable pricing environment. The company continues to focus on operational efficiencies and strategic drilling, with capital expenditures primarily directed towards U.S. crude oil activities. The company's balance sheet remains strong, with a debt-to-total capitalization ratio of 27% as of June 30, 2018. EOG Resources also demonstrated its commitment to returning value to shareholders by increasing its quarterly cash dividend. The company's forward-looking strategy emphasizes maximizing return on investment through cost control and efficient reserve recovery, positioning it well to navigate the volatile energy market.

Financial Highlights

46 data points

Beta

Revenue

$4.24B

Net Income

$696.73M

0.2% Net Margin

EPS (Diluted)

$1.20

Total Assets

$32.09B

Cash & Equivalents

$1.01B

Free Cash Flow

$1.94B

Financial Statements

Beta

Revenue	$4.24B
Operating Expenses	$3.27B
Operating Income	$964.93M
Interest Expense	$63.44M
Net Income	$696.73M
EPS (Basic)	$1.21
EPS (Diluted)	$1.20
Shares Outstanding (Basic)	576.13M
Shares Outstanding (Diluted)	580.38M

Key Highlights

1Significant revenue growth: Operating revenues increased by 62% year-over-year to $4.24 billion in Q2 2018 and by 52% to $7.92 billion in the first half of 2018.
2Substantial net income improvement: Net income rose dramatically to $696.7 million in Q2 2018 and $1.34 billion in the first half of 2018, compared to $23.1 million and $51.6 million, respectively, in the prior year periods.
3Strong pricing environment: Average crude oil and condensate prices increased by 43% in Q2 2018 and 35% in the first half of 2018 compared to the prior year.
4Increased production volumes: Crude oil and condensate production increased by 15% in Q2 2018 and 15% in the first half of 2018.
5Healthy balance sheet: Debt-to-total capitalization ratio remained strong at 27% as of June 30, 2018.
6Commitment to shareholder returns: EOG Resources announced an increase in its quarterly cash dividend.
7Strategic capital allocation: Capital expenditures are primarily focused on U.S. crude oil activities, with a budget of $5.4 to $5.8 billion for 2018.

EOG RESOURCES INC Quarterly Report for Q2 Ended Jun 30, 2018

Summary

Financial Highlights

Key Highlights

Frequently Asked Questions