8-KOther Events

EOG RESOURCES INC 8-K Report (Aug 30, 2002)

Filed August 30, 2002For Securities:EOG

Summary

EOG Resources, Inc. (EOG) filed an 8-K on August 30, 2002, to disclose its updated commodity hedging activities for the third and fourth quarters of 2002. The filing details the company's use of financial price swap and costless collar contracts for both natural gas and crude oil, aiming to enhance revenue certainty. Investors should note the specific price points and volumes covered by these derivative instruments, as they provide insight into EOG's strategy for managing price volatility in a key period. The company has entered into natural gas price swaps covering a significant portion of its notional volumes for the remainder of 2002, with average prices ranging from $3.11 to $3.35 per MMBtu. Additionally, a costless collar was established for October 2002, setting a floor price of $3.10 per MMBtu and an average ceiling of $3.43 per MMBtu for 100,000 MMBtud. For crude oil, EOG has swap contracts in place for 2,000 barrels per day at $21.50 per barrel through December 2002, with July contracts already closed.

Key Highlights

  • 1EOG Resources entered into new costless collar contracts for natural gas on August 30, 2002.
  • 2The natural gas costless collar covers October 2002 with a floor price of $3.10/MMBtu and an average ceiling of $3.43/MMBtu.
  • 3Notional volumes for the new natural gas collar are 100,000 MMBtud.
  • 4EOG has natural gas price swap contracts with average prices ranging from $3.11 to $3.35 per MMBtu for the remainder of 2002.
  • 5Crude oil price swap contracts are in place for 2,000 barrels per day at $21.50 per barrel through December 2002.
  • 6All disclosed commodity derivative contracts are accounted for under mark-to-market accounting.

Frequently Asked Questions

EOG Resources is disclosing these hedging contracts to inform investors about their strategies to enhance the certainty of future revenues by managing commodity price volatility. This allows investors to better understand the company's potential exposure and protection against price fluctuations in natural gas and crude oil markets.

The costless collar agreement, entered into on August 30, 2002, covers notional volumes of 100,000 MMBtud for October 2002. It establishes a floor price of $3.10 per MMBtu, meaning EOG is guaranteed at least this price, and a ceiling price that averages $3.43 per MMBtu, capping potential upside beyond this level.

EOG Resources accounts for these natural gas and crude oil financial price swap and costless collar contracts under mark-to-market accounting. This means the contracts are valued at their current market price, and any changes in their value are recognized in earnings.

For the second half of 2002, EOG has price swap contracts with average prices between $3.11 and $3.35 per MMBtu for significant notional volumes. The newly disclosed costless collar for October further refines this protection by setting a specific floor of $3.10/MMBtu and a ceiling of $3.43/MMBtu for a portion of their October production.