What was the primary purpose of the acquisition in Canada?

The acquisition of natural gas properties in Alberta, Canada, for $320 million was primarily to expand and consolidate EOG Resources' existing operations in the region. The acquired assets are strategically located adjacent to or within areas where EOG already has a significant presence and working interest.

How are EOG's commodity contracts accounted for, and what is their impact?

EOG accounts for its financial commodity price swap and collar contracts using the mark-to-market method. This means that gains and losses from these contracts are recognized in earnings as market values change, not just when contracts are settled. This can lead to volatility in reported earnings, as the reported value is sensitive to closing NYMEX prices at the end of each reporting period.

What is EOG's outlook on commodity prices based on their hedging contracts?

The disclosed contracts suggest EOG is hedging to lock in prices. For natural gas, the average prices for swaps in Q4 2003 and 2004 range from approximately $4.70 to $5.57 per MMBtu. Crude oil swap prices for Q4 2003 average around $24.47 to $24.90 per barrel. The collar contracts further define price ranges, indicating a strategy to protect against significant price declines while participating in some upside.

Did EOG experience gains or losses from its commodity contracts in the third quarter of 2003?

Yes, EOG anticipates a gain of $23.6 million from mark-to-market financial commodity price swap and collar contracts for the third quarter of 2003. This is a significant positive swing compared to a loss of $7.8 million in the same period of the prior year (2002).

EOG 8-K SEC Disclosure

Summary

EOG Resources Inc. (EOG) filed an 8-K on October 1, 2003, disclosing two significant events. First, the company's Canadian subsidiary closed an asset purchase of natural gas properties in Alberta from a Husky Energy Inc. subsidiary for $320 million. These acquired assets are strategically located adjacent to EOG's existing operations or in areas where EOG already holds working interests, suggesting a focus on consolidating and expanding its Canadian footprint. Second, the filing provides an update on EOG's financial commodity contracts for the third quarter of 2003 and its outlook for the fourth quarter of 2003 and full year 2004. The company anticipates a significant gain from mark-to-market financial commodity price swaps and collars in Q3 2003, a notable improvement from a loss in the prior year. The report details the specific volumes, average prices, floor prices, and ceiling prices for natural gas and crude oil swaps and collars, offering insight into EOG's hedging strategies and its efforts to secure future revenue certainty.

Key Highlights

1Completed a $320 million acquisition of natural gas properties in Alberta, Canada.
2Acquired assets are adjacent to or within existing EOG operational areas in Canada.
3Anticipates a $23.6 million gain from mark-to-market financial commodity contracts in Q3 2003, a turnaround from a $7.8 million loss in Q3 2002.
4Disclosed details of natural gas financial price swap contracts for Q4 2003 and 2004, with average prices ranging from $4.70 to $5.57 per MMBtu.
5Provided data on crude oil financial price swap contracts for Q4 2003, with average prices around $24.47 to $24.90 per barrel.
6Detailed natural gas financial collar contracts for Q4 2003 and 2004, including floor and ceiling prices to manage price volatility.
7Mark-to-market accounting for commodity contracts means financial impacts are sensitive to closing NYMEX prices at period-end.

EOG RESOURCES INC 8-K Report (Oct 1, 2003)

Summary

Key Highlights

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