8-KRegulation FD

EOG RESOURCES INC 8-K Report, Regulation FD Disclosure (Apr 23, 2019)

Filed April 23, 2019For Securities:EOG

Summary

EOG Resources Inc. (EOG) filed an 8-K on April 23, 2019, primarily to update investors on its price sensitivity and commodity derivative contracts. The filing quantifies EOG's exposure to fluctuations in crude oil and natural gas prices, indicating that each $1.00 per barrel change in oil price (combined with NGLs) affects net income by approximately $104 million and pretax cash flows by $135 million. Similarly, a $0.10 per thousand cubic feet change in natural gas prices impacts net income by $25 million and pretax cash flows by $32 million for the full year 2019. The report also details EOG's hedging activities, providing an update on crude oil and natural gas derivative contracts entered into since its last 10-K. This includes specific information on Midland Differential and Gulf Coast Differential basis swap contracts, as well as crude oil and natural gas price swap contracts with defined notional volumes and prices through the end of 2019. Investors can use this information to better understand EOG's strategy to manage commodity price risk and enhance revenue certainty.

Key Highlights

  • 1EOG quantifies its price sensitivity: a $1.00/bbl oil price change impacts net income by ~$104M and pretax cash flow by ~$135M for 2019.
  • 2A $0.10/MMBtu natural gas price change impacts net income by ~$25M and pretax cash flow by ~$32M for 2019.
  • 3EOG has entered into additional crude oil basis swap contracts to manage Midland and Gulf Coast differentials.
  • 4Details provided on crude oil price swap contracts covering 25,000 Bbld at $60.00/Bbl for April 2019 and 150,000 Bbld at $62.50/Bbl for May-Dec 2019.
  • 5Natural gas price swap contracts are in place for 250,000 MMBtu/day at $2.90/MMBtu through October 2019.
  • 6The company anticipates a net loss of $20.6 million on the mark-to-market of its financial commodity derivative contracts for Q1 2019.
  • 7Net cash received from settlements of financial commodity derivative contracts in Q1 2019 was $20.8 million.

Frequently Asked Questions

EOG Resources manages commodity price risk through a strategy of entering into various financial derivative contracts, including swap, option, swaption, collar, and basis swap contracts on U.S. NYMEX-related commodities. This aims to enhance the certainty of future revenues.

As of April 23, 2019, EOG Resources indicated that for each $1.00 per barrel increase or decrease in wellhead crude oil and condensate prices (combined with estimated changes in natural gas liquids prices), its net income is expected to change by approximately $104 million, and pretax cash flows from operating activities by approximately $135 million for the full year 2019.

EOG has provided updated summaries of its crude oil basis swap contracts (Midland and Gulf Coast differentials) and crude oil and natural gas price swap contracts, detailing notional volumes and weighted average prices for periods through the end of 2019. The company also reported an anticipated net loss of $20.6 million on the mark-to-market of its derivative contracts for the first quarter of 2019, with net cash received from settlements totaling $20.8 million in the same quarter.