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.