Summary
EOG Resources Inc. (EOG) filed an 8-K on October 10, 2019, providing an update on its commodity price sensitivity and risk management activities. The filing highlights EOG's exposure to fluctuations in crude oil, natural gas liquids, and natural gas prices. For every $1.00 change in crude oil/NGL prices, EOG's net income is impacted by approximately $102 million, and pretax cash flows by $132 million for the full year 2019. Similarly, a $0.10 change in natural gas prices affects net income by $24 million and pretax cash flows by $31 million. Additionally, the report details EOG's use of financial commodity derivative contracts, including swaps and basis swaps, to manage price risk and enhance revenue certainty. For the third quarter of 2019, EOG anticipated a net gain of $85.9 million on its mark-to-market derivative positions and received $108.4 million in net cash settlements. The filing also provides specific details on their outstanding crude oil and natural gas derivative contracts, including volumes and weighted average prices/differentials through the end of 2019 and into 2020 for some natural gas hedges.
Key Highlights
- 1EOG's price sensitivity indicates that a $1/bbl change in crude oil/NGL prices impacts full-year 2019 net income by ~$102 million and pretax cash flow by ~$132 million.
- 2A $0.10/MMBtu change in natural gas prices impacts full-year 2019 net income by ~$24 million and pretax cash flow by ~$31 million.
- 3EOG uses various financial commodity derivative contracts (swaps, options, collars, basis swaps) to manage price risk.
- 4For Q3 2019, EOG anticipated an $85.9 million net gain from mark-to-market of derivative contracts and received $108.4 million in net cash settlements.
- 5No new crude oil derivative contracts were entered into since the last 10-Q filing.
- 6EOG has fixed the Midland Differential basis for 20,000 Bbld at $1.075/Bbl for the remainder of 2019.
- 7EOG has hedged 150,000 Bbld of crude oil production at an average price of $62.50/Bbl for Q4 2019.