8-KRegulation FD

EOG RESOURCES INC 8-K Report, Regulation FD Disclosure (Jul 11, 2023)

Filed July 11, 2023For Securities:EOG

Summary

EOG Resources, Inc. (EOG) filed an 8-K on July 11, 2023, providing an update on its price sensitivity and risk management strategies. As of June 30, 2023, EOG indicated that a $1.00 per barrel change in crude oil/condensate prices (combined with NGL price changes) would impact full-year net income by approximately $135 million and pretax cash flows by $173 million. For natural gas, a $0.10 per thousand cubic feet change would affect net income by $35 million and pretax cash flows by $44 million, considering derivatives, tax position, and unpriced volumes. The company also provided preliminary information regarding its second quarter 2023 financial results, specifically noting an anticipated net gain of $101 million on the mark-to-market of its financial commodity derivative contracts and $30 million in net cash paid for settlements. These items are expected to be excluded from the calculation of Adjusted Net Income (Non-GAAP) for the quarter. EOG's disclosure also detailed its extensive derivative positions in crude oil and natural gas swaps, aiming to enhance revenue and cash flow certainty.

Key Highlights

  • 1Price sensitivity analysis as of June 30, 2023: a $1/bbl oil price change impacts net income by ~$135M and pretax cash flow by ~$173M for the full year.
  • 2Natural gas price sensitivity: a $0.10/MMBtu gas price change impacts net income by ~$35M and pretax cash flow by ~$44M for the full year.
  • 3EOG anticipates a $101 million net gain from mark-to-market of financial commodity derivatives for Q2 2023.
  • 4EOG expects $30 million in net cash paid for derivative settlements in Q2 2023.
  • 5These derivative gains and payments are expected to be adjusted out for the Non-GAAP "Adjusted Net Income (Loss)" calculation for Q2 2023.
  • 6As of June 30, 2023, EOG had no collateral posted or held related to its derivative contracts.
  • 7Detailed schedules of outstanding crude oil and natural gas financial derivative contracts as of June 30, 2023, are provided.

Frequently Asked Questions

As of June 30, 2023, EOG estimates that for every $1.00 per barrel increase or decrease in crude oil and condensate prices (combined with NGL price changes), its full-year net income would be impacted by approximately $135 million, and pretax cash flows from operations by approximately $173 million. For natural gas, a $0.10 per thousand cubic feet change would impact net income by roughly $35 million and pretax cash flows by $44 million.

EOG anticipates a net gain of $101 million from the mark-to-market accounting of its financial commodity derivative contracts for the second quarter of 2023. Additionally, the company expects to have paid $30 million in net cash for settlements of these contracts during the same period. These amounts are expected to be excluded when calculating Adjusted Net Income (Non-GAAP).

The filing details EOG's outstanding financial commodity derivative contracts as of June 30, 2023, including crude oil and natural gas swap contracts extending into 2025. The company utilizes these instruments to enhance the certainty of future revenues and cash flows. Notably, EOG reported having no collateral posted or held related to these derivative contracts as of that date.

EOG's filing highlights numerous risks, including fluctuations in commodity prices, the success of its exploration and development efforts, cost control, cybersecurity threats, regulatory changes (including climate-related policies and tax laws), competition, availability of infrastructure, weather impacts, and geopolitical factors.