01—Abstract
Summary
Summary of the 8-K filed May 2, 2024. Cited figures are marked; the original filing is the authoritative source.
EOG Resources reported first-quarter 2024 results that combined record-scale production with lower earnings, as weaker natural gas prices and higher depreciation offset volume growth.
Total crude oil equivalent production rose about 9% year over year to 1,028.8 MBoed, and U.S. crude oil volumes grew about 6.5% to 487.4 MBbld. Total operating revenues were $6.12 billiona, up roughly 1% from $6.04 billion a year earlier. GAAP net income fell about 12% to $1.79 billion ($3.10 per diluted share), and operating income declined to $2.27 billion from $2.57 billion.
The main drag was depreciation, depletion and amortization, which rose to $1.07 billionb from $798 million, and realized natural gas prices fell to $2.26 per Mcf from $3.51. On a non-GAAP basis, adjusted net income was $1.63 billion, or $2.82 per diluted share, compared with $2.69 a year earlier, an increase of about 5%. This excludes a $237 million mark-to-market derivative gain and a $26 million gain on asset dispositions, among other items.
Cash flow from operations was $2.90 billionc, down from $3.26 billion, but free cash flow (non-GAAP) improved to $1.23 billion from $1.07 billion because capital expenditures rose to $1.70 billion. The company returned capital through $525 million of dividends and $759 million of share repurchases, more than double the prior-year buybacks, and ended the quarter with $5.29 billion of cash against $3.79 billion of debt, a net cash position of $1.50 billion. The filing itself contains the first-quarter results and supplemental data, but the second-quarter and full-year 2024 forecast and benchmark pricing referenced in Item 7.01 are not included in the text provided, so investors should review Exhibit 99.1 directly for guidance.
02—Key points
Key Highlights
- Production growth: Total crude oil equivalent volumes reached 1,028.8 MBoed, up about 9% from 943.0 MBoed in Q1 2023, led by U.S. crude oil (487.4 MBbld, up about 6.5%) and natural gas liquids (231.7 MBbld, up about 8%).
- GAAP earnings decline: Net income was $1.79 billion ($3.10 diluted EPS), down about 12% from $2.02 billion ($3.45) a year earlier, driven largely by a rise in DD&A to $1.07 billion from $798 million.
- Adjusted earnings growth: Adjusted net income was $1.63 billion ($2.82 per diluted share), up about 5% from $2.69 in Q1 2023 after excluding mark-to-market derivative gains and asset disposition gains.
- Natural gas price weakness: The average U.S. natural gas price fell to $2.10 per Mcf from $2.70 year over year (composite $2.26 vs. $2.79), while the average U.S. crude oil price was $78.46/Bbl, roughly flat with $79.18 in the prior year.
- Free cash flow improvement: Free cash flow (non-GAAP) was $1.23 billion versus $1.07 billion a year earlier, even as operating cash flow fell to $2.90 billion from $3.26 billion and total capital expenditures rose to $1.70 billion from $1.49 billion.
- Shareholder returns: EOG paid $525 million in dividends, declared $0.91 per share for the quarter, and repurchased $759 million of stock, compared with $317 million in Q1 2023.
- Balance sheet strength: The company held $5.29 billion of cash against $3.79 billion of total debt, a net cash position of $1.50 billion and a net debt-to-total capitalization ratio of -5.5%.
03—Questions
Frequently Asked Questions
Why did GAAP net income decline even though production grew?
Production rose about 9% year over year, but GAAP net income fell about 12%. The main factors were a sharp rise in depreciation, depletion and amortization to $1.07 billion from $798 million, and lower realized natural gas prices, which dropped to $2.26 per Mcf composite from $3.51. Mark-to-market derivative gains of $237 million (versus $376 million a year earlier) also contributed to the lower GAAP figure.
How did adjusted earnings compare with the prior year?
Adjusted net income was $1.63 billion, or $2.82 per diluted share, versus $1.58 billion, or $2.69 per share, in Q1 2023. That is an increase of roughly 5% per share. The adjustments remove mark-to-market derivative gains, net cash derivative settlements, asset disposition gains and certain impairments. Management presents this measure to aid comparisons with industry peers.
Is EOG generating enough cash to fund its activity and shareholder returns?
Yes, in this quarter. Cash flow from operations before working capital changes was $2.93 billion, which covered $1.70 billion of total capital expenditures and left $1.23 billion of free cash flow. That free cash flow funded $525 million of dividends and $759 million of buybacks. Cash still rose modestly, to $5.29 billion from $5.28 billion at year-end 2023, with the remaining shortfall covered by the balance sheet.
What does the balance sheet look like?
EOG's balance sheet remains conservative. Total debt was $3.79 billion, against $5.29 billion of cash, for a net cash position of $1.50 billion. Total stockholders' equity was $28.6 billion, and the debt-to-total capitalization ratio was about 11.7%. Treasury stock grew to $1.65 billion, reflecting the larger buybacks.
04—Continue