Why did adjusted EPS grow faster than GAAP EPS in Q2 2024?

GAAP EPS of $2.95 included a $47 million pre-tax mark-to-market loss on derivative contracts, which reduced reported earnings by about $0.07 per share after tax. Adjusted EPS of $3.16 removes that loss, adds back the $79 million of realized derivative settlements, excludes a $20 million pre-tax gain on asset dispositions, and adds back certain impairments. The difference between the two metrics is therefore mainly due to derivative accounting and non-recurring items, not operating performance.

How strong was the company's cash generation and what did it do with the cash?

Operating cash flow of $2,889 million covered total capital expenditures of $1,668 million, leaving free cash flow (non-GAAP) of $1,374 million. EOG returned cash through $520 million of dividends paid and $699 million of share repurchases, and cash on the balance sheet still rose to $5,431 million from $5,292 million at the end of Q1 2024.

Is EOG's balance sheet leveraged?

No. Total debt was $3,784 million at June 30, 2024, and cash was $5,431 million, which gives net cash (non-GAAP) of about $1,647 million. The company's GAAP debt-to-total capitalization ratio was 11.5%, and its net debt-to-total capitalization ratio was -6.0%, indicating a net cash position.

What does the dividend increase signal to investors?

The dividend declared per common share rose to $0.91 in Q2 2024 from $0.825 in Q2 2023, an increase of about 10%. The increase, together with the buybacks, indicates that management is returning a larger share of cash flow to shareholders while the balance sheet remains in a net cash position.

What should investors look for in the forecast information that this filing references?

The press release says it includes third quarter and full-year 2024 forecast and benchmark commodity pricing information, but the forecast figures are not included in the text provided. Investors should review Exhibit 99.1 and the accompanying guidance tables directly to assess expected production, capital spending, and pricing assumptions, which are not summarized here.

EOG 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed August 1, 2024. Cited figures are marked; the original filing is the authoritative source.

EOG Resources reported second quarter 2024 results on August 1, 2024, with year-over-year growth in production, revenue, and earnings.

Total crude oil equivalent production rose about 8% to 1,047.5 MBoed from 970.3 MBoed in Q2 2023, and total operating revenues rose about 8% to $6,025 million^a. GAAP net income was $1,690 million, or $2.95 per diluted share, compared with $1,553 million, or $2.66 per diluted share, a year earlier. Adjusted net income, a non-GAAP measure that excludes mark-to-market derivative effects, asset disposition gains, certain impairments, and includes realized derivative settlements, was $1,807 million, or $3.16 per diluted share, up roughly 27% from $2.49 in Q2 2023.

The larger gain in adjusted earnings reflects higher average U.S. crude oil prices ($82.71^b/Bbl versus $74.98/Bbl) and lower depreciation, depletion and amortization relative to revenue. Cash generation was strong. Net cash provided by operating activities was $2,889 million, up from $2,277 million.

Cash flow from operations before changes in working capital was $3,042 million^c, and free cash flow (non-GAAP) was $1,374 million, compared with $1,042 million in Q2 2023. Total capital expenditures were $1,668 million. The company paid $520 million in dividends and repurchased $699 million of common stock during the quarter.

The quarterly dividend declared was $0.91^d per share, up from $0.825 a year earlier. Cash and cash equivalents ended the quarter at $5,431 million against total debt of $3,784 million, leaving net cash (non-GAAP) of about $1,647 million and a net debt-to-total capitalization ratio of -6.0%. The press release also includes third quarter and full-year 2024 forecast and benchmark commodity pricing information, which is incorporated by reference.

That forecast content is not reproduced in the text provided, so this summary does not characterize the guidance. The filing furnishes the information under Items 2.02 and 7.01 and states that it is not deemed 'filed' for purposes of Section 18 of the Exchange Act.

02—Key points

Key Highlights

Q2 2024 GAAP net income was $1,690 million ($2.95 diluted EPS), up about 9% in dollar terms and about 11% per share from $1,553 million ($2.66) in Q2 2023.
Adjusted net income (non-GAAP) was $1,807 million ($3.16 diluted EPS), up about 27% per share from $2.49 in Q2 2023.
Total crude oil equivalent production rose about 8% year over year to 1,047.5 MBoed, with crude oil and condensate at 490.7 MBbld, and U.S. crude oil realized at $82.71/Bbl before derivatives.
Operating cash flow was $2,889 million, up about 27% from $2,277 million, and free cash flow (non-GAAP) was $1,374 million versus $1,042 million a year earlier.
Mark-to-market derivative losses of $47 million pre-tax weighed on GAAP results, while realized derivative settlements contributed a $79 million pre-tax gain.
The quarterly dividend was raised to $0.91 per share from $0.825, and the company repurchased $699 million of stock and paid $520 million in dividends during the quarter.
The balance sheet remained net cash positive, with $5,431 million of cash against $3,784 million of total debt, and the net debt-to-total capitalization ratio was -6.0%.

03—Questions

Frequently Asked Questions

Why did adjusted EPS grow faster than GAAP EPS in Q2 2024?
GAAP EPS of $2.95 included a $47 million pre-tax mark-to-market loss on derivative contracts, which reduced reported earnings by about $0.07 per share after tax. Adjusted EPS of $3.16 removes that loss, adds back the $79 million of realized derivative settlements, excludes a $20 million pre-tax gain on asset dispositions, and adds back certain impairments. The difference between the two metrics is therefore mainly due to derivative accounting and non-recurring items, not operating performance.
How strong was the company's cash generation and what did it do with the cash?
Operating cash flow of $2,889 million covered total capital expenditures of $1,668 million, leaving free cash flow (non-GAAP) of $1,374 million. EOG returned cash through $520 million of dividends paid and $699 million of share repurchases, and cash on the balance sheet still rose to $5,431 million from $5,292 million at the end of Q1 2024.
Is EOG's balance sheet leveraged?
No. Total debt was $3,784 million at June 30, 2024, and cash was $5,431 million, which gives net cash (non-GAAP) of about $1,647 million. The company's GAAP debt-to-total capitalization ratio was 11.5%, and its net debt-to-total capitalization ratio was -6.0%, indicating a net cash position.
What does the dividend increase signal to investors?
The dividend declared per common share rose to $0.91 in Q2 2024 from $0.825 in Q2 2023, an increase of about 10%. The increase, together with the buybacks, indicates that management is returning a larger share of cash flow to shareholders while the balance sheet remains in a net cash position.
What should investors look for in the forecast information that this filing references?
The press release says it includes third quarter and full-year 2024 forecast and benchmark commodity pricing information, but the forecast figures are not included in the text provided. Investors should review Exhibit 99.1 and the accompanying guidance tables directly to assess expected production, capital spending, and pricing assumptions, which are not summarized here.

04—Continue

← View all 8-K filings