-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OxlD2LoGbttdZvy9DGZj7oCe5ttlhR+WASenjbsY5yv7TPn8LwotKmkbm+wegKfk 30+tajcSa5CtHf3csXDIrA== 0000821189-00-000007.txt : 20000511 0000821189-00-000007.hdr.sgml : 20000511 ACCESSION NUMBER: 0000821189-00-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EOG RESOURCES INC CENTRAL INDEX KEY: 0000821189 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 470684736 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09743 FILM NUMBER: 623797 BUSINESS ADDRESS: STREET 1: 1200 SMITH ST CITY: HOUSTON STATE: TX ZIP: 77002-7361 BUSINESS PHONE: 7136517000 MAIL ADDRESS: STREET 1: 1200 SMITH STREET CITY: HOUSTON STATE: TX ZIP: 77002-7361 FORMER COMPANY: FORMER CONFORMED NAME: ENRON OIL & GAS CO DATE OF NAME CHANGE: 19920703 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 Form 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 1-9743 EOG RESOURCES, INC. (Exact name of registrant as specified in its charter) Delaware 47-0684736 (State or other (I.R.S. Employer jurisdiction Identification No.) of incorporation or organization) 1200 Smith Street, Suite 300, Houston, Texas 77002-7361 (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: 713-651-7000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No . Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of May 1, 2000. Title of each class Number of shares Common Stock, $.01 par value 117,363,177 EOG RESOURCES, INC. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Page No. ITEM 1. Financial Statements Consolidated Statements of Income - Three Months Ended March 31, 2000 and 1999................................................... 3 Consolidated Balance Sheets - March 31, 2000 and December 31, 1999.. 4 Consolidated Statements of Cash Flows - Three Months Ended March 31, 2000 and 1999......................................... 5 Notes to Consolidated Financial Statements.......................... 6 ITEM 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations............................ 10 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings.......................................... 14 ITEM 6. Exhibits and Reports on Form 8-K........................... 14 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS EOG RESOURCES, INC. CONSOLIDATED STATEMENTS OF INCOME (In Thousands Except Per Share Amounts) (Unaudited) Three Months Ended March 31, 2000 1999 ------- ------- NET OPERATING REVENUES Natural Gas Trade $179,283 $117,267 Associated Companies - 12,843 Crude Oil, Condensate and Natural Gas Liquids Trade 72,530 26,517 Associated Companies - 1,036 Gains on Sales of Reserves and Related Assets and Other, Net 629 1,291 -------- -------- TOTAL 252,442 158,954 OPERATING EXPENSES Lease and Well 26,285 24,069 Exploration Costs 12,945 16,789 Dry Hole Costs 5,761 345 Impairment of Unproved Oil and Gas Properties 7,957 8,003 Depreciation, Depletion and Amortization 84,582 82,022 General and Administrative 16,287 23,635 Taxes Other Than Income 18,415 13,695 -------- -------- TOTAL 172,232 168,558 -------- -------- OPERATING INCOME (LOSS) 80,210 (9,604) OTHER INCOME, NET 17 26,938 -------- -------- INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES 80,227 17,334 INTEREST EXPENSE, NET 14,568 14,267 -------- -------- INCOME BEFORE INCOME TAXES 65,659 3,067 INCOME TAX PROVISION (BENEFIT) 24,169 (1,999) -------- -------- NET INCOME 41,490 5,066 PREFERRED STOCK DIVIDENDS (2,654) - -------- -------- NET INCOME AVAILABLE TO COMMON $ 38,836 $ 5,066 ======== ======== NET INCOME PER SHARE AVAILABLE TO COMMON Basic $ 0.33 $ 0.03 ======== ======== Diluted $ 0.33 $ 0.03 ======== ======== AVERAGE NUMBER OF COMMON SHARES Basic 117,827 153,733 ======== ======== Diluted 118,279 154,615 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. PART I. FINANCIAL INFORMATION - (Continued) ITEM 1. FINANCIAL STATEMENTS - (Continued) EOG RESOURCES, INC. CONSOLIDATED BALANCE SHEETS (In Thousands) March 31, December 31, 2000 1999 ---------- ------------ (Unaudited) ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 33,358 $ 24,836 Accounts Receivable 180,039 148,189 Inventories 16,954 18,816 Other 6,741 8,660 ----------- ----------- TOTAL 237,092 200,501 OIL AND GAS PROPERTIES (SUCCESSFUL EFFORTS METHOD) 4,625,619 4,602,740 Less: Accumulated Depreciation, Depletion and Amortization (2,330,808) (2,267,812) ----------- ----------- Net Oil and Gas Properties 2,294,811 2,334,928 OTHER ASSETS 84,182 75,364 ----------- ----------- TOTAL ASSETS $ 2,616,085 $ 2,610,793 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 187,436 $ 172,780 Accrued Taxes Payable 19,119 19,648 Dividends Payable 4,516 4,227 Other 24,644 21,963 ----------- ----------- TOTAL 235,715 218,618 LONG-TERM DEBT 940,920 990,306 OTHER LIABILITIES 62,124 46,306 DEFERRED INCOME TAXES 243,430 225,952 SHAREHOLDERS' EQUITY Preferred Stock, $.01 Par, 10,000,000 Shares Authorized: Series A, 100,000 Shares Issued, Cumulative, $100,000,000 Liquidation Preference 97,883 97,909 Series C, 500 Shares Issued, Cumulative, $50,000,000 Liquidation Preference 49,255 49,281 Common Stock, $.01 Par, 320,000,000 Shares Authorized; 124,730,000 Shares Issued 201,247 201,247 Additional Paid In Capital 2,842 - Unearned Compensation (4,383) (1,618) Cumulative Foreign Currency Translation Adjustment (21,909) (19,810) Retained Earnings 965,722 930,938 Common Stock Held in Treasury, 7,518,729 shares at March 31, 2000 and 5,625,446 shares at December 31, 1999 (156,761) (128,336) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 1,133,896 1,129,611 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,616,085 $ 2,610,793 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. PART I. FINANCIAL INFORMATION - (Continued) ITEM 1. FINANCIAL STATEMENTS - (Continued) EOG RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Three Months Ended March 31, 2000 1999 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Reconciliation of Net Income to Net Operating Cash Inflows: Net Income $ 41,490 $ 5,066 Items Not Requiring (Providing) Cash Depreciation, Depletion and Amortization 84,582 82,022 Impairment of Unproved Oil and Gas Properties 7,957 8,003 Deferred Income Taxes 17,045 (4,099) Other, Net 826 (264) Exploration Costs 12,945 16,789 Dry Hole Costs 5,761 345 Losses on Sales of Reserves and Related Assets and Other, Net 1,571 1 Gains on Sales of Other Assets - (27,991) Other, Net (2,129) (9,094) Changes in Components of Working Capital and Other Liabilities Accounts Receivable (30,410) 23,730 Inventories 1,862 1,197 Accounts Payable 20,289 (33,873) Accrued Taxes Payable (529) (4,618) Other Liabilities 3,924 (475) Other, Net 4,600 (4,606) Changes in Components of Working Capital Associated with Investing and Financing Activities 5,059 16,977 --------- --------- NET OPERATING CASH INFLOWS 174,843 69,110 INVESTING CASH FLOWS Additions to Oil and Gas Properties (78,493) (91,501) Exploration Costs (12,945) (16,789) Dry Hole Costs (5,761) (345) Proceeds from Sales of Reserves and Related Assets 20,621 88 Proceeds from Sale of Other Assets - 39,700 Changes in Components of Working Capital Associated with Investing Activities (5,266) (16,977) Other, Net (315) 254 --------- --------- NET INVESTING CASH OUTFLOWS (82,159) (85,570) FINANCING CASH FLOWS Long-Term Debt Trade (49,386) 227,739 Affiliate - (200,000) Dividends Paid (6,330) (4,601) Treasury Stock Purchased (30,253) - Proceeds from Sales of Treasury Stock 1,093 184 Other, Net 714 (32) --------- --------- NET FINANCING CASH INFLOWS (OUTFLOWS) (84,162) 23,290 --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,522 6,830 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 24,836 6,303 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 33,358 $ 13,133 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. PART I. FINANCIAL INFORMATION (Continued) ITEM 1. FINANCIAL STATEMENTS (Continued) EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated financial statements of EOG Resources, Inc. and subsidiaries (the "Company") included herein have been prepared by management without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial results for the interim periods. Certain information and notes normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications have been made to prior period financial statements to conform with the current presentation. As more fully discussed in Notes 1 and 14 to the consolidated financial statements included in the Company's 1999 Annual Report on Form 10-K, the Company engages in price risk management activities from time to time primarily for non-trading and to a lesser extent for trading purposes. Derivative financial instruments (primarily price swaps and costless collars) are utilized selectively for non- trading purposes to hedge the impact of market fluctuations on natural gas and crude oil market prices. Hedge accounting is utilized in non-trading activities when there is a high degree of correlation between price movements in the derivative and the item designated as being hedged. Gains and losses on derivative financial instruments used for hedging purposes are recognized as revenue in the same period as the hedged item. The gains or losses are recorded in Net Operating Revenues for Natural Gas - Associated Companies and Crude Oil, Condensate and Natural Gas Liquids - Associated Companies through August 1999. Gains or losses are currently recorded in Trade as a result of the Share Exchange Agreement ("Share Exchange") described in Note 2. Gains and losses on hedging instruments that are closed prior to maturity are deferred in the consolidated balance sheets and amortized over the original hedge period. In instances where the anticipated correlation of price movements does not occur, hedge accounting is terminated and future changes in the value of the derivative are recognized as gains or losses using the mark-to-market method of accounting. Derivative and other financial instruments utilized in connection with trading activities, primarily price swaps and call options, are accounted for using the mark-to-market method, under which changes in the market value of outstanding financial instruments are recognized as gains or losses in the period of change. The cash flow impact of derivative and other financial instruments used for non-trading and trading purposes is reflected as cash flows from operating activities in the consolidated statements of cash flows. 2. On August 16, 1999, the Company and Enron Corp. completed the Share Exchange whereby the Company received 62,270,000 shares of the Company's common stock out of 82,270,000 shares owned by Enron Corp. in exchange for all the stock of the Company's subsidiary, EOGI-India, Inc. (See Note 7 to the Consolidated Financial Statements in the Company's 1999 Annual Report on Form 10-K). 3. Natural gas revenues, trade for the three-month periods ended March 31, 2000 and 1999, are net of costs of natural gas purchased for sale related to natural gas marketing activities of $12.5 million and $8.4 million, respectively. Natural gas revenues, associated for the three-month period ended March 31, 1999, are net of costs of natural gas purchased for sale related to natural gas marketing activities of $13.1 million. 4. Income taxes for first quarter of 2000 were calculated using the estimated annual effective tax rate. The first quarter 1999 tax provision was computed using the actual effective tax rate for the quarter rather than the estimated annual effective tax rate. A reliable estimate of the annual effective tax rate could not be made given the impact oil and gas price volatility had on the estimate for that year. PART I. FINANCIAL INFORMATION (Continued) ITEM 1. FINANCIAL STATEMENTS (Continued) EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. The difference between the average number of common shares outstanding for basic and diluted net income per share available to common is due to the assumed issuance of approximately 452,000 common shares (394,000 relating to stock options, 34,000 relating to restricted stock and 24,000 relating to phantom stock) for the three- month period ended March 31, 2000. For the three-month period ended March 31, 1999, the difference is due to the assumed issuance of approximately 882,000 common shares relating to stock options. 6. The Company's total comprehensive income was $39.4 million and $8.5 million for the three-month periods ended March 31, 2000 and 1999, respectively. The only adjustment made to net income in the periods was for a foreign currency translation loss of $2.1 million and gain of $3.4 million for the three-month periods ended March 31, 2000 and 1999, respectively. 7. During the first quarter of 2000, the Company completed a property exchange with Burlington Resources Oil & Gas Company. The acquired properties were assigned the net book value of the properties transferred of approximately $45 million, resulting in no gain or loss. 8. Selected financial information about operating segments is reported below for the three-month periods ended March 31, 2000 and 1999: Three Months Ended March 31, 2000 1999 -------- -------- (In Thousands) NET OPERATING REVENUES United States $199,909 $106,892 Canada 31,641 16,224 Trinidad 20,883 16,999 India (1) - 18,833 China (1) - 2 Other 9 4 -------- -------- TOTAL $252,442 $158,954 ======== ======== OPERATING INCOME (LOSS) United States $ 59,792 $(18,514) Canada 14,126 2,342 Trinidad 7,031 10,131 India (1) - 658 China (1) - (2,367) Other (739) (1,854) -------- -------- TOTAL 80,210 (9,604) RECONCILING ITEMS Other Income, Net 17 26,938 Interest Expense, Net 14,568 14,267 -------- -------- INCOME BEFORE INCOME TAXES $ 65,659 $ 3,067 ======== ======== --------------------------------------------------------------------- (1) See Note 2. 9. As reported in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, two stockholders of the Company filed separate lawsuits purportedly on behalf of the Company against Enron Corp. and directors of the Company, alleging that Enron Corp. and directors of the Company breached their fiduciary duties of good faith and loyalty in approving the Share Exchange described in Note 2 above. The lawsuits have been consolidated and seek to temporarily and permanently enjoin the Share Exchange and seek to rescind the transaction or to receive monetary damages and costs and expenses, including reasonable attorneys' and experts' fees. The Company, Enron Corp. and directors of the Company believe the lawsuits are without merit and intend to vigorously contest them. PART I. FINANCIAL INFORMATION (Continued) ITEM 1. FINANCIAL STATEMENTS (Continued) EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS There are various other suits and claims against the Company that have arisen in the ordinary course of business. However, management does not believe these suits and claims will individually or in the aggregate have a material adverse effect on the financial condition or results of operations of the Company. The Company has been named as a potentially responsible party in certain Comprehensive Environmental Response Compensation and Liability Act proceedings. However, management does not believe that any potential assessments resulting from such proceedings will individually or in the aggregate have a materially adverse effect on the financial condition or results of operations of the Company. 10. In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133 - "Accounting for Derivative Instruments and Hedging Activities" effective for fiscal years beginning after June 15, 1999. In June 1999, the FASB issued SFAS No. 137, which delays the effective date of SFAS No. 133 for one year, to fiscal years beginning after June 15, 2000. SFAS No. 133, as amended by SFAS No. 137, cannot be applied retroactively and must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired or substantively modified after a transition date to be selected by the Company of either December 31, 1997 or December 31, 1998. The statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. The statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the statements of income and requires a company to formally document, designate and assess the effectiveness of transactions that receive hedge accounting treatment. The Company has not yet quantified the impacts of adopting SFAS No. 133 on its financial statements and has not determined the timing of adoption. Based on the Company's current level of derivative and hedging activities, the Company does not expect the impact of adoption to be material. 11. On February 14, 2000, the Company's Board of Directors declared a dividend of one preferred share purchase right (a "Right" or "Rights Agreement") for each outstanding share of common stock, par value $.01 per share. The Board of Directors has adopted this Rights Agreement to protect stockholders from coercive or otherwise unfair takeover tactics. The dividend was distributed to the stockholders of record on February 24, 2000. Each Right, expiring February 24, 2010, represents a right to buy from the Company one hundredth (1/100) of a share of Series E Junior Participating Preferred Stock ("Preferred Share") for $90, once the Rights become exercisable. This portion of a Preferred Share will give the stockholder approximately the same dividend, voting, and liquidation rights as would one share of common stock. Prior to exercise, the Right does not give its holder any dividend, voting, or liquidation rights. If issued, each one hundredth (1/100) of a Preferred Share (i) will not be redeemable; (ii) will entitle holders to quarterly dividend payments of $.01 per share, or an amount equal to the dividend paid on one share of common stock, whichever is greater; (iii) will entitle holders upon liquidation either to receive $1 per share or an amount equal to the payment made on one share of common stock, whichever is greater; (iv) will have the same voting power as one share of common stock; and (v) if shares of the Company's common stock are exchanged via merger, consolidation, or a similar transaction, will entitle holders to a per share payment equal to the payment made on one share of common stock. The Rights will not be exercisable until ten days after the public announcement that a person or group has become an acquiring person ("Acquiring Person") by obtaining beneficial ownership of 15% or more of the Company's common stock, or if earlier, ten business days (or a later date determined by the Company's Board of Directors before any person or group becomes an Acquiring Person) after a person or group begins a tender or exchange offer which, if consummated, would result in that person or group becoming an Acquiring Person. The Board of Directors may reduce the threshold at which a person or a group becomes an Acquiring Person from 15% to not less than 10% of the outstanding common stock. PART I. FINANCIAL INFORMATION (Continued) ITEM 1. FINANCIAL STATEMENTS (Concluded) EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS If a person or group becomes an Acquiring Person, all holders of Rights except the Acquiring Person may, for $90, purchase shares of our common stock with a market value of $180, based on the market price of the common stock prior to such acquisition. If the Company is later acquired in a merger or similar transaction after the Rights become exercisable, all holders of Rights except the Acquiring Person may, for $90, purchase shares of the acquiring corporation with a market value of $180 based on the market price of the acquiring corporation's stock prior to such merger. The Company's Board of Directors may redeem the Rights for $.01 per Right at any time before any person or group becomes an Acquiring Person. If the Board of Directors redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of Rights will be to receive the redemption price of $.01 per Right. The redemption price will be adjusted if the Company has a stock split or stock dividends of the Company's common stock. After a person or group becomes an Acquiring Person, but before an Acquiring Person owns 50% or more of the Company's outstanding common stock, the Board of Directors may exchange the Rights for common stock or equivalent security at an exchange ratio of one share of common stock or an equivalent security for each such Right, other than Rights held by the Acquiring Person. PART I. FINANCIAL INFORMATION (Continued) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS EOG RESOURCES, INC. The following review of operations for the three-month periods ended March 31, 2000 and 1999 should be read in conjunction with the consolidated financial statements of EOG Resources, Inc. (the "Company") and Notes thereto. Results of Operations Three Months Ended March 31, 2000 vs. Three Months Ended March 31,1999 The Company generated first quarter net income of $41 million compared to net income of $5 million for the first quarter of 1999. Net operating revenues were $252 million compared to $159 million for the first quarter of 1999. Following is an explanation of the variances causing this increase. Wellhead volume and price statistics are summarized below: 2000 1999 - ----------------------------------------------------------------------- Natural Gas Volumes (MMcf per day)(1) United States 656 677 Canada 132 104 ------ ------ North America 788 781 Trinidad 128 152 India (2) - 71 ------ ------ TOTAL 916 1,004 ====== ====== Average Natural Gas Prices ($/Mcf)(3) United States $2.47 $1.62 Canada 2.08 1.39 North America Composite 2.41 1.58 Trinidad 1.17 1.06 India (2) - 1.96 COMPOSITE 2.23 1.53 Crude Oil/Condensate Volumes (MBbl per day)(1) United States 20.7 13.1 Canada 2.3 2.7 ------ ------ North America 23.0 15.8 Trinidad 2.9 2.8 India (2) - 7.1 ------ ------ TOTAL 25.9 25.7 ====== ====== Average Crude Oil/Condensate Prices ($/Bbl)(3) United States $28.02 $11.31 Canada 26.83 11.75 North America Composite 27.90 11.39 Trinidad 27.85 9.63 India (2) - 9.79 COMPOSITE 27.89 10.76 Natural Gas Liquids Volumes (MBbl per day)(1) United States 4.3 2.6 Canada 0.8 0.4 ------ ------ TOTAL 5.1 3.0 Average Natural Gas Liquids Prices ($/Bbl) (3) United States $19.85 $7.69 Canada 13.64 5.00 COMPOSITE 18.91 7.34 Natural Gas Equivalent Volumes (MMcfe per day)(4) United States 805 771 Canada 151 123 ------ ------ North America 956 894 Trinidad 145 169 India (2) - 114 ------ ------ TOTAL 1,101 1,177 ====== ====== Total Bcfe(4)Deliveries 100 106 - --------------------------------------------------------------------------- (1) Million cubic feet per day or thousand barrels per day, as applicable. (2) See Note 2 to the Consolidated Financial Statements. (3) Dollars per thousand cubic feet or per barrel, as applicable. (4) Million cubic feet equivalent per day or billion cubic feet equivalent, as applicable. PART I. FINANCIAL INFORMATION (Continued) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued) EOG RESOURCES, INC. Wellhead revenues increased 58% to $261 million in the first quarter of 2000 compared to $165 million in the first quarter of 1999, primarily due to higher average wellhead prices worldwide for natural gas, crude oil and condensate and natural gas liquids, partially offset by a decrease in deliveries of natural gas. Average wellhead natural gas prices were up by 46%, increasing net operating revenues by $58 million. Average wellhead crude oil and condensate prices were approximately 159% higher than the comparable period in 1999, increasing net operating revenues by $40 million. First quarter 2000 wellhead natural gas deliveries were approximately 9% lower than the comparable period in 1999, decreasing net operating revenues by $11 million. The decrease in volumes is primarily due to the transfer of producing properties in the Share Exchange and decreased deliveries in Trinidad. (See Note 2 in the Notes to the Consolidated Financial Statements for a discussion of the Share Exchange.) Wellhead crude oil and condensate deliveries were 1% higher than the prior year period increasing net operating revenues by $.5 million. The increase is primarily due to increased North American crude oil production from the East Texas, South Texas, West Texas and Denver divisions, partially offset by the transfer of producing properties in the Share Exchange. Natural gas liquids prices and deliveries were 158% and 70% higher than the comparable period in 1999, increasing net operating revenues by $5 million and $1 million, respectively. Other marketing activities associated with sales and purchases of natural gas, natural gas and crude oil price hedging and trading transactions decreased net operating revenues by $9 million compared to an $8 million revenue decrease in the first quarter of 1999. This variance was primarily due to a $7 million revenue decrease in 2000 from natural gas marketing activities and hedging contracts closed in prior periods and a $2 million revenue decrease from crude oil hedging contracts (see Note 14 to the Consolidated Financial Statements in the Company's 1999 Annual Report on Form 10-K), as compared to a $9 million revenue decrease related to natural gas marketing activities and hedging activities, partially offset by a $1 million revenue increase from crude oil hedging contracts in the first quarter of 1999. Operating expenses of $172 million for the first quarter of 2000 were approximately $4 million higher than the first quarter of 1999. Depreciation, depletion and amortization ("DD&A") expense increased approximately $3 million compared to the prior year period primarily due to the Company's decision to defer the development of the Big Piney Madison deep Paleozoic formation methane reserves in Wyoming in the fourth quarter of 1999, partially offset by the effects of the Share Exchange and decreased production volumes in Trinidad. General and administrative ("G&A") expense was $7 million lower than the prior year period primarily due to the effects of the Share Exchange. Exploration expenses decreased approximately $4 million compared to the same period last year due primarily to decreased exploration activities and as a result of the transfer of certain properties in the Share Exchange. Dry hole costs were $5 million higher than the first quarter of 1999. Taxes other than income were also $5 million higher due to increased wellhead revenues in North America and Trinidad. The per unit operating costs of the Company for lease and well, DD&A, G&A, interest expense, and taxes other than income averaged $1.60 per Mcfe during the first quarter of 2000 compared to $1.49 per Mcfe during the first quarter of 1999. The increase is primarily due to a higher per unit rate of DD&A, lease and well, interest expense and taxes other than income partially offset by a lower per unit rate of G&A. Other income, net for the first quarter of 1999 included a $28 million pretax gain on the sale of 1.6 million options owned by the Company to purchase Enron Corp. common stock. Income tax provision for the first quarter of 2000 was $24 million compared to a $2 million income tax benefit for the comparable period of 1999. The increase in income taxes was primarily due to higher pre- tax income. The first quarter 2000 tax provision was computed using the estimated annual effective tax rate. The first quarter 1999 tax provision was calculated using the actual effective tax rate for the quarter rather than the estimated annual effective tax rate. A reliable estimate of the annual effective tax rate could not be made given the impact oil and gas price volatility had on the estimate for that year. PART I. FINANCIAL INFORMATION (Continued) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued) EOG RESOURCES, INC. Capital Resources and Liquidity The Company's primary sources of cash during the three months ended March 31, 2000 included funds generated from operations and proceeds from sales of reserves and related assets. Primary cash outflows included funds used in operations, exploration and development expenditures, repayments of debt, dividends paid to Company shareholders, and common stock repurchases. Net operating cash flows of $175 million for the first three months of 2000 increased approximately $106 million as compared to the first three months of 1999 primarily reflecting higher operating revenues and lower cash operating expenses. Net investing cash outflows of approximately $82 million for the first three months of 2000 decreased by $3 million versus the comparable prior year period due primarily to reduced exploration and development expenditures and higher proceeds from sales of reserves and related assets, partially offset by proceeds from sale of other assets in the first quarter of 1999. Changes in Components of Working Capital Associated with Investing Activities included changes in accounts payable associated with the accrual of exploration and development expenditures and changes in inventories which represent materials and equipment used in drilling and related activities. Exploration and development expenditures for the first three months of 2000 and 1999 are as follows (in millions): 2000 1999 ------ ------ United States $ 77 $ 83 Canada 10 12 ------ ------ North America 87 95 Trinidad 9 1 India (1) - 10 China (1) - 2 Other 1 1 ------ ------ TOTAL $ 97 $ 109 ====== ====== - ------------------------------------------------------------------------ (1) See Note 2 to the Consolidated Financial Statements. Exploration and development expenditures of $97 million for the first three months of 2000 were $12 million lower than the prior year period due primarily to the acquisition of producing properties in the Big Piney area in the first quarter of 1999 and the Share Exchange, partially offset by the increased spending on Trinidad exploratory activities. The level of exploration and development expenditures will vary in future periods depending on energy market conditions and other related economic factors. The Company has significant flexibility with respect to financing alternatives and the ability to adjust its exploration and development expenditure budget as circumstances warrant. There are no material continuing commitments associated with expenditure plans. Cash used by financing activities was $84 million for the first three months of 2000 versus a cash inflow of $23 million for the comparable prior year period. Financing activities for 2000 included repayment of debt of $49 million, repurchases of the Company's common stock of $30 million and cash dividend payment of $6 million. On April 18, 2000, the Company announced a 17% increase in the annual dividend rate from $.12 per share to $.14 per share beginning with dividends payable after April 28, 2000. Based upon existing economic and market conditions, management believes net operating cash flow and available financing alternatives will be sufficient to fund net investing and other cash requirements of the Company for the foreseeable future. PART I. FINANCIAL INFORMATION - (Concluded) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Concluded) EOG RESOURCES, INC. Information Regarding Forward Looking Statements This Quarterly Report on Form 10-Q includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts, including, among others, statements regarding the Company's future financial position, business strategy, budgets, reserve information, projected levels of production, projected costs and plans and objectives of management for future operations, are forward-looking statements. The Company typically uses words such as "expect," "anticipate," "estimate," "strategy," "intend," "plan" and "believe" or the negative of those terms or other variations of them or by comparable terminology to identify its forward-looking statements. In particular, statements, express or implied, concerning future operating results or the ability to generate income or cash flows are forward-looking statements. Although the Company believes its expectations reflected in forward- looking statements are based on reasonable assumptions, no assurance can be given that these expectations will be achieved. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include, among others: timing and extent of changes in commodity prices for crude oil, natural gas and related products and interest rates; extent of the Company's success in discovering, developing, marketing and producing reserves and in acquiring oil and gas properties; political developments around the world; and financial market conditions. In light of these risks, uncertainties and assumptions, the events anticipated by the Company's forward-looking statements might not occur. The Company undertakes no obligations to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise. PART II. OTHER INFORMATION EOG RESOURCES, INC. ITEM 1. Legal Proceedings See Part 1, Item 1, Note 9 to Consolidated Financial Statements, which is incorporated herein by reference. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K Current Report on Form 8-K filed on February 18, 2000, to report the Adoption of Rights Plan and the Amendment to By-laws on February 14, 2000 in Item 5 - Other Events. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EOG RESOURCES, INC. (Registrant) Date: May 10, 2000 By /S/ T. K. DRIGGERS T. K. Driggers Vice President and Controller (Principal Accounting Officer) Exhibit 12 EOG RESOURCES, INC. Computation of Ratio of Earnings to Fixed Charges (In Thousands) (Unaudited) Three Months Ended March 31, Year Ended December 31, - ------------------------------------------------------------------------------------------------------ 2000 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------ EARNINGS AVAILABLE FOR FIXED CHARGES: Net Income $ 41,490 $569,094 $ 56,171 $121,970 $140,008 $142,118 Less: Capitalized Interest Expense (1,805) (10,594) (12,711) (13,706) (9,136) (6,490) Add: Fixed Charges 16,373 72,413 61,290 41,423 21,997 18,414 Income Tax Provision 24,169 (1,382) 4,111 41,500 50,954 41,936 -------- -------- -------- -------- -------- -------- EARNINGS AVAILABLE $ 80,227 $629,531 $108,861 $191,187 $203,823 $195,978 ======== ======== ======== ======== ======== ======== FIXED CHARGES: Interest Expense $ 14,568 $ 61,819 $ 48,463 $ 27,369 $ 12,370 $ 11,310 Capitalized Interest 1,805 10,594 12,711 13,706 9,136 6,490 Rental Expense Representative of Interest Factor - - 116 348 491 614 -------- -------- -------- -------- -------- -------- TOTAL FIXED CHARGES 16,373 72,413 61,290 41,423 21,997 18,414 Preferred Dividends 2,654 535 - - - - -------- -------- -------- -------- -------- -------- TOTAL FIXED CHARGES AND PREFERRED DIVIDENDS $ 19,027 $ 72,948 $ 61,290 $ 41,423 $ 21,997 $ 18,414 ======== ======== ======== ======== ======== ======== RATIO OF EARNINGS TO FIXED CHARGES 4.90 8.69 1.78 4.62 9.27 10.64 RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS 4.22 8.63 1.78 4.62 9.27 10.64
EX-27 2
5 3-MOS DEC-31-2000 MAR-31-2000 33,358 0 180,039 0 16,954 237,092 4,625,619 (2,330,808) 2,616,085 235,715 0 0 147,138 201,247 785,511 2,616,085 251,813 252,442 0 172,232 (17) 0 14,568 65,659 24,169 41,490 0 0 0 41,490 0.33 0.33
-----END PRIVACY-ENHANCED MESSAGE-----