-----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, KSYZnMYKxDlDSI3e9xuTWxszb9CdReTR3PA/GodO06vlbJ5syMzopCZpWzuEyPp/ Y1jHqsgGK4j45/iWXCiBpA== /in/edgar/work/20000808/0000821189-00-000010/0000821189-00-000010.txt : 20000921 0000821189-00-000010.hdr.sgml : 20000921 ACCESSION NUMBER: 0000821189-00-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EOG RESOURCES INC CENTRAL INDEX KEY: 0000821189 STANDARD INDUSTRIAL CLASSIFICATION: [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: 688157 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 0001.txt 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 June 30, 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 jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 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 August 1, 2000. Title of each class Number of shares Common Stock, $.01 par value 116,226,059 EOG RESOURCES, INC. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Page No. ITEM 1. Financial Statements Consolidated Statements of Income - Three Months Ended June 30, 2000 and 1999 And Six Months Ended June 30, 2000 and 1999.......... 3 Consolidated Balance Sheets - June 30, 2000 and December 31, 1999..... 4 Consolidated Statements of Cash Flows - Six Months Ended June 30, 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............................................ 16 ITEM 4. Submission of Matters to a Vote of Security Holders.......... 16 ITEM 6. Exhibits and Reports on Form 8-K............................. 16 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 Six Months Ended June 30, June 30, -------------------- ------------------- 2000 1999 2000 1999 -------- --------- -------- --------- NET OPERATING REVENUES Natural Gas $238,260 $155,759 $417,543 $285,869 Crude Oil, Condensate and Natural Gas Liquids 76,898 36,963 149,428 64,516 Gains (Losses) on Sales of Reserves and Related Assets and Other, Net 984 (5,527) 1,613 (4,236) ------- ------- ------- ------- TOTAL 316,142 187,195 568,584 346,149 OPERATING EXPENSES Lease and Well 25,638 23,538 51,923 47,607 Exploration Costs 13,204 10,302 26,149 27,091 Dry Hole Costs 3,290 2,130 9,051 2,475 Impairment of Unproved Oil and Gas Properties 7,925 7,984 15,882 15,987 Depreciation, Depletion and Amortization 90,149 88,781 174,731 170,803 General and Administrative 16,027 26,384 32,314 50,019 Taxes Other Than Income 20,674 12,381 39,089 26,076 ------- ------- ------- ------- TOTAL 176,907 171,500 349,139 340,058 ------- ------- ------- ------- OTHER INCOME, NET 763 31,352 780 58,290 ------- ------- ------- ------- INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES 139,998 47,047 220,225 64,381 INTEREST EXPENSE, NET 15,581 14,774 30,149 29,041 ------- ------- ------- ------- INCOME BEFORE INCOME TAXES 124,417 32,273 190,076 35,340 INCOME TAX PROVISION 46,900 11,635 71,069 9,636 ------- ------- ------- ------- NET INCOME 77,517 20,638 119,007 25,704 PREFERRED STOCK DIVIDENDS (2,860) - (5,514) - ------- ------- ------- ------- NET INCOME AVAILABLE TO COMMON $ 74,657 $ 20,638 $113,493 $ 25,704 ======= ======= ======= ======= NET INCOME PER SHARE OF COMMON STOCK Basic $ 0.64 $ 0.13 $ 0.97 $ 0.17 ======= ======= ======= ======= Diluted $ 0.63 $ 0.13 $ 0.96 $ 0.17 ======= ======= ======= ======= AVERAGE NUMBER OF COMMON SHARES Basic 116,666 153,485 117,247 153,439 ======= ======= ======= ======= Diluted 119,177 154,131 118,757 153,880 ======= ======= ======= ======= 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) June 30, December 31, 2000 1999 ------------ ------------ (Unaudited) ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 11,714 $ 24,836 Accounts Receivable 225,598 148,189 Inventories 17,364 18,816 Other 11,073 8,660 ---------- ---------- TOTAL 265,749 200,501 OIL AND GAS PROPERTIES (SUCCESSFUL EFFORTS METHOD) 4,709,569 4,602,740 Less: Accumulated Depreciation, Depletion and Amortization (2,417,656) (2,267,812) ---------- ---------- Net Oil and Gas Properties 2,291,913 2,334,928 OTHER ASSETS 94,082 75,364 ---------- ---------- TOTAL ASSETS $ 2,651,744 $ 2,610,793 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 167,040 $ 172,780 Accrued Taxes Payable 16,747 19,648 Dividends Payable 4,616 4,227 Other 18,097 21,963 ---------- ---------- TOTAL 206,500 218,618 LONG-TERM DEBT 949,550 990,306 OTHER LIABILITIES 66,616 46,306 DEFERRED INCOME TAXES 265,923 225,952 SHAREHOLDERS' EQUITY Preferred Stock, $.01 Par, 10,000,000 Shares Authorized: Series A, 100,000 Shares Issued, Cumulatve, $100,000,000 Liquidation Preference 97,874 97,909 Series C, 500 Shares Issued, Cumulative, $50,000,000 Liquidation Preference 49,291 49,281 Common Stock, $.01 Par, 320,000,000 Shares Authorized; 124,730,000 Shares Issued 201,247 201,247 Additional Paid in Capital 3,800 - Unearned Compensation (4,338) (1,618) Cumulative Foreign Currency Translation Adjustment (27,341) (19,810) Retained Earnings 1,036,745 930,938 Common Stock Held in Treasury, 8,117,853 shares at June 30, 2000 and 5,625,446 shares at December 31, 1999 (194,123) (128,336) ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 1,163,155 1,129,611 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,651,744 $ 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) Six Months Ended June 30, --------------------- 2000 1999 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Reconciliation of Net Income to Net Operating Cash Inflows: Net Income $ 119,007 $ 25,704 Items Not Requiring Cash Depreciation, Depletion and Amortization 174,731 170,803 Impairment of Unproved Oil and Gas Properties 15,882 15,987 Deferred Income Taxes 40,714 4,317 Other, Net 2,459 410 Exploration Costs 26,149 27,091 Dry Hole Costs 9,051 2,475 Losses on Sales of Reserves and Related Assets and Other, Net 1,650 6,723 Gains on Sales of Other Assets - (59,647) Tax Benefits from Stock Options Exercised 11,593 238 Other, Net (5,336) (13,322) Changes in Components of Working Capital and Other Liabilities Accounts Receivable (77,406) 19,226 Inventories 1,452 4,406 Accounts Payable 5,624 (46,285) Accrued Taxes Payable (2,901) (3,622) Other Liabilities 5,570 (3,909) Other, Net (6,279) (11,234) Changes in Components of Working Capital Associated with Investing and Financing Activities 5,633 16,019 -------- -------- NET OPERATING CASH INFLOWS 327,593 155,380 INVESTING CASH FLOWS Additions to Oil and Gas Properties (179,613) (179,749) Exploration Costs (26,149) (27,091) Dry Hole Costs (9,051) (2,475) Proceeds from Sales of Reserves and Related Assets 21,961 2,756 Proceeds from Sale of Other Assets - 83,015 Changes in Components of Working Capital Associated with Investing Activities (6,180) (15,811) Other, Net (11,669) (1,201) -------- -------- NET INVESTING CASH OUTFLOWS (210,701) (140,556) FINANCING CASH FLOWS Long-Term Debt Trade (40,756) 131,104 Affiliate - (134,000) Dividends Paid (12,517) (9,203) Treasury Stock Purchased (134,348) - Proceeds from Sales of Treasury Stock 56,800 2,711 Other, Net 807 (328) -------- -------- NET FINANCING CASH OUTFLOWS (130,014) (9,716) -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,122) 5,108 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 24,836 6,303 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,714 $ 11,411 ======== ======== 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 and Crude Oil, Condensate and Natural Gas Liquids. 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 for the three-month and six-month periods ended June 30, 2000 and 1999, are net of costs of natural gas purchased for sale related to natural gas marketing activities of $11.6 million, $12.8 million, $24.1 million and $34.3 million, respectively. 4. The income tax provisions for the three-month and six-month periods ended June 30, 2000 were calculated using the annual effective rate method. The income tax provision for the six-month period ended June 30, 1999 was calculated using the annual effective rate method. The income tax provision for the three-month period ended June 30, 1999 was calculated as the difference between the six-month period ended June 30, 1999 provision and the three-month period ended March 31, 1999 provision, which was calculated using the actual effective rate for that period. PART I. FINANCIAL INFORMATION (Continued) ITEM 1. FINANCIAL STATEMENTS (Continued) EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. The following table sets forth the computation of basic and diluted earnings from net income available to common (in thousands, except per share amounts): Quarter Ended Six Months Ended June 30, June 30, ------------------ ------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Numerator for basic and diluted earnings per share - Net income available to common $ 74,657 $ 20,638 $113,493 $ 25,704 ======= ======= ======= ======= Denominator for basic earnings per share - Weighted average shares 116,666 153,485 117,247 153,439 Potential dilutive common shares - Stock options 2,397 521 1,413 317 Restricted stock 55 111 52 108 Phantom stock 59 14 45 16 ------- ------- ------- ------- Denominator for diluted earnings per share - Adjusted weighted average shares 119,177 154,131 118,757 153,880 ======= ======= ======= ======= Net income per share of common stock Basic $ 0.64 $ 0.13 $ 0.97 $ 0.17 ======= ======= ======= ======= Diluted $ 0.63 $ 0.13 $ 0.96 $ 0.17 ======= ======= ======= ======= 6. The Company's total comprehensive income was $72.1 million, $26.9 million, $111.5 million and $35.4 million for the three-month and six- month periods ended June 30, 2000 and 1999, respectively. The only adjustment made to net income in the periods was for a foreign currency translation loss of $5.4 million, gain of $6.3 million, loss of $7.5 million and gain of $9.7 million for the three-month and six-month periods ended June 30, 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. During the first and second quarters of 1999, the Company sold its 3.2 million options to purchase common stock of Enron Corp. having a strike price of $39.1875 per share. In the first quarter of 1999, the Company sold 1.6 million options at an average price of $24.81 ($64.00 Enron Corp. stock price equivalent), realizing net proceeds of $40 million and a gain of $28 million pre-tax ($18 million after-tax). Early in the second quarter of 1999, the Company sold the remaining 1.6 million options at an average price of $27.07 ($66.26 Enron Corp. stock price equivalent), realizing net proceeds of $43 million and a gain of $32 million pre-tax ($21 million after-tax). PART I. FINANCIAL INFORMATION (Continued) ITEM 1. FINANCIAL STATEMENTS (Continued) EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. Selected financial information about operating segments is reported below for the three-month and six-month periods ended June 30, 2000 and 1999 (in thousands): Three Months Ended Six Months Ended June 30, June 30, -------------------- ------------------ 2000 1999 2000 1999 -------- -------- -------- -------- NET OPERATING REVENUES United States $257,610 $135,377 $457,519 $242,269 Canada 39,647 21,086 71,288 37,310 Trinidad 18,875 15,690 39,758 32,689 India (1) - 21,432 - 40,265 China (1) - 2 - 4 Other 10 (6,392) 19 (6,388) ------- ------- ------- ------- TOTAL $316,142 $187,195 $568,584 $346,149 ======= ======= ======= ======= OPERATING INCOME (LOSS) United States $110,879 $ 1,904 $170,671 $(16,610) Canada 19,315 6,505 33,441 8,847 Trinidad 10,401 9,506 17,432 19,637 India (1) - 12,324 - 15,830 China (1) - (2,631) - (4,998) Other (1,360) (11,913) (2,099) (16,615) ------- ------- ------- ------- TOTAL 139,235 15,695 219,445 6,091 RECONCILING ITEMS Other Income, Net 763 31,352 780 58,290 Interest Expense, Net 15,581 14,774 30,149 29,041 ------- ------- ------- ------- INCOME BEFORE INCOME TAXES $124,417 $ 32,273 $190,076 $ 35,340 ======= ======= ======= ======= (1) See Note 2. 10. 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 rescind the Share Exchange 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. 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. 11. 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. In June 2000, the FASB issued SFAS No. 138, which amends the accounting and reporting standards of SFAS No. 133 for certain derivative instruments and certain hedging activities. SFAS No. 133, as amended by SFAS No. 137 and No. 138, 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. PART I. FINANCIAL INFORMATION (Continued) ITEM 1. FINANCIAL STATEMENTS (Concluded) EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 12. During the first half of 2000, the Company repurchased 5.6 million shares of common stock, primarily to reduce the number of shares of stock outstanding and to manage the dilution resulting from shares issued or anticipated to be issued under the Company's employee stock plans. To supplement its share repurchase program, the Company entered into a series of equity derivative transactions in the second quarter. As of June 30, the Company had purchased the right, but not the obligation, to buy up to 1 million shares of the Company's stock at a price of $20.00 per share in April 2001. Also, as of June 30, 2000 the Company had sold put options obligating the Company to purchase up to 1.5 million shares of its common stock, with such options expiring from September 2000 to April 2001 at prices ranging from $15.00 to $18.00. Additionally, the Company has sold to a counterparty the right to purchase up to 2 million shares of EOG's common stock at a price of $29.60 per share, which right expires in April 2001. Settlement alternatives under all circumstances are at the option of the Company and include physical share, net share and net cash settlement. These transactions are accounted for as equity transactions with premiums received recorded to Additional Paid In Capital in the consolidated balance sheets. The Company will assess the status of its share repurchase program at the time these various options expire and will determine at that time whether to settle these options in shares or in cash. 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 and six-month periods ended June 30, 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 June 30, 2000 vs. Three Months Ended June 30, 1999 The Company generated second quarter net income available to common of $75 million compared to $21 million for the second quarter of 1999. Net operating revenues were $316 million compared to $187 million for the second quarter of 1999. Following is an explanation of the variances causing this increase. Wellhead volume and price statistics are summarized below: 2000 1999 ------ ------ Natural Gas Volumes (MMcf per day)(1) United States 633 642 Canada 131 112 ----- ----- North America 764 754 Trinidad 116 130 India (2) - 75 ----- ----- TOTAL 880 959 ===== ===== Average Natural Gas Prices ($/Mcf)(3) United States $ 3.39 $ 1.99 Canada 2.79 1.63 North America Composite 3.29 1.93 Trinidad 1.17 1.07 India (2) - 1.95 COMPOSITE 3.01 1.82 Crude Oil/Condensate Volumes (MBbl per day)(1) United States 22.8 13.1 Canada 2.3 2.7 ----- ----- North America 25.1 15.8 Trinidad 2.5 2.3 India (2) - 6.4 ----- ----- TOTAL 27.6 24.5 ===== ===== Average Crude Oil/Condensate Prices ($/Bbl)(3) United States $28.29 $16.48 Canada 25.66 14.26 North America Composite 28.05 16.10 Trinidad 28.54 14.46 India (2) - 14.03 COMPOSITE 28.09 15.41 Natural Gas Liquids Volumes (MBbl per day)(1) United States 4.3 2.8 Canada 0.8 1.0 ----- ----- TOTAL 5.1 3.8 Average Natural Gas Liquids Prices ($/Bbl) (3) United States $17.96 $ 8.57 Canada 15.24 6.15 COMPOSITE 17.56 7.95 Natural Gas Equivalent Volumes (MMcfe per day)(4) United States 795 737 Canada 150 135 ----- ----- North America 945 872 Trinidad 131 144 India (2) - 113 ----- ----- TOTAL 1,076 1,129 ===== ===== Total Bcfe(4)Deliveries 98 103 (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 63% to $320 million in the second quarter of 2000 compared to $196 million in the second quarter of 1999. Average wellhead natural gas prices were up by 65%, increasing net operating revenues by $95 million. Average wellhead crude oil and condensate prices were approximately 82% higher than the comparable period in 1999, increasing net operating revenues by $32 million. Second quarter 2000 wellhead natural gas deliveries were approximately 8% lower than the comparable period in 1999, decreasing net operating revenues by $13 million. The decrease in volumes is primarily due to the transfer of producing properties in the Share Exchange and decreased deliveries in Trinidad, partially offset by increased deliveries in North America. (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 13% higher than the prior year period increasing net operating revenues by $4 million. The increase is primarily due to increased North American crude oil production from the East Texas, South Texas, West Texas and Wyoming areas, partially offset by the transfer of producing properties in the Share Exchange. Natural gas liquids prices and deliveries were 121% and 34% higher than the comparable period in 1999, increasing net operating revenues by $4 million and $1 million, respectively. Gain (losses) on sales of reserves and related assets and other, net totaled a $1 million gain in the second quarter of 2000 compared to a $6 million loss in the comparable period of 1999. Included in 1999 was a $6 million loss related to the anticipated disposition of certain international assets. Operating expenses of $177 million for the second quarter of 2000 were approximately $5 million higher than the second quarter of 1999. Taxes other than income were $8 million higher primarily due to increased wellhead revenues in North America and Trinidad. Lease and well expenses were $2 million higher than the prior year period primarily due to the increase in natural gas and crude oil and condensate deliveries in North America, partially offset by the transfer of certain properties in the Share Exchange. Exploration and dry hole costs were $4 million higher than the second quarter of 1999 primarily due to increased exploratory drilling and other exploration activities. General and administrative expense ("G&A") decreased approximately $10 million compared to the prior year period primarily due to the effects of the Share Exchange, costs incurred related to the potential sale of the Company and personnel expenses in the prior year. The per unit operating costs of the Company for lease and well, depreciation, depletion & amortization ("DD&A"), G&A, interest expense, and taxes other than income averaged $1.71 per Mcfe during the second quarter of 2000 compared to $1.61 per Mcfe during the second 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 second quarter of 1999 included a $32 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 second quarter of 2000 increased $35 million as compared to the comparable period of 1999 primarily due to higher pre-tax income. PART I. FINANCIAL INFORMATION (Continued) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS EOG RESOURCES, INC. Results of Operations Six Months Ended June 30, 2000 vs. Six Months Ended June 30, 1999 In the first half of 2000, the Company generated net income available to common of $113 million compared to $26 million for the first half of 1999. Net operating revenues for the first half of 2000 were $569 million as compared to $346 million for the first half of 1999. Wellhead volume and price statistics are summarized below: 2000 1999 ------ ------ Natural Gas Volumes (MMcf per day) United States 644 659 Canada 132 108 ----- ----- North America 776 767 Trinidad 122 141 India (1) - 74 ----- ----- TOTAL 898 982 ===== ===== Average Natural Gas Prices ($/Mcf) United States $ 2.92 $ 1.80 Canada 2.43 1.51 North America Composite 2.84 1.76 Trinidad 1.17 1.07 India (1) - 1.95 COMPOSITE 2.61 1.67 Crude Oil/Condensate Volumes (MBbl per day) United States 21.7 13.1 Canada 2.3 2.7 ----- ----- North America 24.0 15.8 Trinidad 2.8 2.6 India (1) - 6.7 ----- ----- TOTAL 26.8 25.1 ===== ===== Average Crude Oil/Condensate Prices ($/Bbl) United States $28.16 $13.91 Canada 26.24 13.03 North America Composite 27.98 13.76 Trinidad 28.17 11.83 India (1) - 11.80 COMPOSITE 28.00 13.04 Natural Gas Liquids Volumes (MBbl per day) United States 4.3 2.7 Canada 0.8 0.7 ----- ----- TOTAL 5.1 3.4 Average Natural Gas Liquids Prices ($/Bbl) United States $18.90 $ 8.15 Canada 14.44 5.83 COMPOSITE 18.23 7.68 Natural Gas Equivalent Volumes (MMcfe per day) United States 801 754 Canada 150 129 ----- ----- North America 951 883 Trinidad 138 156 India (1) - 114 ----- ----- TOTAL 1,089 1,153 ===== ===== Total Bcfe Deliveries 198 209 (1) See Note 2 to the Consolidated Financial Statements. 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 approximately 61% to $580 million in the first half of 2000 compared to $361 million in the first half of 1999. Average wellhead natural gas prices for the first half of 2000 were approximately 56% higher than the comparable period of 1999 increasing net operating revenues by approximately $154 million. Average wellhead crude oil and condensate prices were up by 115%, increasing net operating revenues by $73 million. First half 2000 wellhead natural gas deliveries were approximately 9% lower than the comparable period in 1999 decreasing net operating revenues by $24 million. The decrease in volumes is primarily due to the transfer of producing properties in the Share Exchange and decreased deliveries in Trinidad, partially offset by increased deliveries in North America. Wellhead crude oil and condensate deliveries were 7% higher than the prior year period increasing net operating revenues by $4 million. The increase is primarily due to increased North America crude oil production from the East Texas, South Texas, West Texas and Wyoming areas, partially offset by the transfer of producing properties in the Share Exchange. Natural gas liquids prices and deliveries were 137% and 50% higher than the comparable period in 1999, increasing net operating revenues by $10 million and $2 million, respectively. Other marketing activities associated with sales and purchases of natural gas, and natural gas and crude oil price hedging and trading transactions decreased net operating revenues by $13 million compared to a decrease of $11 million in the first half of 1999. This decrease in 2000 was primarily due to a $9 million revenue decrease from natural gas marketing activities and hedging contracts closed in prior periods and a $4 million revenue decrease from crude oil hedging contracts. The $11 million revenue decrease in 1999 primarily related to natural gas marketing activities and hedging contracts closed in prior periods. Gains (losses) on sales of reserves and related assets and other, net totaled a gain of $2 million in the first half of 2000 compared to a net loss of $4 million in the comparable prior year period. The difference is due primarily to a $6 million loss related to the anticipated disposition of certain international assets in the first half of 1999. Operating expenses of $349 million for the first half of 2000 were approximately $9 million higher than the comparable period in 1999. Taxes other than income were $13 million higher primarily due to increased wellhead revenues in North America and Trinidad. Lease and well expenses were $4 million higher than the prior year period primarily due to the increase in natural gas, crude oil and condensate deliveries in North America, partially offset by the effects of the Share Exchange. Dry hole costs were $7 million higher than the first half of 1999. DD&A increased approximately $4 million compared to the prior year period primarily due to increased production volumes in North America, impairment in the Canada operating segment in the second quarter of 2000 and 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 a charge recorded in second quarter of 1999 pursuant to a change in strategy related to the pursuit of certain offshore operations and the effects of the Share Exchange. G&A was $18 million lower than the prior year period primarily due to the effects of the Share Exchange, costs incurred related to the potential sale of the Company and personnel expenses in the prior year. The per unit operating costs of the Company for lease and well, DD&A, G&A, interest expense and taxes other than income averaged $1.66 per Mcfe during the first half of 2000 compared to $1.55 per Mcfe in 1999. This increase is primarily due to a higher per unit rate of DD&A, taxes other than income, lease and well, and interest, partially offset by a lower per unit rate of G&A expense. Other income, net for the first half of 1999 included a $59.6 million pre-tax gain on the sale of 3.2 million options owned by the Company to purchase Enron Corp. common stock (see Note 8 to the Consolidated Financial Statements). 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 six months ended June 30, 2000 included funds generated from operations, proceeds from sales of treasury stock 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 $328 million for the first six months of 2000 increased approximately $172 million as compared to the first six months of 1999 primarily reflecting higher operating revenues, partially offset by higher cash operating expenses. Net investing cash outflows of approximately $211 million for the first six months of 2000 increased by $70 million versus the comparable prior year period due primarily to increased exploration and development expenditures and equity investments in the first six months of 2000 and the non-recurrence of proceeds from sales of Enron Corp. options in the first half of 1999, partially offset by increased proceeds from sales of reserves and related assets. 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 six months of 2000 and 1999 are as follows (in millions): 2000 1999 ------ ------ United States $ 185 $ 160 Canada 19 19 ---- ---- North America 204 179 Trinidad 18 2 India (1) - 19 China (1) - 6 Other 2 3 ---- ---- TOTAL $ 224 $ 209 ==== ==== (1) See Note 2 to the Consolidated Financial Statements. Exploration and development expenditures of $224 million for the first six months of 2000 were $15 million higher than the prior year period due primarily to increased exploration and development activities in the United States and Trinidad and equity investments in the CNC ammonia plant in Trinidad, partially offset by the Share Exchange and the acquisition of producing properties in the Big Piney area in the first quarter of 1999. 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 $130 million for the first six months of 2000 versus $10 million for the comparable prior year period. Financing activities for 2000 included repayment of debt of $41 million, repurchases of the Company's common stock of $134 million, proceeds from sales of treasury stock of $57 million and cash dividend payments of $13 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. PART I. FINANCIAL INFORMATION - (Concluded) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Concluded) EOG RESOURCES, INC. During the first half of 2000, the Company repurchased 5.6 million shares of common stock, primarily to reduce the number of shares of stock outstanding and to manage the dilution resulting from shares issued or anticipated to be issued under the Company's employee stock plans. To supplement its share repurchase program, the Company entered into a series of equity derivative transactions in the second quarter. As of June 30, the Company had purchased the right, but not the obligation, to buy up to 1 million shares of the Company's stock at a price of $20.00 per share in April 2001. Also, as of June 30, 2000 the Company had sold put options obligating the Company to purchase up to 1.5 million shares of its common stock, with such options expiring from September 2000 to April 2001 at prices ranging from $15.00 to $18.00. Additionally, the Company has sold to a counterparty the right to purchase up to 2 million shares of EOG's common stock at a price of $29.60 per share, which right expires in April 2001. Settlement alternatives under all circumstances are at the option of the Company and include physical share, net share and net cash settlement. These transactions are accounted for as equity transactions with premiums received recorded to Additional Paid In Capital in the consolidated balance sheets. The Company will assess the status of its share repurchase program at the time these various options expire and will determine at that time whether to settle these options in shares or in cash. 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. 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 10 to Consolidated Financial Statements, which is incorporated herein by reference. ITEM 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders of EOG Resources, Inc. was held on May 9, 2000, in Houston, Texas, for the purpose of electing a board of directors and ratifying the appointment of auditors. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934, and there was no solicitation in opposition to management's solicitations. (a) Each of the directors nominated by the Board and listed in the proxy statement was elected with votes as follows: Shares Shares Nominee For Withheld --------------------- ----------- --------- Fred C. Ackman 104,577,697 2,860,673 Mark G. Papa 104,586,207 2,852,163 Edward Randall, III 104,577,155 2,861,215 Edmund P. Segner, III 104,569,498 2,868,872 Frank G. Wisner 104,582,634 2,855,736 (b) The appointment of Arthur Andersen LLP, independent public accountants, as auditors for the year ending December 31, 2000 was approved by the following vote: 107,344,777 shares for; 42,459 shares against; and 51,134 shares abstaining. 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 There were no reports on Form 8-K filed for the period ended June 30, 2000. 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: August 8, 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 and Preferred Dividends (In Thousands) (Unaudited) Six Months Ended June 30, Year Ended December 31, - ----------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 1995 - ----------------------------------------------------------------------------------------------------------------- EARNINGS AVAILABLE FOR FIXED CHARGES: Net Income $119,007 $569,094 $ 56,171 $121,970 $140,008 $142,118 Less: Capitalized Interest Expense (3,405) (10,594) (12,711) (13,706) (9,136) (6,490) Add: Fixed Charges 33,554 72,413 61,290 41,423 21,997 18,414 Income Tax Provision (Benefit) 71,069 (1,382) 4,111 41,500 50,954 41,936 ------- ------- ------- ------- ------- ------- EARNINGS AVAILABLE $220,225 $629,531 $108,861 $191,187 $203,823 $195,978 ======= ======= ======= ======= ======= ======= FIXED CHARGES: Interest Expense $ 30,149 $ 61,819 $ 48,463 $ 27,369 $ 12,370 $ 11,310 Capitalized Interest 3,405 10,594 12,711 13,706 9,136 6,490 Rental Expense Representative of Interest Factor - - 116 348 491 614 ------- ------- ------- ------- ------- ------- TOTAL FIXED CHARGES 33,554 72,413 61,290 41,423 21,997 18,414 Preferred Dividends 8,807 660 - - - - ------- ------- ------- ------- ------- ------- TOTAL FIXED CHARGES AND PREFERRED DIVIDENDS $ 42,361 $ 73,073 $ 61,290 $ 41,423 $ 21,997 $ 18,414 ======= ======= ======= ======= ======= ======= RATIO OF EARNINGS TO FIXED CHARGES 6.56 8.69 1.78 4.62 9.27 10.64 RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS 5.20 8.62 1.78 4.62 9.27 10.64
EX-27 2 0002.txt
5 6-MOS DEC-31-2000 JUN-30-2000 11,714 0 225,598 0 17,364 265,749 4,709,569 (2,417,656) 2,651,744 206,500 0 0 147,165 201,247 814,743 2,651,744 566,971 568,584 0 349,139 (780) 0 30,149 190,076 71,069 119,007 0 0 0 119,007 0.97 0.96 BASIC
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