-----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, HLORV/iPGqxxjLfa3eA6pxb972gMi4n5Cj47LZIh9nmPTAhUVRP+ulbsXIPrCVNY H5bQkop3SMiZPX4hXM8yFA== /in/edgar/work/0000821189-00-500007/0000821189-00-500007.txt : 20001102 0000821189-00-500007.hdr.sgml : 20001102 ACCESSION NUMBER: 0000821189-00-500007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001031 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: 750193 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 qtr310q.txt 3RD QUARTER FORM 10Q 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 September 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 (I.R.S. jurisdiction Employer of incorporation or Identification No.) 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 October 24, 2000. Title of each class Number of shares Common Stock, $.01 par value 116,860,229 EOG RESOURCES, INC. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Page No. ITEM 1. Financial Statements Consolidated Statements of Income - Three Months Ended September 30, 2000 and 1999 And Nine Months Ended September 30, 2000 and 1999 ......... 3 Consolidated Balance Sheets - September 30, 2000 and December 31, 1999 .................................................................... 4 Consolidated Statements of Cash Flows - Nine Months Ended September 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 6. Exhibits and Reports on Form 8-K ................................ 16
2 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 Nine Months Ended September 30, September 30, ------------------ ------------------- 2000 1999 2000 1999 NET OPERATING REVENUES -------- -------- --------- -------- Natural Gas $301,842 $179,972 $719,385 $465,841 Crude Oil, Condensate and Natural Gas Liquids 87,823 44,024 237,251 108,540 Gains(Losses)on Sales of Reserves and Related Assets and Other, Net 4,049 2,784 5,662 (1,452) ------- ------- ------- ------- TOTAL 393,714 226,780 962,298 572,929 OPERATING EXPENSES Lease and Well 26,867 23,932 78,790 71,539 Exploration Costs 14,898 14,478 41,047 41,569 Dry Hole Costs 5,627 1,427 14,678 3,902 Impairment of Unproved Oil and Gas Properties 9,307 7,839 25,189 23,826 Depreciation, Depletion and Amortization 92,056 198,098 266,787 368,901 General and Administrative 17,053 20,001 49,367 70,021 Taxes Other Than Income 24,248 14,234 63,337 40,309 ------- ------- ------- ------- TOTAL 190,056 280,009 539,195 620,067 ------- ------- ------- ------- OPERATING INCOME(LOSS) 203,658 (53,229) 423,103 (47,138) OTHER INCOME (EXPENSE) Gain on Share Exchange - 575,151 - 575,151 Other, Net 35 (20,716) 815 37,574 ------- ------- ------- ------- TOTAL 35 554,435 815 612,725 ------- ------- ------- ------- INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES 203,693 501,206 423,918 565,587 INTEREST EXPENSE, NET 14,750 16,925 44,899 45,966 ------- ------- ------- ------- INCOME BEFORE INCOME TAXES 188,943 484,281 379,019 519,621 INCOME TAX PROVISION(BENEFIT) 72,466 (28,640) 143,535 (19,004) ------- ------- ------- ------- NET INCOME 116,477 512,921 235,484 538,625 PREFERRED STOCK DIVIDENDS (2,755) - (8,269) - ------- ------- ------- ------- NET INCOME AVAILABLE TO COMMON $113,722 $512,921 $227,215 $538,625 ======= ======= ======= ======= NET INCOME PER SHARE AVAILABLE TO COMMON Basic $0.98 $3.75 $1.94 $3.64 ======= ======= ======= ======= Diluted $0.95 $3.71 $1.91 $3.62 ======= ======= ======= ======= AVERAGE NUMBER OF COMMON SHARES Basic 116,559 136,662 117,018 147,845 ======= ======= ======= ======= Diluted 119,262 138,270 118,932 148,933 ======= ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements.
3 PART I. FINANCIAL INFORMATION - (Continued) ITEM 1. FINANCIAL STATEMENTS - (Continued) EOG RESOURCES, INC. CONSOLIDATED BALANCE SHEETS (In Thousands) September 30, December 31, 2000 1999 - -------------------------------------------------------------------------------------------- (Unaudited) ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 16,707 $ 24,836 Accounts Receivable 267,217 148,189 Inventories 16,612 18,816 Other 30,603 8,660 ---------- ---------- TOTAL 331,139 200,501 OIL AND GAS PROPERTIES (SUCCESSFUL EFFORTS METHOD) 4,942,760 4,602,740 Less: Accumulated Depreciation, Depletion and Amortization (2,499,385) (2,267,812) ---------- ---------- Net Oil and Gas Properties 2,443,375 2,334,928 OTHER ASSETS 97,979 75,364 ---------- ---------- TOTAL ASSETS $ 2,872,493 $ 2,610,793 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 216,773 $ 172,780 Accrued Taxes Payable 29,928 19,648 Dividends Payable 4,589 4,227 Other 38,462 21,963 ---------- ---------- TOTAL 289,752 218,618 LONG-TERM DEBT 945,167 990,306 OTHER LIABILITIES 64,507 46,306 DEFERRED INCOME TAXES 324,743 225,952 SHAREHOLDERS' EQUITY Preferred Stock, $.01 Par, 10,000,000 Shares Authorized: Series B, 100,000 Shares Issued, Cumulative, $100,000,000 Liquidation Preference 97,820 97,909 Series D, 500 Shares Issued, Cumulative, $50,000,000 Liquidation Preference 49,240 49,281 Common Stock, $.01 Par, 320,000,000 Shares Authorized; 124,730,000 Shares Issued 201,247 201,247 Additional Paid in Capital 1,901 - Unearned Compensation (4,087) (1,618) Accumulated Other Comprehensive Income (32,485) (19,810) Retained Earnings 1,146,381 930,938 Common Stock Held in Treasury, 8,015,662 shares at September 30, 2000 and 5,625,446 shares at December 31, 1999 (211,693) (128,336) ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 1,248,324 1,129,611 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,872,493 $ 2,610,793 ========== ========== The accompanying notes are an integral part of these consolidated financial statements.
4 PART I. FINANCIAL INFORMATION - (Continued) ITEM 1. FINANCIAL STATEMENTS - (Continued) EOG RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Nine Months Ended September 30, - ------------------------------------------------------------------------------------------- 2000 1999 - ------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Reconciliation of Net Income to Net Operating Cash Inflows: Net Income $ 235,484 $ 538,625 Items Not Requiring Cash Depreciation, Depletion and Amortization 266,787 368,901 Impairment of Unproved Oil and Gas Properties 25,189 23,826 Deferred Income Taxes 81,603 (17,601) Other, Net 3,587 23,849 Exploration Costs 41,047 41,569 Dry Hole Costs 14,678 3,902 Losses(Gains)on Sales of Reserves and Related Assets and Other, Net (1,944) 4,608 Gains on Sales of Other Assets - (59,647) Gain on Share Exchange - (575,151) Tax Benefits from Stock Options Exercised 23,400 1,203 Other, Net (8,706) (15,982) Changes in Components of Working Capital and Other Liabilities Accounts Receivable (115,659) (788) Inventories 2,356 3,496 Accounts Payable 56,682 (21,252) Accrued Taxes Payable 10,280 3,358 Other Liabilities 5,274 (18,818) Other, Net (5,975) (16,376) Changes in Components of Working Capital Associated with Investing and Financing Activities (21,780) (4,620) -------- -------- NET OPERATING CASH INFLOWS 612,303 283,102 INVESTING CASH FLOWS Additions to Oil and Gas Properties (422,821) (294,875) Exploration Costs (41,047) (41,569) Dry Hole Costs (14,678) (3,902) Proceeds from Sales of Reserves and Related Assets 25,588 7,817 Proceeds from Sale of Other Assets - 82,965 Changes in Components of Working Capital Associated with Investing Activities 20,517 758 Other, Net (16,071) 3,284 -------- -------- NET INVESTING CASH OUTFLOWS (448,512) (245,522) FINANCING CASH FLOWS Long-Term Debt Trade (45,139) 222,446 Affiliate - (200,000) Proceeds from Equity Offering - 577,939 Dividends Paid (19,263) (13,828) Treasury Stock Purchased (196,867) - Proceeds from Sales of Treasury Stock 91,783 12,588 Equity Contribution to Transferred Subsidiaries - (608,750) Other, Net (2,434) (15,438) -------- -------- NET FINANCING CASH OUTFLOWS (171,920) (25,043) -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8,129) 12,537 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 24,836 6,303 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,707 $ 18,840 ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
5 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 and derivatives not designated as hedges, 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 nine-month periods ended September 30, 2000 and 1999, are net of costs of natural gas purchased for sale related to natural gas marketing activities of $16.2 million, $13.7 million, $40.3 million and $48.0 million, respectively. 6 PART I. FINANCIAL INFORMATION (Continued) ITEM 1. FINANCIAL STATEMENTS (Continued) EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. 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 Nine Months Ended September 30, September 30, ----------------------------------------------------------------------------------------- 2000 1999 2000 1999 ----------------------------------------------------------------------------------------- Numerator for basic and diluted earnings per share - Net income available to common $113,722 $512,921 $227,215 $538,625 ======= ======= ======= ======= Denominator for basic earnings per share - Weighted average shares 116,559 136,662 117,018 147,845 Potential dilutive common shares - Stock options 2,570 1,596 1,797 1,076 Restricted stock 62 - 59 - Phantom stock 71 12 58 12 ------- ------- ------- ------- Denominator for diluted earnings per share - Adjusted weighted average shares 119,262 138,270 118,932 148,933 ======= ======= ======= ======= Net income per share of common stock Basic $0.98 $3.75 $1.94 $3.64 ======= ======= ======= ======= Diluted $0.95 $3.71 $1.91 $3.62 ======= ======= ======= =======
5. The Company's total comprehensive income was $111 million, $514 million, $223 million and $549 million for the three-month and nine-month periods ended September 30, 2000 and 1999, respectively. The difference between net income and total comprehensive income in the periods was primarily due to a foreign currency translation loss of $5 million, gain of $1 million, loss of $13 million and gain of $11 million for the three-month and nine-month periods ended September 30, 2000 and 1999, respectively. 6. 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. 7. 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). 7 PART I. FINANCIAL INFORMATION (Continued) ITEM 1. FINANCIAL STATEMENTS (Continued) EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. Selected financial information about operating segments is reported below for the three-month and nine-month periods ended September 30, 2000 and 1999 (in thousands): Three Months Ended Nine Months Ended September 30, September 30, -------------------------------------------------------------------------------------- 2000 1999 2000 1999 -------------------------------------------------------------------------------------- NET OPERATING REVENUES United States $326,849 $172,692 $784,368 $414,961 Canada 45,282 27,238 116,570 64,548 Trinidad 21,566 15,474 61,324 48,163 India (1) - 11,289 - 51,554 China (1) - - - 4 Other 17 87 36 (6,301) ------- ------- ------- ------- TOTAL $393,714 $226,780 $962,298 $572,929 ======= ======= ======= ======= OPERATING INCOME (LOSS) United States $163,622 $(41,297) $334,293 $(57,907) Canada 27,979 12,303 61,420 21,150 Trinidad 12,749 8,312 30,181 27,949 India (1) - 9,869 - 25,699 China (1) - (3,461) - (8,459) Other (692) (38,955) (2,791) (55,570) ------- ------- ------- ------- TOTAL 203,658 (53,229) 423,103 (47,138) RECONCILING ITEMS Other Income, Net 35 554,435 815 612,725 Interest Expense, Net 14,750 16,925 44,899 45,966 ------- ------- ------- ------- INCOME BEFORE INCOME TAXES $188,943 $484,281 $379,019 $519,621 ======= ======= ======= ======= (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 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. 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. 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. 8 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 plans to adopt SFAS No. 133 on January 1, 2001. During the third quarter of 2000, the Company conducted an assessment on the Company's current derivative and hedging activities. The results of the assessment indicate that the adoption of SFAS No. 133 will not have a material impact on the Company's financial statements. 11. During the third quarter of 2000, the Company repurchased 1.7 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 had previously entered into a series of equity derivative transactions. During the quarter, several of the put options written by the Company expired without requiring any cash outlay on the part of the Company. Additionally, the Company closed certain equity derivative contracts which were to expire in April 2001 by paying $3.75 million to the counterparty. These transactions are accounted for as equity transactions with amounts received and or paid recorded to Additional Paid In Capital in the consolidated balance sheets. The Company had one million put options which it had written which were still outstanding at September 30, 2000. The strike price of these options is $18.00 per share, and they expire in April 2001. 12. During the quarter, the Company completed two exchange offers for its preferred stock whereby shares of the Company's Series A preferred stock were exchanged for shares of the Company's Series B preferred stock, and shares of the Company's Series C preferred stock were exchanged for shares of the Company's Series D preferred stock. All preferred shares were validly tendered and not withdrawn prior to expiration of the offers. The Company accepted all of the tendered shares and issued the respective series in exchange. 13. During the quarter, the Company filed a shelf registration statement for the offer and sale from time to time of up to $600 million of Company debt securities, preferred stock and/or common stock. Such registration statement was declared effective by the Securities and Exchange Commission on October 27, 2000. As of October 31, 2000, the Company had sold no securities pursuant to this shelf registration. When combined with the unused portion of a previously filed registration declared effective in January 1998, such registration statements provide for the offer and sale from time to time of Company debt securities, preferred stock and/or common stock by the Company in an aggregate amount up to $688 million. 9 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 nine- month periods ended September 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 September 30,2000 vs.Three Months Ended September 30,1999 The Company generated third quarter net income available to common of $114 million compared to $513 million for the third quarter of 1999. Included in the 1999 net income was a tax-free net gain of $575 million from the Share Exchange described in Note 2 of the Notes to the Consolidated Financial Statements. Net operating revenues were $394 million compared to $227 million for the third quarter of 1999. Following is an explanation of the variances causing this increase. Wellhead volume and price statistics are summarized below: 2000 1999 - ------------------------------------------------------------------------ Natural Gas Volumes (MMcf per day)(1) United States 652 642 Canada 125 117 ----- ----- North America 777 759 Trinidad 132 114 India (2) - 38 ----- ----- TOTAL 909 911 ===== ===== Average Natural Gas Prices ($/Mcf)(3) United States $4.14 $2.40 Canada 3.34 1.99 North America Composite 4.01 2.34 Trinidad 1.17 1.07 India (2) - 1.94 COMPOSITE 3.60 2.16 Crude Oil/Condensate Volumes (MBbl per day)(1) United States 23.8 14.6 Canada 2.1 2.7 ----- ----- North America 25.9 17.3 Trinidad 2.5 2.4 India (2) - 2.9 ----- ----- TOTAL 28.4 22.6 ===== ===== Average Crude Oil/Condensate Prices ($/Bbl)(3) United States $31.38 $20.33 Canada 28.83 18.88 North America Composite 31.17 20.10 Trinidad 31.87 19.60 India (2) - 17.43 COMPOSITE 31.23 19.71 Natural Gas Liquids Volumes (MBbl per day)(1) United States 4.2 2.4 Canada 0.7 0.8 ----- ----- TOTAL 4.9 3.2 Average Natural Gas Liquids Prices ($/Bbl) (3) United States $19.12 $15.25 Canada 18.16 9.62 COMPOSITE 18.98 13.83 Natural Gas Equivalent Volumes (MMcfe per day)(4) United States 820 743 Canada 142 139 ----- ----- North America 962 882 Trinidad 147 128 India (2) - 55 ----- ----- TOTAL 1,109 1,065 ===== ===== Total Bcfe(4)Deliveries 102 98 - -------------------------------------------------------------------------- (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. 10 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 73% to $391 million in the third quarter of 2000 compared to $226 million in the third quarter of 1999. Average wellhead natural gas prices were up by 67%, increasing net operating revenues by $120 million. Average wellhead crude oil and condensate prices were approximately 58% higher than the comparable period in 1999, increasing net operating revenues by $30 million. Third quarter 2000 wellhead natural gas deliveries were less than 1% lower than the comparable period in 1999, as the decrease in volumes due to the transfer of producing properties in the Share Exchange was offset by increased deliveries in North America and 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 26% higher than the prior year period increasing net operating revenues by $11 million. The increase is primarily due to increased North American crude oil production from the East Texas, South Texas, West Texas, California and Wyoming areas, partially offset by the transfer of producing properties in the Share Exchange and decreased Canadian crude oil production. Natural gas liquids prices and deliveries were 37% and 53% higher than the comparable period in 1999 respectively, increasing net operating revenues by $5 million. Gains (losses) on sales of reserves and related assets and other, net totaled a $4 million gain in the third quarter of 2000 compared to a $3 million gain in the comparable period of 1999. Included in 2000 was a $7 million gain related to the sale of a coal lease, partially offset by a loss on a crude oil price swap of $3 million, calculated using the mark-to-market method of accounting. Operating expenses of $190 million for the third quarter of 2000 were approximately $90 million lower than the third quarter of 1999. Depreciation, depletion and amortization ("DD&A") expense decreased $106 million compared to the prior year period primarily due to a non- recurring charge of $114 million in the third quarter of 1999 related primarily to assets determined no longer central to the Company's business, partially offset by increased natural gas and crude oil and condensate deliveries in North America and Trinidad. Taxes other than income were $10 million higher primarily due to increased wellhead revenues in North America and Trinidad. Exploration and dry hole costs were $6 million higher than the third quarter of 1999 primarily due to increased exploratory drilling and other exploration activities. General and administrative ("G&A") expense was $3 million lower than the prior year period primarily due to non-recurring costs incurred in the third quarter of 1999 related to the completion of the Share Exchange. Lease and well expenses were $3 million higher 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. The per unit operating costs of the Company for lease and well, DD&A, G&A, interest expense, and taxes other than income averaged $1.71 per Mcfe during the third quarter of 2000 compared to $2.78 per Mcfe during the third quarter of 1999. The decrease is primarily due to a lower per unit rate of DD&A, G&A and interest expenses, partially offset by a higher per unit rate of lease and well and taxes other than income. The per unit operating costs of the Company were $1.56 per Mcfe in the third quarter of 1999, excluding the previously mentioned non-recurring charges in DD&A and G&A. The per unit operating costs of $1.71 per Mcfe in the third quarter of 2000 were $0.15 higher than the adjusted per unit operating costs of $1.56 per Mcfe in the third quarter of 1999 primarily due to higher per unit rates of taxes other than income, G&A, lease and well, and DD&A, partially offset by a lower per unit rate of interest. Other income (expense) - other, net for the third quarter of 1999 included an $18.7 million charge for estimated exit costs related to the Company's decision to dispose of certain international assets. Income tax provision (benefit) decreased net income by $72 million in the third quarter of 2000 as compared to an increase in net income of $29 million in the comparable period a year ago. The increase in 1999 was primarily due to the tax-free net gain of $575 million from the Share Exchange (see Note 2 of the Notes to the Consolidated Financial Statements). 11 PART I. FINANCIAL INFORMATION (Continued) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued) EOG RESOURCES, INC. Results of Operations Nine Months Ended September 30, 2000 vs. Nine Months Ended September 30,1999 In the first nine months of 2000, the Company generated net income available to common of $227 million compared to $539 million for the first nine months of 1999. Included in the 1999 net income were a tax- free net gain of $575 million from the Share Exchange described in Note 2 of the Notes to the Consolidated Financial Statements and a gain of $39 million on sale of 3.2 million Enron Corp. common stock options held by the Company. Net operating revenues for the first nine months of 2000 were $962 million as compared to $573 million for the first nine months of 1999. Wellhead volume and price statistics are summarized below: 2000 1999 - ------------------------------------------------------------------------ Natural Gas Volumes (MMcf per day) United States 647 653 Canada 130 112 ----- ----- North America 777 765 Trinidad 124 132 India (1) - 61 ----- ----- TOTAL 901 958 ===== ===== Average Natural Gas Prices ($/Mcf) United States $3.33 $2.00 Canada 2.73 1.68 North America Composite 3.23 1.95 Trinidad 1.17 1.07 India (1) - 1.95 COMPOSITE 2.95 1.83 Crude Oil/Condensate Volumes (MBbl per day) United States 22.5 13.6 Canada 2.2 2.7 ----- ----- North America 24.7 16.3 Trinidad 2.6 2.5 India (1) - 5.4 ----- ----- TOTAL 27.3 24.2 ===== ===== Average Crude Oil/Condensate Prices ($/Bbl) United States $29.30 $16.23 Canada 27.07 15.02 North America Composite 29.10 16.02 Trinidad 29.36 14.32 India (1) - 12.80 COMPOSITE 29.13 15.13 Natural Gas Liquids Volumes (MBbl per day) United States 4.3 2.6 Canada 0.7 0.7 ----- ----- TOTAL 5.0 3.3 Average Natural Gas Liquids Prices ($/Bbl) United States $18.98 $10.33 Canada 15.61 7.24 COMPOSITE 18.48 9.66 Natural Gas Equivalent Volumes (MMcfe per day) United States 807 750 Canada 148 132 ----- ----- North America 955 882 Trinidad 140 147 India (1) - 94 ----- ----- TOTAL 1,095 1,123 ===== ===== Total Bcfe Deliveries 300 307 - ------------------------------------------------------------------------- (1) See Note 2 to the Consolidated Financial Statements. 12 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 65% to $971 million in the first nine months of 2000 compared to $587 million in the first nine months of 1999. Average wellhead natural gas prices for the first nine months of 2000 were approximately 61% higher than the comparable period of 1999 increasing net operating revenues by approximately $276 million. Average wellhead crude oil and condensate prices were up by 93%, increasing net operating revenues by $105 million. Wellhead natural gas deliveries for the first nine months of 2000 were approximately 6% lower than the comparable period in 1999 decreasing net operating revenues by $26 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 13% higher than the prior year period increasing net operating revenues by $13 million. The increase is primarily due to increased North America crude oil production from the East Texas, South Texas, West Texas, California and Wyoming areas, partially offset by the transfer of producing properties in the Share Exchange. Natural gas liquids prices and deliveries were 91% and 52% higher than the comparable period in 1999, increasing net operating revenues by $12 million and $5 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 $15 million compared to a decrease of $13 million in the first nine months of 1999. This decrease in 2000 was primarily due to a $7 million revenue decrease from natural gas marketing activities and hedging contracts closed in prior periods and a $6 million revenue decrease from crude oil hedging contracts. The $13 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 $6 million in the first nine months of 2000 compared to a net loss of $2 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 nine months of 1999 and a $7 million gain related to the sale of a coal lease in the third quarter of 2000, partially offset by a loss of $3 million on a crude oil price swap in the third quarter of 2000, calculated using the mark-to-market method of accounting. Operating expenses of $539 million for the first nine months of 2000 were approximately $81 million lower than the comparable period in 1999. DD&A expense decreased $102 million compared to the prior year period primarily due to a non-recurring charge of $114 million in the third quarter of 1999 related primarily to assets determined no longer central to the Company's business, partially offset by increased natural gas and crude oil and condensate deliveries in North America. Taxes other than income were $23 million higher primarily due to increased wellhead revenues in North America and Trinidad. Exploration and dry hole costs were $12 million higher than the first nine months in 1999 primarily due to increased exploratory drilling and other exploration activities. G&A expense was $21 million lower than the prior year period primarily due to non-recurring costs incurred related to the completion of the Share Exchange, costs incurred related to the potential sale of the Company and personnel expenses in the prior year. Lease and well expenses were $7 million higher 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. The per unit operating costs of the Company for lease and well, DD&A, G&A, interest expense, and taxes other than income averaged $1.67 per Mcfe during the first nine months of 2000 compared to $1.94 per Mcfe during the comparable period in 1999. The decrease is primarily due to a lower per unit rate of DD&A and G&A expenses, partially offset by a higher per unit rate of lease and well and taxes other than income. The per unit operating costs of the Company were $1.50 per Mcfe in the first nine months of 1999, excluding the previously mentioned non-recurring charges in DD&A and G&A. The per unit operating costs of $1.67 per Mcfe in the first nine months of 2000 were $0.17 higher than the adjusted per unit operating costs of $1.50 per Mcfe in the first nine months of 1999 primarily due to higher per unit rates of taxes other than income, G&A, lease and well, and DD&A, partially offset by a lower per unit rate of interest. Other income (expense) - other, net for the first nine months of 1999 included a $59.6 million gain on the sale of 3.2 million options owned by the Company to purchase Enron Corp. common stock and an $18.7 million charge for estimated exit costs related to the Company's decision to dispose of certain international assets. Income tax provision (benefit) decreased net income by $144 million in the first nine months of 2000 as compared to an increase of $19 million in net income in the comparable period a year ago. The increase in 1999 was primarily due to the tax-free net gain of $575 million from the Share Exchange (see Note 2 of the Notes to the Consolidated Financial Statements). 13 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 nine months ended September 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 $612 million for the first nine months of 2000 increased approximately $329 million as compared to the first nine months of 1999 primarily reflecting higher operating revenues and lower cash operating expenses. Net investing cash outflows of approximately $449 million for the first nine months of 2000 increased by $203 million versus the comparable prior year period due primarily to increased exploration and development expenditures and equity investments in the first nine months of 2000 and the non-recurrence of proceeds from sales of Enron Corp. options in the first nine months 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 nine months of 2000 and 1999 are as follows (in millions): 2000 1999 ----- ----- United States $409 $249 Canada 45 51 ---- ---- North America 454 300 Trinidad 23 3 India (1) - 25 China (1) - 9 Other 2 3 ---- ---- TOTAL $479 $340 ==== ==== (1) See Note 2 to the Consolidated Financial Statements. Exploration and development expenditures of $479 million for the first nine months of 2000 were $139 million higher than the prior year period due primarily to increased exploration and development activities in the United States and Trinidad, and an acquisition of oil and gas properties of approximately $83 million, 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. Investing cash flows other, net of $16 million outflow for the first nine months of 2000 includes investments in the CNC ammonia plant in Trinidad and other investments. Cash used by financing activities was $172 million for the first nine months of 2000 versus $25 million for the comparable prior year period. Financing activities for 2000 included repayment of debt of $45 million, repurchases of the Company's common stock of $197 million, proceeds from sales of treasury stock of $92 million and cash dividend payments of $19 million. Financing activities for 1999 included funds used in the Share Exchange of $609 million and dividend payments of $14 million, partially offset by net addition to long-term debt of $22 million, net proceeds from an equity offering of $578 million and proceeds from sales of treasury stock 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. 14 PART I. FINANCIAL INFORMATION - (Concluded) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Concluded) EOG RESOURCES, INC. On July 26, 2000, the $400 million credit facility that was scheduled to expire was renewed for $375 million, thereby reducing aggregate long-term committed credit from $800 million at December 31, 1999 to $775 million. Credit facility expirations are as follows: $375 million in 2001 and $400 million in 2004. With respect to the $375 million expiring in 2001, the Company may, at its option, extend the final maturity date of any advances made under the facility by one full year from the expiration date of the facility, effectively qualifying such debt as long-term. At September 30, 2000, there were no advances outstanding under either of these agreements. During the third quarter of 2000, the Company repurchased 1.7 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 had previously entered into a series of equity derivative transactions. During the quarter several of the put options written by the Company expired without requiring any cash outlay on the part of the Company. Additionally, the Company closed certain equity derivative contracts which were to expire in April 2001 by paying $3.75 million to the counterparty. These transactions are accounted for as equity transactions with amounts received and or paid recorded to Additional Paid In Capital in the consolidated balance sheets. The Company had one million put options which it had written which were still outstanding at September 30, 2000. The strike price of these options is $18.00 per share, and they expire in April 2001. 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. 15 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 There were no reports on Form 8-K filed for the period ended September 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: October 31, 2000 By /S/ T. K. DRIGGERS ---------------------------- T. K. Driggers Vice President, Accounting & Land Administration (Principal Accounting Officer) 17 Exhibit 12 EOG RESOURCES, INC. Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends (In Thousands) (Unaudited) Nine Months Ended September 30, Year Ended December 31, - ------------------------------------------------------------------------------------------------------ 2000 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------ EARNINGS AVAILABLE FOR FIXED CHARGES: Net Income $235,484 $569,094 $ 56,171 $121,970 $140,008 $142,118 Less: Capitalized Interest Expense (5,014) (10,594) (12,711) (13,706) (9,136) (6,490) Add: Fixed Charges 49,913 72,413 61,290 41,423 21,997 18,414 Income Tax Provision (Benefit) 143,535 (1,382) 4,111 41,500 50,954 41,936 ------- ------- ------- ------- ------- ------- EARNINGS AVAILABLE $423,918 $629,531 $108,861 $191,187 $203,823 $195,978 ======= ======= ======= ======= ======= ======= FIXED CHARGES: Interest Expense $ 44,899 $ 61,819 $ 48,463 $ 27,369 $ 12,370 $ 11,310 Capitalized Interest 5,014 10,594 12,711 13,706 9,136 6,490 Rental Expense Representative of Interest Factor - - 116 348 491 614 ------- ------- ------- ------- ------- ------- TOTAL FIXED CHARGES 49,913 72,413 61,290 41,423 21,997 18,414 Preferred Dividends 13,309 660 - - - - ------- ------- ------- ------- ------- ------- TOTAL FIXED CHARGES AND PREFERRED DIVIDENDS $ 63,222 $ 73,073 $ 61,290 $ 41,423 $ 21,997 $ 18,414 ======= ======= ======= ======= ======= ======= RATIO OF EARNINGS TO FIXED CHARGES 8.49 8.69 1.78 4.62 9.27 10.64 RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS 6.71 8.62 1.78 4.62 9.27 10.64
18 EX-27 2 fdstemplate3q.xfd FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 9-MOS Dec-31-2000 Sep-30-2000 16,707 0 267,217 0 16,612 331,139 4,942,760 (2,499,385) 2,872,493 289,752 0 0 147,060 201,247 900,017 2,872,493 956,636 962,298 0 539,195 (815) 0 44,899 379,019 143,535 235,484 0 0 0 235,484 1.94 1.91
-----END PRIVACY-ENHANCED MESSAGE-----