EOG Resources Reports Third Quarter 2015 Results; Increases Delaware Basin Net Resource Potential by 1.0 BnBoe

HOUSTON, Nov. 5, 2015 /PRNewswire/ --

• Updates Delaware Basin Net Resource Potential to 2.35 BnBoe
  • Increases Wolfcamp Net Reserve Potential by 500 MMBoe
  • Announces Second Bone Spring Sand Net Reserve Potential of 500 MMBoe
  • Expands Drilling Inventory from 2,700 to 4,900 Net Wells
  • Acquires 26,000 Net Acres in the Delaware Basin Oil Window in Three Transactions
  • Completes Record Horizontal Well for Delaware Basin Wolfcamp
• Continues to Improve Well Productivity While Lowering Costs
• Exceeds Third Quarter Oil and Total Production Guidance
• Reduces Per-Unit Lease Operating Costs by 5 Percent Versus Second Quarter

EOG Resources, Inc. EOG (EOG) today reported a third quarter 2015 net loss of $4.1 billion, or $7.47 per share. This compares to third quarter 2014 net income of $1.1 billion, or $2.01 per share.

Adjusted non-GAAP net income for the third quarter 2015 was $13.5 million, or $0.02 per share, compared to the same prior year period adjusted non-GAAP net income of $720.6 million, or $1.31 per share.  Adjusted non-GAAP net income is calculated by matching realizations to settlement months and making certain other adjustments in order to exclude one-time items.  (Please refer to the attached tables for the reconciliation of non-GAAP measures to GAAP measures.)

During the third quarter 2015, proved oil and gas properties and related assets were written down to their fair value resulting in non-cash impairment charges of $4.1 billion net of tax.  The impairments were due to declines in commodity prices and were primarily related to legacy natural gas and marginal liquids assets. 

Significant reductions in operating expenses were more than offset by lower commodity price realizations, resulting in decreases in adjusted non-GAAP net income, discretionary cash flow and adjusted EBITDAX during the third quarter 2015 compared to the third quarter 2014. (Please refer to the attached tables for the reconciliation of non-GAAP measures to GAAP measures.)

Operational Highlights
In the third quarter 2015, total crude oil and condensate production exceeded prior guidance due to improved well productivity.  Total company production decreased 5 percent compared to the third quarter 2014 excluding production related to EOG's Canadian operations, which were divested in the fourth quarter 2014.  Total capital expenditures decreased 36 percent compared to the same prior year period. 

EOG also continued to reduce completed well costs and operating costs compared to the same quarter last year.  Lease and well expenses decreased 17 percent on a per-unit basis due to improved operational efficiencies and reduced service costs.  Per-unit transportation costs decreased 11 percent, and total general and administrative expenses declined 6 percent.

"We are executing on our 2015 plan to reset the company to be successful in a low commodity price environment," said William R. "Bill" Thomas, Chairman and Chief Executive Officer.  "By continuing to make the best oil wells in the industry, significantly reducing costs and expanding resource potential in the best North American oil plays, EOG is uniquely positioned for 2016 and to lead the industry for years to come."

2015 Capital Plan Update
EOG is maintaining full-year 2015 capital spending guidance.  U.S. crude oil production guidance increased due to strong well performance.  Total company crude oil production guidance is slightly lower due to delays in the startup of the U.K. Conwy project. 

Delaware Basin
EOG increased its Delaware Basin net resource potential by 1.0 billion barrels of oil equivalent (BnBoe).  For the Delaware Basin Wolfcamp, EOG added 950 net drilling locations and increased its net resource potential estimate over 60 percent to 1.3 BnBoe.  Advancements in targeting and completion technology are enabling tighter well spacing and increased production per well.  In the Second Bone Spring Sand oil play, EOG provided an initial net resource potential estimate of 500 million barrels of oil equivalent (MMBoe) and added 1,250 net drilling locations in this high quality crude oil play. 

EOG added 26,000 net acres to its Delaware Basin position in the third quarter 2015 through three tactical acquisitions in Loving County, Texas, and Lea County, N.M., for a total of $368 million.  Most of the acquired acreage is adjacent to EOG's existing operating areas in the high rate of return Delaware Basin oil window.  Combined, these acquisitions added net production of 750 barrels of oil equivalent (Boe) per day with an associated 2.5 MMBoe of proved producing reserves.  These acquisitions and the updated resource potential bring EOG's total Delaware Basin net position to 2.35 BnBoe and 4,900 locations, providing decades of high return drilling potential.

"Outstanding technical and operational advances enabled us to increase potential resource estimates for our Delaware Basin position by over 70 percent," Thomas said.  "We are also pleased that through our tactical acquisitions of new, high quality Delaware Basin acreage, we added assets which meet our high rate of return hurdle.  EOG's Delaware Basin assets along with the company's Eagle Ford and Bakken positions continue to grow in both size and quality.  With premier assets and commitment to innovation, EOG continues to enhance its capability for high return growth in a low oil price environment."

In addition, EOG completed a number of noteworthy new wells in the Delaware Basin in the third quarter.

In the Wolfcamp shale in Lea County, N.M., EOG completed the Thor 21 #701H and #702H with average initial production rates per well of 3,255 barrels of oil per day (Bopd), 470 barrels per day (Bpd) of natural gas liquids (NGLs) and 3.9 million cubic feet per day (MMcfd) of natural gas.  The Thor 21 #702H set a new industry 30-day production record for horizontal wells in the Delaware Basin Wolfcamp.

In the Second Bone Spring Sand in Lea County, N.M., EOG completed the Neptune 10 State Com #501H and #502H in a two-well pattern with average initial production rates per well of 2,205 Bopd, 185 Bpd of NGLs and 1.5 MMcfd of natural gas. 

In the Leonard shale in Lea County, N.M., EOG completed the Hawk 35 Fed #7H, #8H, #9H and #10H in a four-well pattern with average initial production rates per well of 1,615 Bopd, 160 Bpd of NGLs and 1.3 MMcfd of natural gas.

South Texas Eagle Ford
The Eagle Ford continues to be EOG's largest high return play.  During 2015, the company expanded the use of high density completions to 95 percent of the Eagle Ford wells planned for the year.  Enabled by high density completions and proprietary targeting technology, EOG is actively testing tighter well spacing in the lower Eagle Ford with stacked-staggered "W" patterns.  Additionally, an efficient drilling program increased the amount of acreage held by production to 91 percent of EOG's 561,000 net acres in the Eagle Ford oil window.  In Gonzales County, EOG completed the Phoenix Unit #4H and #5H with average initial production rates per well of 3,815 Bopd, 415 Bpd of NGLs and 2.8 MMcfd of natural gas.  In McMullen County, EOG completed the Naylor Jones Unit 26 #1H and #2H in a two-well pattern with average initial production rates per well of 2,650 Bopd with 150 Bpd of NGLs and 1.0 MMcfd of natural gas. 

North Dakota Bakken
EOG's activity in North Dakota remains focused on the Bakken Core and Antelope Extension areas.  The company continued to improve its drilling and completion techniques including the expanded use of high density completions.  In addition, recently installed water gathering facilities have significantly reduced operating expenses.  During the third quarter 2015, the company completed the Parshall #88-3029H, #23-3029H and #26-3029H in a three-well pattern with average initial production rates per well of 1,830 Bopd and 1.0 MMcfd of rich natural gas.  Average lateral lengths for the wells were 5,925 feet.

Hedging Activity
For the period November 1 through December 31, 2015, EOG has crude oil financial price swap contracts in place for 10,000 Bopd at a weighted average price of $89.98 per barrel.  In addition, EOG has put options in place which establish a floor price of $45.00 per barrel for 82,500 Bopd for November 2015.

For December 2015, EOG has natural gas financial price swap contracts in place for 175,000 million British thermal units (MMBtu) per day at a weighted average price of $4.51 per MMBtu, excluding unexercised options. Comprehensive summaries of crude oil and natural gas derivative contracts are provided in the attached tables.            

Capital Structure
At September 30, 2015, EOG's total debt outstanding was $6.4 billion with a debt-to-total capitalization ratio of 33 percent. Taking into account cash on the balance sheet of $743 million at September 30, EOG's net debt was $5.7 billion with a net debt-to-total capitalization ratio of 30 percent. A reconciliation of non-GAAP measures to GAAP measures is provided in the attached tables.

Conference Call November 6, 2015
EOG's third quarter 2015 results conference call will be available via live audio webcast at 9 a.m. Central time (10 a.m. Eastern time) on Friday, November 6, 2015. To listen, log on to www.eogresources.com. The webcast will be archived on EOG's website through December 7, 2015.

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  All statements, other than statements of historical facts, including, among others, statements and projections regarding EOG's future financial position, operations, performance, business strategy, returns, budgets, reserves, levels of production and costs, statements regarding future commodity prices and statements regarding the plans and objectives of EOG's management for future operations, are forward-looking statements.  EOG typically uses words such as "expect," "anticipate," "estimate," "project," "strategy," "intend," "plan," "target," "goal," "may," "will," "should" and "believe" or the negative of those terms or other variations or comparable terminology to identify its forward-looking statements.  In particular, statements, express or implied, concerning EOG's future operating results and returns or EOG's ability to replace or increase reserves, increase production, generate income or cash flows or pay dividends are forward-looking statements.  Forward-looking statements are not guarantees of performance.  Although EOG believes the expectations reflected in its forward-looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct.  Moreover, EOG's forward-looking statements may be affected by known, unknown or currently unforeseen risks, events or circumstances that may be outside EOG's control.  Important factors that could cause EOG's actual results to differ materially from the expectations reflected in EOG's forward-looking statements include, among others:

• the timing, extent and duration of changes in prices for, and demand for, crude oil and condensate, natural gas liquids, natural gas and related commodities;
• the extent to which EOG is successful in its efforts to acquire or discover additional reserves;
• the extent to which EOG is successful in its efforts to economically develop its acreage in, produce reserves and achieve anticipated production levels from, and optimize reserve recovery from, its existing and future crude oil and natural gas exploration and development projects;
• the extent to which EOG is successful in its efforts to market its crude oil, natural gas and related commodity production;
• the availability, proximity and capacity of, and costs associated with, appropriate gathering, processing, compression, transportation and refining facilities;
• the availability, cost, terms and timing of issuance or execution of, and competition for, mineral licenses and leases and governmental and other permits and rights-of-way, and EOG's ability to retain mineral licenses and leases;
• the impact of, and changes in, government policies, laws and regulations, including tax laws and regulations; environmental, health and safety laws and regulations relating to air emissions, disposal of produced water, drilling fluids and other wastes, hydraulic fracturing and access to and use of water; laws and regulations imposing conditions or restrictions on drilling and completion operations and on the transportation of crude oil and natural gas; laws and regulations with respect to derivatives and hedging activities; and laws and regulations with respect to the import and export of crude oil, natural gas and related commodities;
• EOG's ability to effectively integrate acquired crude oil and natural gas properties into its operations, fully identify existing and potential problems with respect to such properties and accurately estimate reserves, production and costs with respect to such properties;
• the extent to which EOG's third-party-operated crude oil and natural gas properties are operated successfully and economically;
• competition in the oil and gas exploration and production industry for employees and other personnel, facilities, equipment, materials and services;
• the availability and cost of employees and other personnel, facilities, equipment, materials (such as water) and services;
• the accuracy of reserve estimates, which by their nature involve the exercise of professional judgment and may therefore be imprecise;
• weather, including its impact on crude oil and natural gas demand, and weather-related delays in drilling and in the installation and operation (by EOG or third parties) of production, gathering, processing, refining, compression and transportation facilities;
• the ability of EOG's customers and other contractual counterparties to satisfy their obligations to EOG and, related thereto, to access the credit and capital markets to obtain financing needed to satisfy their obligations to EOG;
• EOG's ability to access the commercial paper market and other credit and capital markets to obtain financing on terms it deems acceptable, if at all, and to otherwise satisfy its capital expenditure requirements;
• the extent and effect of any hedging activities engaged in by EOG;
• the timing and extent of changes in foreign currency exchange rates, interest rates, inflation rates, global and domestic financial market conditions and global and domestic general economic conditions;
• political conditions and developments around the world (such as political instability and armed conflict), including in the areas in which EOG operates;
• the use of competing energy sources and the development of alternative energy sources;
• the extent to which EOG incurs uninsured losses and liabilities or losses and liabilities in excess of its insurance coverage;
• acts of war and terrorism and responses to these acts;
• physical, electronic and cyber security breaches; and
• the other factors described under ITEM 1A, Risk Factors, on pages 13 through 20 of EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, and any updates to those factors set forth in EOG's subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

In light of these risks, uncertainties and assumptions, the events anticipated by EOG's forward-looking statements may not occur, and, if any of such events do, we may not have anticipated the timing of their occurrence or the extent of their impact on our actual results.  Accordingly, you should not place any undue reliance on any of EOG's forward-looking statements. EOG's forward-looking statements speak only as of the date made, and EOG undertakes no obligation, other than as required by applicable law, to update or revise its forward-looking statements, whether as a result of new information, subsequent events, anticipated or unanticipated circumstances or otherwise.

The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose not only "proved" reserves (i.e., quantities of oil and gas that are estimated to be recoverable with a high degree of confidence), but also "probable" reserves (i.e., quantities of oil and gas that are as likely as not to be recovered) as well as "possible" reserves (i.e., additional quantities of oil and gas that might be recovered, but with a lower probability than probable reserves).  Statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any reserve estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include "potential" reserves and/or other estimated reserves not necessarily calculated in accordance with, or contemplated by, the SEC's latest reserve reporting guidelines.  Investors are urged to consider closely the disclosure in EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, available from EOG at P.O. Box 4362, Houston, Texas 77210-4362 (Attn: Investor Relations). You can also obtain this report from the SEC by calling 1-800-SEC-0330 or from the SEC's website at www.sec.gov.  In addition, reconciliation and calculation schedules for non-GAAP financial measures can be found on the EOG website at www.eogresources.com.

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE EOG Resources, Inc.