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
<PAGE>
EOG RESOURCES, INC.
TABLE OF CONTENTS
<TABLE>
PART I. FINANCIAL INFORMATION Page No.
<S> <C>
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
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EOG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2000 1999 2000 1999
NET OPERATING REVENUES -------- -------- --------- --------
<S> <C> <C> <C> <C>
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.
</TABLE>
3
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
EOG RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
September 30, December 31,
2000 1999
--------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
<S> <C> <C>
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.
</TABLE>
4
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
EOG RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
Nine Months Ended
September 30,
-------------------------------------------------------------------------------------------
2000 1999
-------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of Net Income to Net Operating Cash Inflows:
<S> <C> <C>
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.
</TABLE>
5
<PAGE>
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
<PAGE>
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):
<TABLE>
Quarter Ended Nine Months Ended
September 30, September 30,
-----------------------------------------------------------------------------------------
2000 1999 2000 1999
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
======= ======= ======= =======
</TABLE>
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
<PAGE>
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):
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------------------------------------------------------
2000 1999 2000 1999
--------------------------------------------------------------------------------------
NET OPERATING REVENUES
<S> <C> <C> <C> <C>
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.
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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
<PAGE>
Exhibit 12
EOG RESOURCES, INC.
Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends
(In Thousands)
(Unaudited)
<TABLE>
Nine Months Ended
September 30, Year Ended December 31,
------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------------------
EARNINGS AVAILABLE FOR
FIXED CHARGES:
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
18
