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