EOG Resources Reports Outstanding Third Quarter 2019 Results; Announces Two New Delaware Basin Plays and Adds 1,700 Net Premium Locations

HOUSTON, Nov. 6, 2019 /PRNewswire/ -- 

• Exceeded Crude Oil Production Target Range and Raised Full-Year 2019 U.S. Crude Oil Growth Target from 14 to 15 Percent
• Capital Expenditures Near Low End of Target Range
• Generated Significant Net Cash From Operating Activities and Free Cash Flow
• Reduced YTD Well Costs 5 Percent
• Per-Unit Lease and Well and DD&A Expense Rates Below Low End of Target Ranges
• Added 1,700 Net Premium Locations to Inventory Now Totaling 10,500 Locations and Representing Over 14 Years of Drilling Inventory
• New Delaware Basin Wolfcamp M and Third Bone Spring Plays Add 1.6 BnBoe Net Resource Potential

EOG Resources, Inc. (EOG) today reported third quarter 2019 net income of $615 million, or $1.06 per share, compared with third quarter 2018 net income of $1.2 billion, or $2.05 per share. Net cash provided by operating activities for the third quarter 2019 was $2.1 billion.

Adjusted non-GAAP net income for the third quarter 2019 was $654 million, or $1.13 per share, compared with adjusted non-GAAP net income of $1.0 billion, or $1.75 per share, for the same prior year period. Please refer to the attached tables for the reconciliation of non-GAAP measures to GAAP measures.

Third Quarter 2019 Operating Review
Total crude oil volumes of 464,100 barrels of oil per day (Bopd) in the third quarter 2019 increased 12 percent compared to the same prior year period and were above the high end of the target range. Natural gas liquids (NGLs) and natural gas volumes each grew 11 percent. EOG incurred total expenditures of $1.6 billion in the third quarter. Cash capital expenditures before acquisitions of $1.5 billion were near the low end of the target range. Please refer to the attached tables for the reconciliation of non-GAAP measures to GAAP measures.

EOG continued to lower operating costs during the third quarter 2019. Per-unit transportation costs declined nine percent compared to the same prior-year period, depreciation, depletion and amortization expenses fell seven percent year-over-year, and lease and well expenses declined three percent year-over-year.

EOG generated $2.0 billion of discretionary cash flow in the third quarter 2019. After considering cash capital expenditures before acquisitions of $1.5 billion and dividend payments of $166 million, EOG generated free cash flow during the third quarter 2019 of $337 million. Please refer to the attached tables for the reconciliation of non-GAAP measures to GAAP measures. 

"EOG's operating performance has never been better. The company generated outstanding financial results in the third quarter driven by improvements in every area," said William R. "Bill" Thomas, Chairman and Chief Executive Officer. "We reduced operating expenses, grew volumes at double-digit rates while lowering well costs and generated substantial free cash flow. EOG has never been in a better position to sustain this success long into the future."

New Delaware Basin Plays and Premium Inventory Update
EOG expanded its lineup of premium plays in the Delaware Basin with the addition of the Wolfcamp M and the Third Bone Spring. The drilling locations in these two plays are highly economic at a flat $40 oil price and flat $2.50 natural gas price, consistent with EOG's definition of premium inventory. The company continues to deepen its technical knowledge of the Delaware Basin as it executes its development program. EOG collects significant amounts of data on each well, integrates it with existing models and incorporates analysis from numerous spacing and targeting tests.

EOG has identified an initial 855 net premium drilling locations in the Wolfcamp M, with estimated net resource potential of 1.0 billion barrels of oil equivalent across its 193,000 net acre position. The wells in this deeper section of the Wolfcamp formation produce roughly equal parts oil, NGLs and natural gas. Benefiting from EOG's low well costs, Wolfcamp M wells deliver strong premium economics and exceptionally low finding costs.

To define the play, EOG has gathered extensive subsurface information and has completed six Wolfcamp M wells, including two during 2019. The Green Drake 16 Fed Com #759H was completed in Lea County, NM with a treated lateral length of 7,200 feet and a 30-day initial production rate of 4,165 barrels of oil equivalent per day (Boed), or 2,145 Bopd, 1,070 barrels per day (Bpd) of NGLs and 5.7 million cubic feet per day (MMcfd) of natural gas. In Reeves County, TX, the State Correa #3H was completed with a treated lateral length of 9,900 feet and a 30-day initial production rate of 2,800 Boed, or 1,175 Bopd, 845 Bpd of NGLs and 4.7 MMcfd of natural gas.

EOG has identified an initial 615 net premium drilling locations in the Third Bone Spring, with estimated net resource potential of 585 million barrels of oil equivalent across its 200,000 net acre position. EOG's early focus in the Delaware Basin has been on development of the Wolfcamp formation, which sits below the Third Bone Spring. Each of the Wolfcamp wells has drilled through the Third Bone Spring, providing significant technical data and helping to delineate multiple targets within the play.

EOG has completed over 50 Third Bone Spring wells to date, including 10 net wells in 2019. The McGregor D 5 #592H targeted the Third Bone Spring Carbonate and was completed in Loving County, TX with a treated lateral length of 9,700 feet and a 30-day initial production rate of 2,865 Boed, or 1,990 Bopd, 500 Bpd of NGLs and 2.3 MMcfd of natural gas. In Lea County, NM, the Caravan 28 State Com #601H and the Convoy 28 State Com #606H targeted the Third Bone Spring Sand and were completed with an average treated lateral length of 10,000 feet per well and average 30-day initial production rates per well of 3,985 Boed, or 2,730 Bopd, 670 Bpd of NGLs and 3.5 MMcfd of natural gas.

In total, EOG added 1,700 net premium drilling locations to its undrilled premium inventory in the third quarter 2019. Taking into account approximately 640 net wells drilled to date in 2019 and updated location counts across its portfolio, EOG's premium inventory now totals 10,500 net locations, representing more than 14 years of high-return drilling inventory.

"EOG is a returns-focused company where organic growth is driven by exploration and low-cost development. The announcement of two more premium plays in the Delaware Basin and the addition of 1,700 new net premium drilling locations demonstrate the sustainability of our unique business model," Thomas continued. "EOG continues to demonstrate its ability to generate attractive returns on capital through reinvestment in an improving inventory of premium wells across multiple plays. Our best-in-class assets prove that EOG can adapt to changing industry conditions and create significant shareholder value for years to come."

Financial Review
EOG further strengthened its financial position during the third quarter 2019. At September 30, 2019, EOG's total debt outstanding was $5.2 billion for a debt-to-total capitalization ratio of 20 percent. Considering $1.6 billion of cash on the balance sheet at the end of the third quarter, EOG's net debt was $3.6 billion for a net debt-to-total capitalization ratio of 15 percent. For a reconciliation of non-GAAP measures to GAAP measures, please refer to the attached tables.

Third Quarter 2019 Results Webcast
Thursday, November 7, 2019, 9:00 a.m. Central time (10:00 a.m. Eastern time)
Webcast will be available on EOG website for one year.
http://investors.eogresources.com/Investors

About EOG
EOG Resources, Inc. (NYSE: EOG) is one of the largest crude oil and natural gas exploration and production companies in the United States with proved reserves in the United States, Trinidad, and China. To learn more visit www.eogresources.com.

Investor Contacts
David Streit  713-571-4902
Neel Panchal  713-571-4884

Media and Investor Contact
Kimberly Ehmer  713-571-4676

This press release may include 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, capital expenditures, costs and asset sales, 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," "aims," "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 returns, replace or increase drilling locations, reduce or otherwise control operating costs and capital expenditures, generate cash flows, pay down or refinance indebtedness or pay and/or increase 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.  Furthermore, this press release and any accompanying disclosures may include or reference certain forward-looking, non-GAAP financial measures, such as free cash flow or discretionary cash flow, and certain related estimates regarding future performance, results and financial position.  Any such forward-looking measures and estimates are intended to be illustrative only and are not intended to reflect the results that EOG will necessarily achieve for the period(s) presented; EOG's actual results may differ materially from such measures and estimates.  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, supplies of, 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 maximize 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 and condensate, natural gas liquids, natural gas and related commodity production;
• ­the availability, proximity and capacity of, and costs associated with, appropriate gathering, processing, compression, storage, 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; climate change and other 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 the acquisition of licenses, leases and properties, 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 tubulars) 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, storage 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 to which EOG is successful in its completion of planned asset dispositions;
• ­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;
• ­geopolitical factors and political conditions and developments around the world (such as the imposition of tariffs or trade or other economic sanctions, 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 cybersecurity breaches; and
• ­the other factors described under ITEM 1A, Risk Factors, on pages 13 through 22 of EOG's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 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 duration or 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 or resource estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include "potential" reserves, "resource potential" and/or other estimated reserves or estimated resources 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, 2018, 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.

SOURCE EOG Resources, Inc.

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