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EOG Resources loses $4.5 billion in 2015

“…achieved significant reductions in our finding and operating costs and substantially increased the size and the quality of our inventory”

EOG

William R. “Bill” Thomas, Chairman and Chief Executive Officer

EOG Resources, Inc. has reported a fourth quarter 2015 net loss of $284.3 million, or $0.52 per share. This compares to fourth quarter 2014 net income of $444.6 million, or $0.81 per share.

For the full year 2015, EOG reported a net loss of $4.5 billion, or $8.29 per share, compared to net income of $2.9 billion, or $5.32 per share, for the full year 2014.

  • Exceeds Fourth Quarter and Full Year 2015 Production Targets
  • Achieves Record Year for Improved Well Productivity and Efficiency Gains
  • Reduces Fourth Quarter Per-Unit Lease and Well Expenses by 30 Percent Versus Prior Year
  • Replaces 192 Percent of 2015 Production, Excluding Price Revisions
  • Announces Disciplined 2016 Capital Plan and Operations Strategy
  • Defines More Than 2.0 BnBoe and 10 Years of Premium Drilling Inventory

Adjusted non-GAAP net loss for the fourth quarter 2015 was $149.5 million, or $0.27 per share, compared to adjusted non-GAAP net income of $431.9 million, or $0.79 per share, for the same prior year period.

Adjusted non-GAAP net income for the full year 2015 was$33.9 million, or $0.06 per share, compared to non-GAAP net income of $2.7 billion, or $4.95 per share, for the full year 2014.  Adjusted non-GAAP net income (loss) is calculated by matching realizations to settlement months and making certain other adjustments in order to exclude one-time items.

inside-enduralloy-pipeReducing tubing wear, extend well run-times with EndurAlloy™ – J55 production tubing with boron diffused into substrate to create extra hard interior surface.

 

Significant reductions in operating expenses were more than offset by lower commodity prices, resulting in decreases to adjusted non-GAAP net income, discretionary cash flow and EBITDAX during the fourth quarter and full year 2015 compared to the same periods in 2014.

“EOG’s performance was resilient in 2015 as oil and natural gas prices declined sharply,” said William R. “Bill” Thomas, Chairman and Chief Executive Officer.  “We achieved significant reductions in our finding and operating costs and substantially increased the size and the quality of our inventory, which further enhances our unique ability to create long-term shareholder value.”

Operational Highlights

For the full year 2015, while exploration and development expenditures (excluding acquisitions) decreased 42 per cent, U.S. crude oil and condensate production remained flat, and overall total company production decreased just 4 per cent compared to 2014.  Total worldwide liquids production decreased 2 per cent, and total worldwide natural gas production decreased 7 per cent versus the prior year.

EOG restrained capital expenditures in the fourth quarter 2015 in response to the lower commodity price environment.  Total exploration and development expenditures decreased 56 per cent compared to the same prior year period.  EOG’s U.S. crude oil and condensate production and total overall company production both decreased by 7 per cent in the fourth quarter of 2015 compared to the same prior year period.

EOG continued to enhance operating efficiencies and leverage prior investments in infrastructure, resulting in cost reductions across its operations.  During the fourth quarter of 2015, lease and well expenses decreased 30 per cent and transportation costs decreased 8 per cent compared to the same prior year period, both on a per-unit basis.  Total general and administrative expenses decreased 17 per cent compared to the fourth quarter 2014.

“EOG remained focused on returns and capital discipline in 2015,” Thomas said.  “Our team raised the bar with record-setting operational achievements, technical advances and organic growth additions.  These sustainable improvements uniquely position EOG for long-term success in any commodity price environment.”

2016 Capital Plan

EOG’s 2016 plan is designed to maximize returns, maintain the strong balance sheet and continue to achieve record-setting cost reduction and productivity gains.

Capital expenditures for 2016 are expected to range from $2.4 to $2.6 billion, including production facilities and gathering, processing and other expenditures, and excluding acquisitions.  EOG expects to complete approximately 270 net wells in 2016, compared to 470 net wells in 2015, with total company crude oil production expected to decline only 5 per cent versus 2015.

EOGThis 45 to 50 per cent year-over-year reduction to capital expenditures reflects the current commodity price environment and further demonstrates EOG’s commitment to maintaining a strong balance sheet with disciplined capital spending.

The company is shifting its focus to premium drilling and completions in 2016.  Driven by continued efficiencies, technical advancements and geoscience breakthroughs, the company has identified over 3,200 premium drilling locations capable of delivering solid rates of return at low commodity prices.

Premium drilling is a step change to EOG’s long-term strategy that will enable it to expand its leadership in investment returns and well performance.  The company is now positioned to return to high investment rates of return as oil prices experience even a modest recovery.

“EOG has now identified more than 2 billion barrels of oil equivalent (BnBoe) of estimated net resource potential and a decade of premium drilling inventory that can earn superior returns in a low commodity price environment,” Thomas said.  “Breakthroughs of this magnitude are unique and will enable EOG to extend its lead as the low-cost U.S. horizontal oil producer.  We are confident our organic growth machine will continue to increase both the size and quality of our premium drilling inventory and allow EOG to enjoy a strong competitive advantage in the world oil market.”

South Texas Eagle Ford

EOG

Drilling in Eagle Ford Texas

The South Texas Eagle Ford continues to showcase EOG’s technological advances in lateral placement and completion design.  During 2015, the company expanded the use of precision lateral targeting and high-density completions across the Eagle Ford.  EOG’s other plays benefit from these industry-leading breakthroughs by quickly adapting these new technologies to each unique environment.

During the fourth quarter of 2015, the Eagle Ford once again delivered outstanding well performance across the play.  In the eastern Eagle Ford in Karnes County, the Lightfoot Unit 5H through 8H four-well pattern had average 30-day initial production rates per well of 2,425 barrels of oil per day (Bopd), 285 barrels per day (Bpd) of natural gas liquids (NGLs) and 1.9 million cubic feet per day (MMcfd) of natural gas.

In Gonzales County, the Lepori Unit 4H had 30-day initial production rates of 2,915 Bopd, 370 Bpd of NGLs and 2.4 MMcfd of natural gas.  In the western Eagle Ford in McMullen County, the Naylor Jones Unit 31-1H had 30-day initial production rates of 1,780 Bopd, 165 Bpd of NGLs and 1.1 MMcfd of natural gas.

In 2016, EOG plans to complete approximately 150 net wells in the Eagle Ford, compared to 329 net wells completed in 2015.

Delaware Basin

2015 was an important year for EOG in the Delaware Basin where EOG increased its estimated net resource potential by 1.0 BnBoe.  With approximately 2.35 BnBoe in total estimated net resource potential, EOG possesses a premier position in the Permian’s best horizontal oil basin.  EOG made significant advances in the basin in 2015 by expanding its technical understanding and improving returns by increasing well productivity and reducing costs.

In the Delaware Basin Wolfcamp, EOG completed a dozen wells in the fourth quarter 2015 with average 30-day initial production rates per well of 1,495 Bopd, 300 Bpd of NGLs and 2.5 MMcfd of natural gas.

EOG’s 2016 plans for the Delaware Basin include completing approximately 75 net wells versus 74 net wells completed in 2015.

North Dakota Bakken and Rockies

EOG continues to advance its high-potential Rockies oil plays.  In 2015, EOG added 600 million barrels of oil equivalent (MMBoe) to its Bakken net resource potential estimate, bringing EOG’s total net resource potential estimate to approximately 1.0 BnBoe.  EOG has decades of drilling inventory in this world-class oil basin.

During 2015, EOG continued to delineate its Powder River Basin and DJ Basin oil plays.  In the fourth quarter 2015, EOG completed several wells in the Powder River Basin Turner oil play.

EOG

Drilling in the Bakken

The Blade 202-2116H and the Flatbow 602-1621H had 30-day initial production rates of 1,300 Bopd, 120 Bpd of NGLs and 1.4 MMcfd of natural gas, and 1,280 Bopd, 145 Bpd of NGLs and 1.7 MMcfd of natural gas, respectively.

In 2016, EOG plans to complete approximately 35 net wells in these plays, compared to 48 net wells in 2015.

 

Reserves

At year-end, total company net proved reserves were 2,118 MMBoe, comprised of 52 per cent crude oil and condensate, 18 per cent NGLs and 30 per cent natural gas.  Net proved reserve additions, excluding revisions due to price, replaced 192 per cent of EOG’s 2015 production at a finding and development cost of $11.91 per barrel of oil equivalent.

Revisions due to price reduced net proved reserves by 574 MMBoe.  Driven by declines in commodity prices, total company net proved reserves decreased 15 per cent in 2015.  (For more reserves detail, including calculation of reserve replacement ratios and reserve replacement costs, please refer to the attached tables.)

For the 28th consecutive year, internal reserve estimates were within 5 percent of estimates independently prepared by DeGolyer and MacNaughton.

Hedging Activity

For the period March 1 through Aug. 31, 2016, EOG has natural gas financial price swap contracts in place for 60,000 million British thermal units (MMBtu) per day at a weighted average price of $2.49 per MMBtu.  EOG has no crude oil financial price contracts in place.  A comprehensive summary of natural gas derivative contracts is provided in the attached tables.

Capital Structure

At December 31, 2015, EOG’s total debt outstanding was $6.7 billion with a debt-to-total capitalization ratio of 34 percent. Taking into account cash on the balance sheet of $719 million at year-end, EOG’s net debt was $5.9 billion with a net debt-to-total capitalization ratio of 31 percent. A reconciliation of non-GAAP measures to GAAP measures is provided in the attached tables.

Dividend

The board of directors declared a dividend of $0.1675 per share on EOG’s Common Stock, payable April 29, 2016, to stockholders of record as of April 15, 2016.  The indicated annual rate is $0.67 per share.

Posted in: Energy Financial

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