EOG EOG Resources Inc

HOUSTON, Aug. 6, 2015 /PRNewswire/ --

• Increases Returns in All Key Plays with Improved Well Productivity, Lower Costs
• Maintains 2015 Total Company Oil Production Guidance; Reduces 2015 Capital Spending Guidance by $200 million
• Announces New Williston Basin Resource Potential
  • ­Increases Bakken and Three Forks Net Reserve Potential by 600 MMBoe to 1.0 BnBoe
  • ­Increases Drilling Inventory to 1,540 Net Wells
  • ­Completes Record Bakken Well with Latest Advanced Completions Technology
• Exceeds Second Quarter Production Forecast and Reduces Per Unit Lease Operating Costs by 17% Versus First Quarter

EOG Resources, Inc. (NYSE: EOG) (EOG) today reported second quarter 2015 net income of $5.3 million, or $0.01 per share. This compares to second quarter 2014 net income of $706.4 million, or $1.29 per share.

Adjusted non-GAAP net income for the second quarter 2015 was $153.1 million, or $0.28 per share, compared to the same prior year period adjusted non-GAAP net income of $796.0 million, or $1.45 per share. Adjusted non-GAAP net income is calculated by matching realizations to settlement months and making certain other adjustments in order to exclude one-time items. (Please refer to the attached tables for the reconciliation of non-GAAP measures to GAAP.)

Higher cash settlements from commodity derivative contracts and lower operating expenses were offset by lower commodity price realizations, resulting in decreases in adjusted non-GAAP net income, discretionary cash flow and EBITDAX during the second quarter 2015 compared to the second quarter 2014. (Please refer to the attached tables for the reconciliation of non-GAAP measures to GAAP measures.)

Operational Highlights
In the second quarter 2015, total crude oil and condensate production increased by one percent compared to the second quarter 2014, excluding production related to EOG's Canadian operations which were divested in December 2014. On the same basis, overall total company production decreased three percent compared to the same prior year period. Total capital expenditures decreased 40 percent compared to the prior year.

In the second quarter 2015, EOG continued to improve well productivity and reduce completed well costs and operating costs. The integration of the latest high-density completion designs in combination with improved wellbore placement resulted in increased well productivity. EOG achieved significant well and operating cost reductions through operational efficiencies and service cost reductions. The combination of increased well productivity and lower costs is enabling the company to make higher returns at lower oil prices.

"EOG's return-driven culture is responding extremely well to low oil prices, and we are excited about the company's continued improvement," said William R. "Bill" Thomas, Chairman and Chief Executive Officer. "The company is generating good returns in all our key assets with $50 oil. Our goal is to continue our progress and remain the industry leader in capital returns."

2015 Capital Plan Update
As a result of productivity improvements and cost reductions, EOG is maintaining full year 2015 oil production guidance and reducing full year 2015 capital spending guidance by $200 million, excluding acquisitions. The company is choosing to refrain from growing oil production into an over-supplied market. EOG's focus in 2015 is on capital efficiency to improve returns and quickly transition the company to be successful in a lower commodity price environment.

North Dakota Bakken
EOG increased its net resource potential in the Bakken and Three Forks plays in the second quarter 2015 from approximately 400 million barrels of oil equivalent (MMBoe) to 1.0 billion barrels of oil equivalent (BnBoe) and grew total net drillable locations from 580 to 1,540. Successful down-spacing and advances in completion technology have generated excellent well results and led to the expanded resource potential. As a result, EOG has decades of high-return drilling potential ready to be developed.

"Our team's outstanding technical and operational advances have enabled us to more than double prior estimates for our position in the Bakken and Three Forks," said Thomas. "EOG's Bakken and Three Forks assets along with the company's Eagle Ford and Delaware Basin positions continue to grow in both size and quality. With these premier assets, EOG is uniquely positioned for high-return growth in a low oil price environment."

In the second quarter 2015, the company continued to make well productivity gains. EOG completed an industry record Bakken well using enhanced high-density completion techniques. The Riverview 102-32H came on line producing 3,395 barrels of oil per day (Bopd) and 6.0 million cubic feet per day (MMcfd) of rich natural gas.

South Texas Eagle Ford
EOG continued to realize strong rates of return and capital efficiencies in the Eagle Ford, EOG's largest play. High-density completions, enhanced wellbore targeting and lower completed well costs are dramatically improving EOG's results across the entire Eagle Ford oil window.

During the second quarter 2015 in the eastern Eagle Ford in Gonzales County, the Otto Unit 3H and 9H, a two-well pattern, had average initial production rates per well of 4,405 Bopd, 515 barrels per day (Bpd) of NGLs and 3.4 MMcfd of natural gas. Also in Gonzales County, the Lefevre Unit 17H – 19H (three-well pattern) had average initial production rates per well of 4,150 Bopd, 405 Bpd of NGLs and 2.7 MMcfd of natural gas.

In McMullen County in the western Eagle Ford, EOG completed the Naylor Jones Unit 11 1H and 2H two-well pattern, which had average initial production rates per well of 3,150 Bopd, 170 Bpd of NGLs and 1.1 MMcfd of natural gas.

Delaware Basin
In the Delaware Basin, EOG continued to actively test and develop its positions in the Leonard, the Second Bone Spring Sand and the upper Wolfcamp, as well as significantly reduce completed well costs and operating costs.

In the Leonard, EOG completed the Gem 36 State Com #1H in Lea County, N.M., which had initial production rates of 2,200 Bopd, 460 Bpd of NGLs and 2.6 MMcfd of natural gas.

In the Second Bone Spring Sand, EOG completed several wells with excellent results. In Lea County, N.M., EOG completed the Dragon 36 State #501H and #502H in a two-well pattern, which had average initial production rates per well of 1,415 Bopd, 115 Bpd of NGLs and 0.9 MMcfd of natural gas. Also in Lea County, N.M., EOG completed the Frazier 34 State Com #501H with an initial flow rate of 1,705 Bopd, 145 Bpd of NGLs and 1.1 MMcfd of natural gas.

In the Wolfcamp in Lea County, N.M., EOG completed the Hearns 27 State Com #703H, which had an initial production rate of 2,830 Bopd, 170 Bpd of NGLs and 1.1 MMcfd of natural gas.

Hedging Activity
For the period August 1 through December 31, 2015, EOG has crude oil financial price swap contracts in place for 10,000 Bopd at a weighted average price of $89.98 per barrel.

For the period September 1 through December 31, 2015, EOG has natural gas financial price swap contracts in place for 175,000 million British thermal units per day at a weighted average price of $4.51 per million British thermal units, excluding unexercised options. (For a comprehensive summary of crude oil and natural gas derivative contracts, please refer to the attached tables.)

Capital Structure
At June 30, 2015, EOG's total debt outstanding was $6.4 billion for a debt-to-total capitalization ratio of 27 percent. Taking into account cash on the balance sheet of $1.4 billion at June 30, EOG's net debt was $5.0 billion for a net debt-to-total capitalization ratio of 22 percent. (Please refer to the attached tables for the reconciliation of non-GAAP measures to GAAP.)

Conference Call August 7, 2015
EOG's second quarter 2015 results conference call will be available via live audio webcast at 9 a.m. Central time (10 a.m. Eastern time) on Friday, August 7, 2015. To listen, log on to www.eogresources.com. The webcast will be archived on EOG's website through August 21, 2015.

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

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

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

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