HOUSTON, March 16, 2020 /PRNewswire/ --
Exploration and development expenditures for 2020 are now expected to range from $4.3 billion to $4.7 billion, including facilities and gathering, processing and other expenditures, and excluding acquisitions and non‐cash exchanges. Net cash from operating activities is expected to fund both capital expenditures and dividend payments assuming mid-$30 oil prices for the remainder of 2020. The revised capital plan supports full-year 2020 crude oil production of 446,000 to 466,000 barrels of oil per day, approximately flat compared to full-year 2019 levels.
Given the current commodity price environment, EOG has elected to reduce activity across its operating areas. The company plans to focus its drilling operations in the Delaware Basin and South Texas Eagle Ford and continue funding projects that support the long-term value of the company, including targeted infrastructure, exploration and environmental projects.
"Our first priority is to generate high returns with every dollar we spend even at low oil prices," said William R. "Bill" Thomas, Chairman and Chief Executive Officer. "EOG's premium drilling strategy is the most strict reinvestment hurdle rate in the industry. With oil around $30 our 2020 premium drilling program is expected to generate more than 30% direct after-tax rate of return. Our commitment to reinvesting at high returns never wavers."
EOG's strategy of maintaining exceptional financial strength leaves it well positioned to sustain its business model through volatile commodity price environments. At December 31, 2019, EOG's total debt outstanding was $5.2 billion for a debt-to-total capitalization ratio of 19 percent. Considering $2.0 billion of cash on the balance sheet at the end of the fourth quarter, EOG's net debt-to-total capitalization ratio was 13 percent. For definitions and the reconciliation of non‐GAAP measures to GAAP measures referenced herein, please refer to the attached tables.
"Our business is more resilient today than it has ever been in the company's history," said Thomas. "By significantly improving the economics of our premium inventory, maintaining operational flexibility and strengthening our balance sheet, we are well positioned to weather the storms of low commodity prices."
EOG Resources plans to provide a more comprehensive operational and financial update for the 2020 plan with the release of its first quarter 2020 results.
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.
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. Because we provide these measures on a forward-looking basis, we cannot reliably or reasonably predict certain of the necessary components of the most directly comparable forward-looking GAAP measures, such as future impairments and future changes in working capital. Accordingly, we are unable to present a quantitative reconciliation of such forward-looking, non-GAAP financial measures to the respective most directly comparable forward-looking GAAP financial measures. Management believes these forward-looking, non-GAAP measures may be a useful tool for the investment community in comparing EOG's forecasted financial performance to the forecasted financial performance of other companies in the industry. 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:
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, 2019, 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.
EOG RESOURCES, INC.
Direct After-Tax Rate of Return (ATROR)
The calculation of our direct after-tax rate of return (ATROR) with respect to our capital expenditure program for a particular play or well is based on the estimated recoverable reserves ("net" to EOG's interest) for all wells in such play or such well (as the case may be), the estimated net present value (NPV) of the future net cash flows from such reserves (for which we utilize certain assumptions regarding future commodity prices and operating costs) and our direct net costs incurred in drilling or acquiring (as the case may be) such wells or well (as the case may be). As such, our direct ATROR with respect to our capital expenditures for a particular play or well cannot be calculated from our consolidated financial statements.
Based on Cash Flow and Time Value of Money
- Estimated future commodity prices and operating costs
- Costs incurred to drill, complete and equip a well, including facilities
Excludes Indirect Capital
- Gathering and Processing and other Midstream
- Land, Seismic, Geological and Geophysical
Payback ~12 Months on 100% Direct ATROR Wells
First Five Years ~1/2 Estimated Ultimate Recovery Produced but ~3/4 of NPV Captured
EOG RESOURCES, INC.
Reconciliation of Net Debt and Total Capitalization
Calculation of Net Debt-to-Total Capitalization Ratio
(Unaudited; in millions, except ratio data)
The following chart reconciles Current and Long-Term Debt (GAAP) to Net Debt (Non-GAAP) and Total Capitalization (GAAP) to Total Capitalization (Non-GAAP), as used in the Net Debt-to-Total Capitalization ratio calculation. A portion of the cash is associated with international subsidiaries; tax considerations may impact debt paydown. EOG believes this presentation may be useful to investors who follow the practice of some industry analysts who utilize Net Debt and Total Capitalization (Non-GAAP) in their Net Debt-to-Total Capitalization ratio calculation. EOG management uses this information for comparative purposes within the industry.
Total Stockholders' Equity - (a)
Current and Long-Term Debt (GAAP) - (b)
Net Debt (Non-GAAP) - (c)
Total Capitalization (GAAP) - (a) + (b)
Total Capitalization (Non-GAAP) - (a) + (c)
Debt-to-Total Capitalization (GAAP) - (b) / [(a) + (b)]
Net Debt-to-Total Capitalization (Non-GAAP) - (c) / [(a) + (c)]
SOURCE EOG Resources, Inc.