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Section 1: 8-K (8-K)

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false0000821189 0000821189 2020-03-16 2020-03-16


 
 
 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 16, 2020

_______________

EOG RESOURCES, INC.
(Exact name of registrant as specified in its charter)

Delaware
1-9743
47-0684736
(State or other jurisdiction
 of incorporation)
(Commission File
 Number)
(I.R.S. Employer
Identification No.)

1111 Bagby, Sky Lobby 2
Houston, Texas  77002
(Address of principal executive offices) (Zip Code)

713-651-7000
(Registrant's telephone number, including area code)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
EOG
New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


 
 
 
 
 




EOG RESOURCES, INC.

Item 7.01     Regulation FD Disclosure.

On March 16, 2020, EOG Resources, Inc. issued a press release announcing an update to its full-year 2020 capital plan and crude oil production volume guidance. A copy of this press release is attached as Exhibit 99.1 to this filing and is incorporated herein by reference. This information shall not be deemed to be "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing under the Securities Act of 1933, as amended, or Securities Exchange Act of 1934, as amended.

Item 9.01     Financial Statements and Exhibits.

(d)    Exhibits

  99.1    Press Release of EOG Resources, Inc. dated March 16, 2020.

104    Cover Page Interactive Data File (formatted as Inline XBRL).



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
EOG RESOURCES, INC.
(Registrant)
 
 
 
 
 
 
 
 
 
Date: March 16, 2020
By:
/s/ TIMOTHY K. DRIGGERS
Timothy K. Driggers
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)


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Section 2: EX-99.1 (PRESS RELEASE OF EOG RESOURCES, INC.)

Exhibit
EXHIBIT 99.1


403303499_eoglogoa34.jpg

March 16, 2020

EOG Resources Updates 2020 Capital Plan; Premium Strategy Proves Resilient at Low Oil Prices
Reduces 2020 Capital Plan 31% to $4.3 to $4.7 Billion and Targets Flat YoY Crude Oil Production Volumes
Revised Plan Generates Strong Returns at $30 Oil Price
2020 Capital Expenditures and Dividend Funded with Net Cash from Operating Activities at Mid-$30 Oil Prices for the Remainder of 2020
Includes Funding for High-Return Drilling, and Targeted Infrastructure, Exploration and Environmental Projects

HOUSTON - EOG Resources, Inc. (EOG) today updated its full-year 2020 capital plan as a result of the significant decline and increased volatility of commodity prices.

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.

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. 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:

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 (i) economically develop its acreage in, (ii) produce reserves and achieve anticipated production levels and rates of return from, (iii) decrease or otherwise control its drilling, completion, operating and capital costs related to, and (iv) maximize reserve recovery from, its existing and future crude oil and natural gas exploration and development projects and associated potential and existing drilling locations;
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;



security threats, including cybersecurity threats and disruptions to our business and operations from breaches of our information technology systems, physical breaches of our facilities and other infrastructure or breaches of the information technology systems, facilities and infrastructure of third parties with which we transact business;
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 drilling, completing and operating costs with respect to such properties;
the extent to which EOG's fourth-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 fourth 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; and
the other factors described under ITEM 1A, Risk Factors, on pages 13 through 23 of EOG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 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, 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.
 
Direct ATROR
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.
 
 
At December 31,
2019
 
Total Stockholders' Equity - (a)
$
21,641

 
 
Current and Long-Term Debt (GAAP) - (b)
5,175

Less: Cash
(2,028
)
Net Debt (Non-GAAP) - (c)
3,147

 
 
Total Capitalization (GAAP) - (a) + (b)
$
26,816

 
 
Total Capitalization (Non-GAAP) - (a) + (c)
$
24,788

 
 
Debt-to-Total Capitalization (GAAP) - (b) / [(a) + (b)]
19
%
 
 
Net Debt-to-Total Capitalization (Non-GAAP) - (c) / [(a) + (c)]
13
%


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