EOG Resources Updates 2020 Capital Plan; Premium Strategy Proves Resilient at Low Oil Prices

HOUSTON, March 16, 2020 /PRNewswire/ --

    --  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

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




                                                 
              
                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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SOURCE EOG Resources, Inc.