EOG Resources Q4 Profit Jumps

EOG Resources, Inc. (EOG) reported fourth quarter 2007 net income available to common stockholders of $358.0 million, or $1.44 per share. This compares to fourth quarter 2006 net income available to common stockholders of $237.2 million, or $0.96 per share. For the full year 2007, EOG reported net income available to common stockholders of $1,083.3 million or $4.37 per share as compared to $1,288.9 million, or $5.24 per share, for the full year 2006.

The results for the fourth quarter 2007 included a tax benefit of $30.3 million ($0.12 per share) related to a Canadian federal tax rate reduction, a $2.3 million ($0.01 per share) charge related to the premium and fees on the repurchase of $38 million of EOG's Series B preferred stock and a previously disclosed $45.2 million ($29.1 million after tax, or $0.12 per share) net gain on the mark-to-market of financial commodity price transactions. During the quarter, the net cash realized related to financial commodity contracts was $28.8 million ($18.5 million after tax, or $0.08 per share). Consistent with some analysts' practice of matching realizations to settlement months and making certain other adjustments to exclude one-time items, adjusted non-GAAP net income available to common stockholders for the quarter was $319.4 million, or $1.29 per share. Adjusted non-GAAP net income available to common stockholders for the fourth quarter 2006 was $252.0 million, or $1.02 per share. On a similar basis, eliminating the items detailed in the attached table, adjusted non-GAAP net income available to common stockholders for the full year 2007 was $1,074.2 million, or $4.34 per share, and for the full year 2006 was $1,189.4 million, or $4.83 per share. (Please refer to the attached tables for the reconciliation of adjusted non-GAAP net income available to common stockholders to net income available to common stockholders.)

"Despite volatile natural gas prices, 2007 was an excellent year for EOG. Total company production grew 11 percent and total reserves increased 14 percent at an attractive replacement cost. We were able to accomplish these goals while maintaining a sound balance sheet," said Mark G. Papa, Chairman and Chief Executive Officer. "These positive results are a reflection of our consistent game plan -- to grow organically through the drillbit with a focus on high returns supported by a very conservative capital structure."

At December 31, 2007, total company reserves were approximately 7.7 trillion cubic feet equivalent, an increase of 944 billion cubic feet equivalent (Bcfe), or 14 percent higher than year-end 2006.

For the 20th consecutive year, internal reserve estimates were within 5 percent of those prepared by the independent reserve engineering firm of DeGolyer and MacNaughton. The firm prepared a complete independent engineering analysis of properties containing 79 percent of EOG's proved reserves on a Bcfe basis.

At December 31, 2007, EOG's total debt outstanding was $1,185 million, and cash on the balance sheet was $54 million, for net debt of $1,131 million. (Please refer to the attached tables for the reconciliation of non-GAAP net debt to long-term debt.) EOG's debt-to-total capitalization ratio was 14 percent at December 31, 2007. Further simplifying its capital structure, EOG repurchased the remaining $43 million outstanding Series B preferred stock in December 2007 and January 2008.

Consistent with EOG's strategy of adding new reserves at high rates of return through organic growth, the company plans to continue expansion of its North American drilling program. The company expects significant production gains from two high rate of return plays, the Fort Worth Barnett Shale and North Dakota Bakken.

EOG has increased its total crude oil and condensate production growth target from the previously stated 33 percent to 36 percent, primarily as a result of expanded drilling operations in the North Dakota Bakken. Natural gas liquids volumes are expected to rise by 40 percent over 2007 as EOG increases drilling activity in the western extension counties of the Fort Worth Barnett Shale and processes more of its rich natural gas.

EOG's 2008 planned exploration and development capital program is approximately $4.1 billion, which excludes acquisitions, gathering systems, processing plant and other expenditures of approximately $280 million. Considering the anticipated proceeds from the previously announced divestiture of its Appalachian shallow natural gas assets, EOG is targeting net debt at year-end 2008 to be relatively flat with December 31, 2007.

"Based on the current North American natural gas market in which we expect 2008 Henry Hub gas prices will average at least $7.50, we are targeting approximately 15 percent total company production growth in 2008, the mid-point of our previously stated range. Essentially all of our projected production growth will emanate from our U.S. operations, since we expect production from Canada, Trinidad and the United Kingdom to be relatively flat with 2007 levels," said Papa. "Although we have a strong hedge position in place, by closely monitoring natural gas fundamentals and staying flexible, we are positioned to adjust our 2008 drilling activity in response to a higher or lower gas price environment while maintaining a conservative balance sheet."

Following a 50 percent increase in 2007, EOG's Board of Directors again increased the cash dividend on the common stock. Effective with the dividend payable on April 30, 2008 to holders of record as of April 16, 2008, the quarterly dividend on the common stock will be $0.12 per share. The indicated annual rate of $0.48 per share reflects a 33 percent increase from 2007, the eighth increase in nine years.

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