EOG Resources Reports Third Quarter 2005 Results
EOG Resources (NYSE: EOG) today reported third quarter 2005 net income available to common of $341.9 million, or $1.40 per share. This compares to third quarter 2004 net income available to common of $169.6 million, or $0.71* per share.
Last year's third quarter results included a $22.7 million ($14.6 million after tax, or $0.06* per share) gain on the mark-to-market of financial commodity price transactions. The net cash outflow from the settlement of financial commodity price transactions was $32.3 million ($20.9 million after tax, or $0.09* per share). Reflecting these items, third quarter 2004 adjusted non-GAAP net income available to common was $134.1 million, or $0.56* per share. (Please refer to the table below for the reconciliation of adjusted non-GAAP net income available to common to net income available to common.)
* Third quarter 2004 per share amounts are restated for the two-for-one stock split effective March 1, 2005. Operational Highlights
EOG's daily production increased 13.7 percent as compared to the third quarter 2004. Total production from the United States and Canada increased 12.0 percent. In the United States, natural gas production increased 16.2 percent from the third quarter last year. Total production from Trinidad and the United Kingdom North Sea increased 20.9 percent.
In Trinidad and Tobago, during late September EOG began supplying natural gas under a new contract to the National Gas Company of Trinidad and Tobago as feedstock for a new methanol plant. The term of the contract runs through 2020. While monthly sales will vary, for the first four years of the contract, EOG is expected to sell an average of approximately 60 million cubic feet per day (MMcfd), net to the plant. Also in Trinidad, EOG has contracted for a rig to drill the Red Snapper well, EOG's first prospect on Block 4(a). Pending rig arrival, this well will be drilled in early 2006. In addition, EOG has confirmed its drilling plans for the Deep Ibis prospect, in which EOG has a 51 percent working interest. BP will operate the drilling phase of the well, which is scheduled to spud in January. Targeting new horizons and significant reserve potential, the prospect will be the deepest well drilled offshore Trinidad to date.
"The continued successful execution of EOG's strategy and robust commodity prices are reflected in our third quarter results. With an extensive inventory of prospects throughout our operations, we continue to grow EOG at high reinvestment rates of return through the drillbit," said Mark G. Papa, Chairman and Chief Executive Officer.
Production increases in the United States during the quarter reflect strong drilling results from the Barnett Shale Play in Central Texas, combined with positive results in South Texas, East Texas and North Louisiana. Following are specific well results reported on a gross production basis.
In the Barnett Shale Play, EOG is operating nine rigs in Johnson County where it completed several wells in early August on its western acreage. The Coppenger Unit #1H, in which EOG has an 83 percent working interest, came on-line at 6.6 MMcfd of natural gas. EOG has a 100 percent working interest in the Kolar Unit #1H, which came on-line at 6.1 MMcfd. In eastern Johnson County, EOG completed the Setback D Unit #1H in mid-September at an initial rate of 7.5 MMcfd. EOG has an 81 percent working interest in this well. The Campbell Unit #1H in eastern Johnson County, in which EOG has a 100 percent working interest, came on-line last week at 7.7 MMcfd.
"We believe the Campbell Unit #1H is the best Barnett well completed to date by any operator in Johnson County. EOG's drilling and reserve recovery results continue to improve as we refine our Barnett horizontal completion techniques," Papa said.
In the western counties of the Barnett Shale Play, EOG is operating one rig in Erath County and another in Parker County. While operational results from these areas are encouraging, further optimization is required before a high level of drilling activity commences, currently projected for mid-2006.
In South Texas, EOG recently completed two Lobo wells in Webb County. The Slator Ranch H#4, in which EOG has a 100 percent working interest, was drilled to 11,300 feet. The well came on-line in July at an initial production rate of 9.8 MMcfd. The Slator Ranch S#1, in which EOG has a 44 percent working interest, was drilled to 11,500 feet and came on-line at 13.0 MMcfd. In the Frio Trend in San Patricio County, EOG completed the 72 percent working interest Crites A-4 well for 6.0 MMcfd and 250 barrels of oil per day.
In the East Texas Branton Field, the AB Johnson #6, in which EOG has a 75 percent working interest, encountered 80 feet of natural gas pay. The well appears to be analogous to a six billion cubic feet equivalent well drilled earlier in the year. From North Louisiana, EOG reported that the recently completed Osborne 19 #1 Alt. in the South Vernon Field in Jackson Parish, La. tested over 16 MMcfd and after 30 days is producing 12 MMcfd. EOG has a 100 percent working interest in this well. In the Driscoll Mountain Field, Bienville Parish, La., the Martin Timber 20 #1 Alt. tested 13 MMcfd of natural gas from two separate zones. A third zone is yet to be completed. EOG has a 38 percent working interest in this well. The company plans to run two rigs in this field through year-end.
"We continue to see favorable organic growth across North America from our
extensive drilling program," Papa said. "Based on these results, we are on
target to achieve 15.5 percent organic production growth this year, while
significantly reducing our net debt at the same time. We expect to achieve
our targeted 9.5 percent for 2006 and average 9 percent overall organic growth
for 2006 through 2010."
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