EOG RESOURCES, INC. Item 7.01 Regulation FD Disclosure.
I. Price Risk Management
With the objective of enhancing the certainty of future revenues and cash flows, from time to time EOG enters into financial price swap, option, swaption, collar and basis swap contracts. EOG accounts for financial commodity derivative contracts using the mark-to-market accounting method. For the fourth quarter of 2022, EOG anticipates a net gain of$233 million on the mark-to-market of its financial commodity derivative contracts. During the fourth quarter of 2022, the net cash paid for settlements of financial commodity derivative contracts was$244 million . Consistent with EOG's customary practice, in calculating Adjusted Net Income (Loss) (Non-GAAP) for the fourth quarter of 2022, EOG expects to (among other expected adjustments) subtract from reported Net Income (Loss) the anticipated gains of$233 million on the mark-to-market of its financial commodity derivative contracts and the$244 million of net cash paid for settlements of financial commodity derivative contracts, as presented in the summary below (in millions). Three Months Ended December 31, 2022 Before Tax Reported Net Income (Loss) (GAAP) $ **
Adjustments:
Gains on Mark-to-Market Financial Commodity Derivative Contracts (233)
Net Cash Payments for Settlements of Financial Commodity Derivative Contracts
(244)
Other Adjustments **
Adjusted Net Income (Loss) (Non-GAAP) $ **
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** To be reported as part of EOG's press release scheduled to be furnished on
Form 8-K on
For the quarter endedDecember 31, 2022 , NYMEX WTI crude oil averaged$82.63 per Bbl, and NYMEX natural gas at Henry Hub averaged$6.27 per MMBtu. EOG's actual realizations for crude oil and natural gas for the quarter endedDecember 31, 2022 , differ from these NYMEX prices due to delivery location (basis), quality and appropriate revenue adjustments. EOG's actual realizations for NGLs are influenced by the components extracted, including ethane, propane, butane and natural gasoline, among others, and the respective market pricing for each component. In connection with its financial commodity derivative contracts, EOG had$324 million of collateral posted atDecember 31, 2022 , compared to$686 million of collateral posted atSeptember 30, 2022 . The amount of posted collateral will increase or decrease based on fluctuations in forward NYMEX WTI andHenry Hub prices. EOG expects this collateral to be applied to the settlement of financial commodity derivative contracts if market prices remain above contract prices. 2 --------------------------------------------------------------------------------
II. Financial Commodity Derivative Transactions
Presented below is a comprehensive summary of EOG's financial commodity derivative contracts as ofDecember 31, 2022 . For a summary of EOG's financial commodity derivative contracts as ofOctober 28, 2022 , see "Financial Commodity Derivative Transactions" in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations of EOG's Quarterly Report on Form 10-Q for the quarterly period endedSeptember 30, 2022 , filed onNovember 3, 2022 . Crude Oil Financial Price Swap Contracts Contracts Sold Contracts Purchased Weighted Weighted Average Average Price Period Settlement Index Volume (MBbld) Price ($/Bbl) Volume (MBbld) ($/Bbl) January - March 2022 (closed) NYMEX WTI 140 $ 65.58 - $ - April - June 2022 (closed) NYMEX WTI 140 65.62 - - July -September 2022 (closed) NYMEX WTI 140 65.59 - - October -December 2022 (closed) (1) NYMEX WTI 53 66.11 - - October -December 2022 (closed) NYMEX WTI 87 65.41 87 88.85 January -March 2023 (closed) (1) (2) NYMEX WTI 55 67.96 - - January - March 2023 NYMEX WTI 95 67.90 6 102.26 April - May 2023 (closed) (1) NYMEX WTI 29 68.28 - - April - May 2023 NYMEX WTI 91 67.63 2 98.15 June 2023 (closed) (1) NYMEX WTI 118 67.77 - - June 2023 NYMEX WTI 2 69.10 2 98.15 July -September 2023 (closed) (1) NYMEX WTI 100 70.15 - - October -December 2023 (closed) (1) NYMEX WTI 69 69.41 - - _________________ (1) In the second quarter of 2022, EOG executed the early termination provision granting EOG the right to terminate certain of itsOctober 2022 -December 2023 crude oil financial price swap contracts which were open at that time. EOG paid net cash of$593 million for the settlement of these contracts. (2) In the third quarter of 2022, EOG executed the early termination provision granting EOG the right to terminate certain of itsJanuary 2023 -March 2023 crude oil financial price swap contracts which were open at that time. EOG paid net cash of$63 million for the settlement of these contracts. Crude Oil Basis Swap Contracts Contracts Sold Weighted Average Price Volume Differential Period Settlement Index (MBbld) ($/Bbl) NYMEX WTI Roll Differential January - December 2022 (closed) (1) 125 $ 0.15
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(1) This settlement index is used to fix the differential in pricing between the NYMEX calendar month average and the physical crude oil delivery month.
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Natural Gas Financial Price Swap Contracts
Contracts Sold
Volume Weighted Average
Period Settlement Index (MMBtud in thousands) Price ($/MMBtu)
January - September 2022 (closed) NYMEX Henry Hub 725 $ 3.57
October - December 2022 (closed)
(1) NYMEX Henry Hub 425 3.05
October - December 2022 (closed) NYMEX Henry Hub 300 4.32
January - December 2023 (closed)
(1) NYMEX Henry Hub 425 3.05
January 2023 (closed) NYMEX Henry Hub 300 3.36
February - December 2023 NYMEX Henry Hub 300 3.36
January - December 2024 NYMEX Henry Hub 725 3.07
January - December 2025 NYMEX Henry Hub 725 3.07
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(1) In the second quarter of 2022, EOG executed the early termination provision
granting EOG the right to terminate certain of its October 2022 - December 2023
natural gas financial price swap contracts which were open at that time. EOG
paid net cash of $735 million for the settlement of these contracts.
Natural Gas Basis Swap Contracts
Contracts Sold
Weighted Average Price
Volume Differential
Period Settlement Index (MMBtud in thousands) ($/MMBtu)
January - December 2022 NYMEX Henry Hub HSC Differential
(closed) (1) 210 $ 0.01
January - December 2023 NYMEX Henry Hub HSC Differential 135 0.01
January - December 2024 NYMEX Henry Hub HSC Differential 10 0.00
January - December 2025 NYMEX Henry Hub HSC Differential 10 0.00
_________________(1) This settlement index is used to fix the differential between pricing at the Houston Ship Channel and NYMEX Henry Hub prices.
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--------------------------------------------------------------------------------III. Forward-Looking Statements
Information Regarding Forward-Looking Statements
This Current Report on Form 8-K includes 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, goals, returns and rates of return, 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 forwardlooking statements. EOG
typically uses words such as "expect," "anticipate," "estimate," "project,"
"strategy," "intend," "plan," "target," "aims," "ambition," "initiative,"
"goal," "may," "will," "focused on," "should" and "believe" or the negative of
those terms or other variations or comparable terminology to identify its
forwardlooking 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 and rates of
return, replace or increase drilling locations, reduce or otherwise control
operating costs and capital expenditures, generate cash flows, pay down or
refinance indebtedness, achieve, reach or otherwise meet initiatives, plans,
goals, ambitions or targets with respect to emissions, other environmental
matters, safety matters or other ESG (environmental/social/governance) matters,
or pay and/or increase dividends are forwardlooking 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.
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 (NGLs), 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 production
of crude oil and condensate, NGLs and natural gas;
•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,
refining, and export facilities;
•the availability, cost, terms and timing of issuance or execution of 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 climate change-related regulations, policies and initiatives (for
example, with respect to air emissions); tax laws and regulations (including,
but not limited to, carbon tax legislation); environmental, health and safety
laws and regulations relating to disposal of produced water, drilling fluids and
other wastes, hydraulic fracturing and access to and use of water; laws and
regulations affecting the leasing of acreage and permitting for oil and gas
drilling and the calculation of royalty payments in respect of oil and gas
production; laws and regulations imposing additional permitting and disclosure
requirements, additional operating restrictions and 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;
•the impact of climate change-related policies and initiatives at the corporate
and/or investor community levels and other potential developments related to
climate change, such as (but not limited to) changes in consumer and
industrial/commercial behavior, preferences and attitudes with respect to the
generation and consumption of energy; increased availability of, and increased
consumer and industrial/commercial demand for, competing energy sources
(including alternative energy sources); technological advances with respect to
the generation, transmission, storage and consumption of energy; alternative
fuel requirements; energy conservation measures; decreased demand for, and
availability of, services and facilities related to the exploration for, and
production of, crude oil, NGLs and natural gas; and negative perceptions of the
oil and gas industry and, in turn, reputational risks associated with the
exploration for, and production of, crude oil, NGLs and natural gas;
•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;
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•the extent to which EOG's third-party-operated crude oil and natural gas
properties are operated successfully, economically and in compliance with
applicable laws and regulations;
•competition in the oil and gas exploration and production industry for the
acquisition of licenses, leases and properties;
•the availability and cost of, and competition in the oil and gas exploration
and production industry for, 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 third parties) of production, gathering, processing, refining, compression,
storage, transportation, and export 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;
•the duration and economic and financial impact of epidemics, pandemics or other
public health issues, including the COVID-19 pandemic;
•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 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 of EOG's Annual Report
on Form 10-K for the fiscal year ended December 31, 2021 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.
Glossary:
$/Bbl Dollars per barrel
$/MMBtu Dollars per million British Thermal Units
Bbl Barrel
EOG EOG Resources, Inc.
HSC Houston Ship Channel
MBbld Thousand barrels per day
MMBtu Million British Thermal Units
MMBtud Million British Thermal Units per day
NGL Natural Gas Liquids
NYMEX New York Mercantile Exchange
WTI West Texas Intermediate
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