Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EOG RESOURCES, INC.

Overview

EOG Resources, Inc., together with its subsidiaries (collectively, EOG), is one of the largest independent (non-integrated) crude oil and natural gas companies in the United States with proved reserves in the United States and Trinidad. EOG operates under a consistent business and operational strategy that focuses predominantly on maximizing the rate of return on investment of capital by controlling operating and capital costs and maximizing reserve recoveries. Pursuant to this strategy, each prospective drilling location is evaluated by its estimated rate of return. This strategy is intended to enhance the generation of cash flow and earnings from each unit of production on a cost-effective basis, allowing EOG to deliver long-term growth in shareholder value and maintain a strong balance sheet. EOG implements its strategy primarily by emphasizing the drilling of internally generated prospects in order to find and develop low-cost reserves. Maintaining the lowest possible operating cost structure, coupled with efficient and safe operations and robust environmental stewardship practices and performance, is integral in the implementation of EOG's strategy.

Commodity Prices**.** Prices for crude oil and condensate, natural gas liquids (NGLs) and natural gas have historically been volatile. This volatility is expected to continue due to the many uncertainties associated with the world political and economic environment and the global supply of, and demand for, crude oil, NGLs and natural gas and the availability of other energy supplies, the relative competitive relationships of the various energy sources in the view of consumers and other factors.

The market prices of crude oil and condensate, NGLs and natural gas impact the amount of cash generated from EOG's operating activities, which, in turn, impact EOG's financial position and results of operations.

For the first six months of 2022, the average U.S. New York Mercantile Exchange (NYMEX) crude oil and natural gas prices were $101.44 per barrel and $6.05 per million British thermal units (MMBtu), respectively, representing increases of 64% and 119%, respectively, from the average NYMEX prices for the same period in 2021. Market prices for NGLs are influenced by the components extracted, including ethane, propane and butane and natural gasoline, among others, and the respective market pricing for each component.

The increases in crude oil and natural gas prices during the first six months of 2022 were due to several factors, including the continued recovery in demand for crude oil, natural gas and NGLs from the impacts of the COVID-19 pandemic; low worldwide inventory levels; continued supply restraint by OPEC+ (a consortium of OPEC (Organization of Petroleum Exporting Countries) and certain non-OPEC global producers); and the impact resulting from the ongoing conflict between Russia and Ukraine.

United States. EOG's efforts to identify plays with large reserve potential have proven to be successful. EOG continues to drill numerous wells in large acreage plays, which in the aggregate have contributed substantially to, and are expected to continue to contribute substantially to, EOG's crude oil and condensate, NGLs and natural gas production. EOG has placed an emphasis on applying its horizontal drilling and completion expertise to unconventional crude oil plays and natural gas plays.

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During the first six months of 2022, EOG continued to focus on increasing drilling, completion and operating efficiencies, to improve well performance and to mitigate inflationary pressures on operating costs (e.g., costs for fuel and tubulars) resulting from supply chain disruptions, increased demand, labor shortages and other factors, including the ongoing conflict between Russia and Ukraine. In addition, EOG continued to evaluate certain potential crude oil and condensate, NGLs and natural gas exploration and development prospects and to look for opportunities to add drilling inventory through leasehold acquisitions, farm-ins, exchanges or tactical or bolt-on acquisitions. On a volumetric basis, as calculated using the ratio of 1.0 barrel of crude oil and condensate or NGLs to 6.0 thousand cubic feet of natural gas, crude oil and condensate and NGLs production accounted for approximately 75% of EOG's United States production during both the first six months of 2022 and 2021, respectively. During the first six months of 2022, EOG's drilling and completion activities occurred primarily in the Delaware Basin play, Eagle Ford oil play and Rocky Mountain area. EOG's major producing areas in the United States are in New Mexico and Texas.

Trinidad. In the Republic of Trinidad and Tobago (Trinidad), EOG continues to deliver natural gas under existing supply contracts. Several fields in the South East Coast Consortium Block, Modified U(a) Block, Block 4(a), Modified U(b) Block, the Banyan Field and the Sercan Area have been developed and are producing natural gas which is sold to the National Gas Company of Trinidad and Tobago Limited and its subsidiary (NGC), and crude oil and condensate which is sold to Heritage Petroleum Company Limited (Heritage).

In March 2021, EOG signed a farmout agreement with Heritage, which allows EOG to earn a 65% working interest in a portion of the contract area (EOG Area) governed by the Trinidad Northern Area License. The EOG Area is located offshore the southwest coast of Trinidad. In the first half of 2022, EOG commenced drilling of one net exploratory well, which was determined to be unsuccessful.

In July 2022, EOG amended the natural gas sales contract with NGC to extend the term and provide for an increase in price realizations if index prices for certain commodities exceed specified levels.

EOG continues to make progress on the design and fabrication of a platform and related facilities for its previously announced discovery in the Modified U(a) Block. In the second half of 2022, EOG expects to install the platform together with the related facilities and drill two net exploratory wells and one net development well.

Other International. In Australia, in November 2021, a subsidiary of EOG was granted an exploration permit for the WA-488-P Block, located offshore Western Australia. In 2022, EOG continues to prepare for the drilling of an exploration well which is expected to commence in 2023.

EOG continues to evaluate other select crude oil and natural gas opportunities outside the United States, primarily by pursuing exploitation opportunities in countries where indigenous crude oil and natural gas reserves have been identified.

2022 Capital and Operating Plan**.** Total 2022 capital expenditures are estimated to range from approximately $4.3 billion to $4.7 billion, including facilities and gathering, processing and other expenditures, and excluding acquisitions, non-cash transactions and exploration costs. EOG plans to continue to focus a substantial portion of its exploration and development expenditures in its major producing areas in the United States. In particular, EOG will be focused on United States drilling activity in the Delaware Basin, Eagle Ford oil play, Rocky Mountain area and Dorado gas play where it generates its highest rates-of-return. To further enhance the economics of these plays, EOG expects to continue to improve well performance and to mitigate recent inflationary pressures on operating costs (e.g., costs for fuel and tubulars - see above related discussion) through efficiency gains. Full-year 2022 total crude oil, NGLs and natural gas production is expected to return to pre-pandemic levels. In addition, EOG expects to spend a portion of its anticipated 2022 capital expenditures on leasing acreage, evaluating new prospects, transportation infrastructure and environmental projects.

Management continues to believe EOG has one of the strongest prospect inventories in EOG's history. When it fits EOG's strategy, EOG will make acquisitions that bolster existing drilling programs or offer incremental exploration and/or production opportunities.

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Capital Structure**.** One of management's key strategies is to maintain a strong balance sheet with a consistently below average debt-to-total capitalization ratio as compared to those in EOG's peer group. EOG's debt-to-total capitalization ratio was 19% at both June 30, 2022 and December 31, 2021, respectively. As used in this calculation, total capitalization represents the sum of total current and long-term debt and total stockholders' equity.

At June 30, 2022, EOG maintained a strong financial and liquidity position, including $3.1 billion of cash and cash equivalents on hand and $2.0 billion of availability under its senior unsecured revolving credit facility.

EOG has significant flexibility with respect to financing alternatives, including borrowings under its commercial paper program, bank borrowings, borrowings under its senior unsecured revolving credit facility, joint development agreements and similar agreements and equity and debt offerings.

Dividend Declarations. On February 24, 2022, EOG's Board of Directors (Board) declared a quarterly cash dividend on the common stock of $0.75 per share paid on April 29, 2022, to stockholders of record as of April 15, 2022. The Board also declared on such date a special dividend of $1.00 per share paid on March 29, 2022, to stockholders of record as of March 15, 2022.

On May 5, 2022, the Board declared a quarterly cash dividend on the common stock of $0.75 per share paid on July 29, 2022, to stockholders of record as of July 15, 2022. The Board also declared on such date a special dividend of $1.80 per share paid on June 30, 2022, to stockholders of record as of June 15, 2022.

On August 4, 2022, the Board declared a special dividend on the common stock of $1.50 per share payable on September 29, 2022, to stockholders of record as of September 15, 2022.

Cash Return Framework. Also on May 5, 2022, EOG announced the addition of quantitative guidance to its cash return framework - specifically, a commitment to return a minimum of 60% of annual net cash provided by operating activities before certain balance sheet-related changes, less total capital expenditures, to stockholders, through a combination of quarterly dividends, special dividends and share repurchases. For related discussion regarding our payment of dividends, see ITEM 1A, Risk Factors, and ITEM 5, Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, of EOG's Annual Report on Form 10-K for the year ended December 31, 2021, filed on February 24, 2022 (EOG's 2021 Annual Report).

Results of Operations

The following review of operations for the three months ended June 30, 2022 and 2021 should be read in conjunction with the Condensed Consolidated Financial Statements of EOG and notes thereto included in this Quarterly Report on Form 10-Q.

Three Months Ended June 30, 2022 vs. Three Months Ended June 30, 2021

Operating Revenues and Other. During the second quarter of 2022, operating revenues increased $3,268 million, or 79%, to $7,407 million from $4,139 million for the same period of 2021. Total wellhead revenues, which are revenues generated from sales of EOG's production of crude oil and condensate, NGLs and natural gas, for the second quarter of 2022 increased $3,006 million, or 87%, to $6,476 million from $3,470 million for the same period of 2021. EOG recognized net losses on the mark-to-market of financial commodity derivative contracts of $1,377 million for the second quarter of 2022 compared to net losses of $427 million for the same period of 2021. Gathering, processing and marketing revenues for the second quarter of 2022 increased $1,147 million, or 112%, to $2,169 million from $1,022 million for the same period of 2021. Net gains on asset dispositions were $97 million for the second quarter of 2022 compared to net gains of $51 million for the same period of 2021.

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Wellhead volume and price statistics for the three-month periods ended June 30, 2022 and 2021 were as follows:

			Three Months Ended June 30,
			2022									2021
Crude Oil and Condensate Volumes (MBbld) (1)
United States			463.5									446.9
Trinidad			0.6									1.7
Other International (2)			—									—
Total			464.1									448.6
Average Crude Oil and Condensate Prices ($/Bbl) (3)
United States			$	111.26								$	66.16
Trinidad			98.29									56.26
Other International (2)			—									55.56
Composite			111.25									66.12
Natural Gas Liquids Volumes (MBbld) (1)
United States			201.9									138.5
Total			201.9									138.5
Average Natural Gas Liquids Prices ($/Bbl) (3)
United States			$	42.28								$	29.15
Composite			42.28									29.15
Natural Gas Volumes (MMcfd) (1)
United States			1,324									1,199
Trinidad			204									233
Other International (2)			—									13
Total			1,528									1,445
Average Natural Gas Prices ($/Mcf) (3)
United States			$	7.77								$	2.99
Trinidad			3.42									3.37
Other International (2)			—									5.69
Composite			7.19									3.07
Crude Oil Equivalent Volumes (MBoed) (4)
United States			886.1									785.2
Trinidad			34.6									40.6
Other International (2)			—									2.2
Total			920.7									828.0
Total MMBoe (4)			83.8									75.3

(1)Thousand barrels per day or million cubic feet per day, as applicable.

(2)Other International includes EOG's China and Canada operations. The China operations were sold in the second quarter of 2021.

(3)Dollars per barrel or per thousand cubic feet, as applicable. Excludes the impact of financial commodity derivative instruments (see Note 12 to the Condensed Consolidated Financial Statements).

(4)Thousand barrels of oil equivalent per day or million barrels of oil equivalent, as applicable; includes crude oil and condensate, NGLs and natural gas. Crude oil equivalent volumes are determined using a ratio of 1.0 barrel of crude oil and condensate or NGLs to 6.0 thousand cubic feet of natural gas. MMBoe is calculated by multiplying the MBoed amount by the number of days in the period and then dividing that amount by one thousand.

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Wellhead crude oil and condensate revenues for the second quarter of 2022 increased $2,000 million, or 74%, to $4,699 million from $2,699 million for the same period of 2021. The increase was due to a higher composite average price ($1,901 million) and an increase of 15.5 MBbld, or 3%, in wellhead crude oil and condensate production ($99 million). Increased production was primarily in the Permian Basin, partially offset by decreased production in the Eagle Ford oil play and the Rocky Mountain area. EOG's composite wellhead crude oil and condensate price for the second quarter of 2022 increased 68% to $111.25 per barrel compared to $66.12 per barrel for the same period of 2021.

NGL revenues for the second quarter of 2022 increased $410 million, or 112%, to $777 million from $367 million for the same period of 2021 due to a higher composite average price ($241 million) and an increase of 63.4 MBbld, or 46%, in NGL deliveries ($169 million). Increased production was primarily from the Permian Basin. EOG's composite NGL price for the second quarter of 2022 increased 45% to $42.28 per barrel compared to $29.15 per barrel for the same period of 2021.

Wellhead natural gas revenues for the second quarter of 2022 increased $596 million, or 148%, to $1,000 million from $404 million for the same period of 2021. The increase was due to a higher average composite price ($571 million) and an increase in natural gas deliveries ($25 million). Natural gas deliveries for the second quarter of 2022 increased 83 MMcfd, or 6%, compared to the same period of 2021 due primarily to higher deliveries in the Dorado gas play and increased production of associated natural gas from the Permian Basin, partially offset by lower natural gas volumes due to the sale of certain legacy natural gas assets in the Rocky Mountain area in the first quarter of 2022, lower natural gas deliveries in Trinidad and lower natural gas volumes associated with the disposition of the China assets in the second quarter of 2021. EOG's composite wellhead natural gas price for the second quarter of 2022 increased 134% to $7.19 per Mcf compared to $3.07 per Mcf for the same period of 2021.

During the second quarter of 2022, EOG recognized net losses on the mark-to-market of financial commodity derivative contracts of $1,377 million compared to net losses of $427 million for the same period of 2021. During the second quarter of 2022, net cash paid for settlements of financial commodity derivative contracts was $2,114 million, of which $1,328 million was related to the early termination of certain contracts. Such early termination payments included $307 million to terminate contracts scheduled to settle in the second half of 2022 and $1,021 million to terminate contracts scheduled to settle after December 31, 2022. Net cash paid for settlements of financial commodity derivative contracts was $193 million for the same period of 2021.

Gathering, processing and marketing revenues are revenues generated from sales of third-party crude oil, NGLs and natural gas, as well as fees associated with gathering third-party natural gas and revenues from sales of EOG-owned sand. Purchases and sales of third-party crude oil and natural gas may be utilized in order to balance firm capacity at third-party facilities with production in certain areas and to utilize excess capacity at EOG-owned facilities. EOG sells sand in order to balance the timing of firm purchase agreements with completion operations. Marketing costs represent the costs to purchase third-party crude oil, natural gas and sand and the associated transportation costs, as well as costs associated with EOG-owned sand sold to third parties.

Gathering, processing and marketing revenues less marketing costs for the second quarter of 2022 increased $11 million as compared to the same period of 2021 primarily due to higher margins on natural gas marketing activities, partially offset by lower margins on crude oil marketing activities.

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Operating and Other Expenses. For the second quarter of 2022, operating expenses of $4,504 million were $1,536 million higher than the $2,968 million incurred during the second quarter of 2021. The following table presents the costs per barrel of oil equivalent (Boe) for the three-month periods ended June 30, 2022 and 2021:

			Three Months Ended June 30,
			2022						2021
Lease and Well			$	3.87					$	3.58
Transportation Costs			2.91						2.84
Gathering and Processing Costs			1.81						1.70
Depreciation, Depletion and Amortization (DD&A) -
Oil and Gas Properties			10.42						11.63
Other Property, Plant and Equipment			0.45						0.50
General and Administrative (G&A)			1.53						1.59
Interest Expense, Net			0.57						0.60
Total (1)			$	21.56					$	22.44

(1)Total excludes exploration costs, dry hole costs, impairments, marketing costs and taxes other than income.

The primary factors impacting the cost components of per-unit rates of lease and well, transportation costs, gathering and processing costs and G&A for the three months ended June 30, 2022, compared to the same period of 2021, are set forth below. See "Operating Revenues and Other" above for a discussion of wellhead volumes.

Lease and well expenses include expenses for EOG-operated properties, as well as expenses billed to EOG from other operators where EOG is not the operator of a property. Lease and well expenses can be divided into the following categories: costs to operate and maintain crude oil and natural gas wells, the cost of workovers and lease and well administrative expenses. Operating and maintenance costs include, among other things, pumping services, salt water disposal, equipment repair and maintenance, compression expense, lease upkeep and fuel and power. Workovers are operations to restore or maintain production from existing wells.

Each of these categories of costs individually fluctuates from time to time as EOG attempts to maintain and increase production while maintaining efficient, safe and environmentally responsible operations. EOG continues to increase its operating activities by drilling new wells in existing and new areas. Operating and maintenance costs within these existing and new areas, as well as the costs of services charged to EOG by vendors, fluctuate over time.

Lease and well expenses of $324 million for the second quarter of 2022 increased $54 million from $270 million for the same prior year period primarily due to increased operating and maintenance costs ($41 million) and increased workover expenditures ($13 million), both in the United States. Lease and well expenses increased in the United States primarily due to increased operating activities resulting in increased production.

Transportation costs represent costs associated with the delivery of hydrocarbon products from the lease or an aggregation point on EOG's gathering system to a downstream point of sale. Transportation costs include transportation fees, storage and terminal fees, the cost of compression (the cost of compressing natural gas to meet pipeline pressure requirements), the cost of dehydration (the cost associated with removing water from natural gas to meet pipeline requirements), gathering fees and fuel costs.

Transportation costs of $244 million for the second quarter of 2022 increased $30 million from $214 million for the same prior year period primarily due to increased transportation costs related to production from the Permian Basin ($18 million), the Eagle Ford oil play ($7 million) and the Dorado gas play ($5 million).

Gathering and processing costs represent operating and maintenance expenses and administrative expenses associated with operating EOG's gathering and processing assets as well as natural gas processing fees and certain NGL fractionation fees paid to third parties. EOG pays third parties to process the majority of its natural gas production to extract NGLs.

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Gathering and processing costs increased $24 million to $152 million for the second quarter of 2022 compared to $128 million for the same prior year period primarily due to increased gathering and processing fees related to production from the Permian Basin ($17 million) and increased operating and maintenance expenses related to production from the Permian Basin ($12 million) and the Eagle Ford oil play ($9 million), partially offset by decreased gathering and processing fees related to production from the Eagle Ford oil play ($8 million) and due to the sale of certain legacy natural gas assets in the Rocky Mountain area in the first quarter of 2022 ($8 million).

G&A expenses of $128 million for the second quarter of 2022 increased $8 million from $120 million for the same prior year period primarily due to increased employee-related costs.

Impairments include: amortization of unproved oil and gas property costs as well as impairments of proved oil and gas properties; other property, plant and equipment; and other assets. Unproved properties with acquisition costs that are not individually significant are aggregated, and the portion of such costs estimated to be nonproductive is amortized over the remaining lease term. Unproved properties with individually significant acquisition costs are reviewed individually for impairment. When circumstances indicate that a proved property may be impaired, EOG compares expected undiscounted future cash flows at a DD&A group level to the unamortized capitalized cost of the asset. If the expected undiscounted future cash flows, based on EOG's estimates of (and assumptions regarding) future crude oil, NGLs and natural gas prices, operating costs, development expenditures, anticipated production from proved reserves and other relevant data, are lower than the unamortized capitalized cost, the capitalized cost is reduced to fair value. Fair value is generally calculated by using the Income Approach described in the Fair Value Measurement Topic of the Financial Accounting Standards Board's Accounting Standards Codification. In certain instances, EOG utilizes accepted offers from third-party purchasers as the basis for determining fair value.

The following table represents impairments for the second quarter of 2022 and 2021 (in millions):

			Three Months Ended June 30,
			2022						2021
Proved properties			$	13					$	—
Unproved properties			54						43
Other assets			23						—
Firm commitment contracts			1						1
Total			$	91					$	44

Taxes other than income include severance/production taxes, ad valorem/property taxes, payroll taxes, franchise taxes and other miscellaneous taxes. Severance/production taxes are generally determined based on wellhead revenues, and ad valorem/property taxes are generally determined based on the valuation of the underlying assets.

Taxes other than income for the second quarter of 2022 increased $233 million to $472 million (7.3% of wellhead revenues) from $239 million (6.9% of wellhead revenues) for the same prior year period. The increase in taxes other than income was primarily due to increased severance/production taxes ($215 million) and increased ad valorem/property taxes ($19 million), all in the United States.

Other income, net was $27 million for the second quarter of 2022 compared to other expense, net of $2 million for the same prior year period. The change of $29 million in the second quarter of 2022 was primarily due to a decrease in deferred compensation expense ($13 million), higher equity income from ammonia plants in Trinidad ($12 million) and increased interest income ($6 million).

EOG recognized an income tax provision of $644 million for the second quarter of 2022 compared to an income tax provision of $217 million for the second quarter of 2021, primarily due to increased pretax income. The net effective tax rate for the second quarter of 2022 increased to 22% from 19% for the second quarter of 2021, mostly due to the absence of certain tax benefits related to EOG's exiting of its Canadian operations.

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Six Months Ended June 30, 2022 vs. Six Months Ended June 30, 2021

Operating Revenues. During the first six months of 2022, operating revenues increased $3,557 million, or 45%, to $11,390 million from $7,833 million for the same period of 2021. Total wellhead revenues for the first six months of 2022 increased $5,102 million, or 77%, to $11,762 million from $6,660 million for the same period of 2021. During the first six months of 2022, EOG recognized net losses on the mark-to-market of financial commodity derivative contracts of $4,197 million compared to net losses of $794 million for the same period of 2021. Gathering, processing and marketing revenues for the first six months of 2022 increased $1,768 million, or 95%, to $3,638 million from $1,870 million for the same period of 2021. Net gains on asset dispositions were $122 million for the first six months of 2022 compared to net gains of $45 million for the same period of 2021.

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Wellhead volume and price statistics for the six-month periods ended June 30, 2022 and 2021 were as follows:

			Six Months Ended June 30,
			2022									2021
Crude Oil and Condensate Volumes (MBbld)
United States			456.5									437.8
Trinidad			0.7									2.0
Other International			—									—
Total			457.2									439.8
Average Crude Oil and Condensate Prices ($/Bbl) (1)
United States			$	103.80								$	62.22
Trinidad			90.33									52.57
Other International			—									42.36
Composite			103.78									62.18
Natural Gas Liquids Volumes (MBbld)
United States			196.1									131.5
Total			196.1									131.5
Average Natural Gas Liquids Prices ($/Bbl) (1)
United States			$	41.07								$	28.62
Composite			41.07									28.62
Natural Gas Volumes (MMcfd)
United States			1,287									1,150
Trinidad			206									225
Other International			—									19
Total			1,493									1,394
Average Natural Gas Prices ($/Mcf) (1)
United States			$	6.83								$	4.19
Trinidad			3.39									3.37
Other International			—									5.67
Composite			6.35									4.08
Crude Oil Equivalent Volumes (MBoed)
United States			867.1									761.0
Trinidad			35.0									39.5
Other International			—									3.1
Total			902.1									803.6
Total MMBoe			163.3									145.4

(1) Excludes the impact of financial commodity derivative instruments (see Note 12 to the Condensed Consolidated Financial Statements).

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Wellhead crude oil and condensate revenues for the first six months of 2022 increased $3,638 million, or 73%, to $8,588 million from $4,950 million for the same period of 2021 due to a higher composite average price ($3,439 million) and an increase of 17.4 MBbld, or 4%, in wellhead crude oil and condensate production ($199 million). Increased production was primarily in the Permian Basin, partially offset by decreased production in the Eagle Ford oil play and the Rocky Mountain area. EOG's composite wellhead crude oil and condensate price for the first six months of 2022 increased 67% to $103.78 per barrel compared to $62.18 per barrel for the same period of 2021.

NGL revenues for the first six months of 2022 increased $777 million, or 114%, to $1,458 million from $681 million for the same period of 2021 due to a higher composite average price ($442 million) and an increase of 64.6 MBbld, or 49%, in NGL deliveries ($335 million). Increased production was primarily from the Permian Basin. EOG's composite NGL price for the first six months of 2022 increased 43% to $41.07 per barrel compared to $28.62 per barrel for the same period of 2021.

Wellhead natural gas revenues for the first six months of 2022 increased $687 million, or 67%, to $1,716 million from $1,029 million for the same period of 2021. The increase was due to a higher composite wellhead natural gas price ($614 million) and an increase in natural gas deliveries ($73 million). Natural gas deliveries for the first six months of 2022 increased 99 MMcfd, or 7%, compared to the same period of 2021 due primarily to higher deliveries in the Dorado gas play and increased production of associated natural gas from the Permian Basin, partially offset by lower natural gas volumes due to the sale of certain legacy natural gas assets in the Rocky Mountain area in the first quarter of 2022, lower natural gas deliveries in Trinidad and lower natural gas volumes associated with the disposition of the China assets in the second quarter of 2021. EOG's composite wellhead natural gas price for the first six months of 2022 increased 56% to $6.35 per Mcf compared to $4.08 per Mcf for the same period of 2021.

During the first six months of 2022, EOG recognized net losses on the mark-to-market of financial commodity derivative contracts of $4,197 million compared to net losses of $794 million for the same period of 2021. During the first six months of 2022, net cash paid for settlements of financial commodity derivative contracts was $2,410 million, of which $1,328 million was related to the early termination of certain contracts. Such early termination payments included $307 million to terminate contracts scheduled to settle in the second half of 2022 and $1,021 million to terminate contracts scheduled to settle after December 31, 2022. Net cash paid for settlements of financial commodity derivative contracts was $223 million for the same period of 2021.

Gathering, processing and marketing revenues less marketing costs for the first six months of 2022 increased $187 million as compared to the same period of 2021 primarily due to higher margins on natural gas marketing and crude oil marketing activities.

Operating and Other Expenses. For the first six months of 2022, operating expenses of $7,941 million were $2,211 million higher than the $5,730 million incurred during the same period of 2021. The following table presents the costs per Boe for the six-month periods ended June 30, 2022 and 2021:

			Six Months Ended June 30,
			2022						2021
Lease and Well			$	3.93					$	3.71
Transportation Costs			2.89						2.86
Gathering and Processing Costs			1.81						1.84
DD&A -
Oil and Gas Properties			10.31						11.96
Other Property, Plant and Equipment			0.46						0.51
G&A			1.54						1.58
Interest Expense, Net			0.59						0.63
Total (1)			$	21.53					$	23.09

(1)Total excludes exploration costs, dry hole costs, impairments, marketing costs and taxes other than income.

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The primary factors impacting the cost components of per-unit rates of lease and well, transportation costs, gathering and processing costs, DD&A, and net interest expense for the six months ended June 30, 2022, compared to the same period of 2021 are set forth below. See "Operating Revenues" above for a discussion of wellhead volumes.

Lease and well expenses of $642 million for the first six months of 2022 increased $102 million from $540 million for the same prior year period primarily due to increased operating and maintenance costs ($75 million) and increased workover expenditures ($24 million), both in the United States.

Transportation costs of $472 million for the first six months of 2022 increased $56 million from $416 million for the same prior year period primarily due to increased transportation costs related to production from the Permian Basin ($38 million) and the Eagle Ford oil play ($12 million).

Gathering and processing costs of $296 million for the first six months of 2022 increased $29 million from $267 million for the same prior year period primarily due to increased gathering and processing fees ($33 million) and increased operating and maintenance expenses ($20 million), both related to production from the Permian Basin, partially offset by decreased gathering and processing fees related to production from the Eagle Ford oil play ($17 million) and decreased gathering and processing fees and operating and maintenance expenses due to the sale of certain legacy natural gas assets in the Rocky Mountain area ($11 million).

G&A expenses of $252 million for the first six months of 2022 increased $22 million from $230 million for the same prior year period primarily due to increased employee-related costs.

DD&A of the cost of proved oil and gas properties is calculated using the unit-of-production method. EOG's DD&A rate and expense are the composite of numerous individual DD&A group calculations. There are several factors that can impact EOG's composite DD&A rate and expense, such as field production profiles, drilling or acquisition of new wells, disposition of existing wells and reserve revisions (upward or downward) primarily related to well performance, economic factors and impairments. Changes to these factors may cause EOG's composite DD&A rate and expense to fluctuate from period to period. DD&A of the cost of other property, plant and equipment is generally calculated using the straight-line depreciation method over the useful lives of the assets.

DD&A expenses for the first six months of 2022 decreased $56 million to $1,758 million from $1,814 million for the same prior year period. DD&A expenses associated with oil and gas properties for the first six months of 2022 were $57 million lower than the same prior year period. The decrease primarily reflects decreased unit rates in the United States ($272 million) and in Trinidad ($5 million), decreased production associated with the disposition of the China assets in the second quarter of 2021 ($5 million) and decreased production in Trinidad ($5 million), partially offset by increased production in the United States ($233 million). Unit rates in the United States decreased primarily due to upward reserve revisions related to higher average crude oil, NGL and natural gas prices used in the reserve estimation process and to reserves added at lower costs as a result of increased efficiencies.

Exploration costs of $80 million for the first six months of 2022 increased $12 million from $68 million for the same prior year period due primarily to increased geological and geophysical expenditures ($11 million) in the United States.

The following table represents impairments for the six-month periods ended June 30, 2022 and 2021 (in millions):

			Six Months Ended June 30,
			2022						2021
Proved properties			$	14					$	—
Unproved properties			108						86
Other assets			23						—
Firm commitment contracts			1						2
Total			$	146					$	88

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Taxes other than income for the first six months of 2022 increased $408 million to $862 million (7.3% of wellhead revenues) from $454 million (6.8% of wellhead revenues) for the same prior year period. The increase in taxes other than income was primarily due to increased severance/production taxes ($344 million), increased ad valorem/property taxes ($57 million) and increased payroll taxes ($6 million), all in the United States.

Other income, net was $26 million for the first six months of 2022 compared to other expense, net of $6 million for the same prior year period. The change of $32 million in the first half of 2022 was primarily due to higher equity income from ammonia plants in Trinidad ($23 million), increased interest income ($6 million) and a decrease in deferred compensation expense ($5 million).

EOG recognized an income tax provision of $751 million for the first six months of 2022 compared to an income tax provision of $421 million for the first six months of 2021, primarily due to increased pretax income. The net effective tax rate for the first six months of 2022 increased to 22% from 21% in the first six months of 2021.

Capital Resources and Liquidity

Cash Flow. The primary sources of cash for EOG during the six months ended June 30, 2022, were funds generated from operations and proceeds from sales of assets. The primary uses of cash were funds used in operations; dividend payments to stockholders; net cash paid for settlements of financial commodity derivative contracts; exploration and development expenditures; net collateral posted for financial commodity derivative contracts; and other property, plant and equipment expenditures. During the first six months of 2022, EOG's cash balance decreased $2,136 million to $3,073 million from $5,209 million at December 31, 2021.

Net cash provided by operating activities of $2,876 million for the first six months of 2022 decreased $553 million compared to the same period of 2021 primarily due to an increase in net cash paid for settlements of financial commodity derivative contracts ($2,187 million), an increase in net collateral posted for financial commodity derivative contracts ($1,659 million), an unfavorable change in net cash paid for income taxes ($921 million), an increase in cash operating expenses ($622 million), net cash used in working capital and other assets and liabilities in the first six months of 2022 ($1,164 million) compared to net cash used in working capital and other assets and liabilities in the first six months of 2021 ($514 million), partially offset by an increase in wellhead revenues ($5,102 million) and an increase in gathering, processing and marketing revenues less marketing costs ($187 million).

Net cash used in investing activities of $2,443 million for the first six months of 2022 increased $794 million compared to the same period of 2021 due to an increase in additions to oil and gas properties ($445 million), net cash used in working capital associated with investing activities in the first six months of 2022 ($211 million) compared to net cash provided by working capital associated with investing activities in the first six months of 2021 ($145 million), an increase in additions to other property, plant and equipment ($48 million) and an increase in other investing activities ($30 million), partially offset by an increase in proceeds from the sale of assets ($85 million).

Net cash used in financing activities of $2,569 million for the first six months of 2022 included cash dividend payments ($2,509 million), purchases of treasury stock in connection with stock compensation plans ($58 million) and repayment of finance lease liabilities ($19 million). Net cash used in financing activities of $1,229 million for the first six months of 2021 included repayments of long-term debt ($750 million), cash dividend payments ($458 million) and repayment of finance lease liabilities ($18 million).

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Total Expenditures. For the year 2022, EOG's updated budget for exploration and development and other property, plant and equipment expenditures is estimated to range from approximately $4.3 billion to $4.7 billion, excluding acquisitions, non-cash transactions and exploration costs. The table below sets out components of total expenditures for the six-month periods ended June 30, 2022 and 2021 (in millions):

			Six Months Ended June 30,
			2022						2021
Expenditure Category
Capital
Exploration and Development Drilling			$	1,679					$	1,444
Facilities			199						187
Leasehold Acquisitions (1)			98						104
Property Acquisitions (2)			356						95
Capitalized Interest			15						15
Subtotal			2,347						1,845
Exploration Costs			80						68
Dry Hole Costs			23						24
Exploration and Development Expenditures			2,450						1,937
Asset Retirement Costs			70						48
Total Exploration and Development Expenditures			2,520						1,985
Other Property, Plant and Equipment (3)			145						171
Total Expenditures			$	2,665					$	2,156

(1) Leasehold acquisitions included $79 million and $22 million for the six-month periods ended June 30, 2022 and 2021, respectively, related to non-cash property exchanges.

(2) Property acquisitions included $5 million and $3 million for the six-month periods ended June 30, 2022 and 2021, respectively, related to non-cash property exchanges.

(3) Other property, plant and equipment included $74 million of non-cash additions for the six-month period ended June 30, 2021, primarily related to finance lease transactions for storage facilities.

Exploration and development expenditures of $2,450 million for the first six months of 2022 were $513 million higher than the same period of 2021 primarily due to increased property acquisitions ($261 million), increased exploration and development drilling expenditures in the United States ($258 million) and increased facilities expenditures ($12 million), partially offset by decreased exploration and development drilling expenditures in Trinidad ($18 million) and Other International ($4 million) and decreased leasehold acquisitions ($6 million). Exploration and development expenditures for the first six months of 2022 of $2,450 million consisted of $1,845 million in development drilling and facilities, $356 million in property acquisitions, $234 million in exploration and $15 million in capitalized interest. Exploration and development expenditures for the first six months of 2021 of $1,937 million consisted of $1,630 million in development drilling and facilities, $197 million in exploration, $95 million in property acquisitions and $15 million in capitalized interest.

The level of exploration and development expenditures, including acquisitions, will vary in future periods depending on energy market conditions and other economic factors. EOG believes it has significant flexibility and availability with respect to financing alternatives and the ability to adjust its exploration and development expenditure budget as circumstances warrant. While EOG has certain continuing commitments associated with expenditure plans related to its operations, such commitments are not expected to be material when considered in relation to the total financial capacity of EOG.

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Financial Commodity Derivative Transactions. As more fully discussed in Note 12 to the Consolidated Financial Statements included in EOG's 2021 Annual Report, EOG engages in price risk management activities from time to time. These activities are intended to manage EOG's exposure to fluctuations in commodity prices for crude oil, NGLs and natural gas. EOG utilizes financial commodity derivative instruments, primarily price swap, option, swaption, collar and basis swap contracts, as a means to manage this price risk. EOG has not designated any of its financial commodity derivative contracts as accounting hedges and, accordingly, accounts for financial commodity derivative contracts using the mark-to-market accounting method. Under this accounting method, changes in the fair value of outstanding financial instruments are recognized as gains or losses in the period of change and are recorded as Losses on Mark-to-Market Financial Commodity Derivative Contracts on the Condensed Consolidated Statements of Income and Comprehensive Income. The related cash flow impact is reflected in Cash Flows from Operating Activities on the Condensed Consolidated Statements of Cash Flows.

The total fair value of EOG's financial commodity derivative contracts, net of associated collateral posted, was reflected on the Condensed Consolidated Balance Sheets at June 30, 2022, as a net liability of $123 million.

As discussed in "Operating Revenues and Other," the net cash paid for settlements of financial commodity derivative contracts during the second quarter and first six months of 2022 was $2,114 million and $2,410 million, respectively, of which $1,328 million during both the second quarter and first six months of 2022 was related to the early termination of certain contracts; see the below summary tables for further discussion.

Presented below is a comprehensive summary of EOG's financial commodity derivative contracts settled during the period from January 1, 2022 to July 29, 2022 (closed) and outstanding as of July 29, 2022. Crude oil and NGL volumes are presented in MBbld and prices are presented in $/Bbl. Natural gas volumes are presented in MMBtu per day (MMBtud) and prices are presented in dollars per MMBtu ($/MMBtu).

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Crude Oil Financial Price Swap Contracts
												Contracts Sold												Contracts Purchased
Period						Settlement Index						Volume (MBbld)						Weighted Average Price ($/Bbl)						Volume (MBbld)						Weighted Average Price ($/Bbl)
January - March 2022 (closed)						NYMEX West Texas Intermediate (WTI)						140						$	65.58					—						$	—
April - June 2022 (closed)						NYMEX WTI						140						65.62						—						—
July 2022 (closed)						NYMEX WTI						140						65.59						—						—
August - September 2022						NYMEX WTI						140						65.59						—						—
October - December 2022 (closed) (1)						NYMEX WTI						53						66.11						—						—
October - December 2022						NYMEX WTI						87						65.41						87						88.85
January - February 2023 (closed) (1)						NYMEX WTI						7						69.51						—						—
January - February 2023						NYMEX WTI						143						67.84						6						102.26
March 2023 (closed) (1)						NYMEX WTI						37						67.35						—						—
March 2023						NYMEX WTI						113						68.11						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 its October 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.

Crude Oil Basis Swap Contracts
												Contracts Sold
Period						Settlement Index						Volume (MBbld)						Weighted Average Price Differential ($/Bbl)
January - August 2022 (closed)						NYMEX WTI Roll Differential (1)						125						$	0.15
September - December 2022						NYMEX WTI Roll Differential (1)						125						0.15

(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
Period						Settlement Index						Volume (MMBtud in thousands)						Weighted Average Price ($/MMBtu)
January - August 2022 (closed)						NYMEX Henry Hub						725						$	3.57
September 2022						NYMEX Henry Hub						725						3.57
October - December 2022 (closed) (1)						NYMEX Henry Hub						425						3.05
October - December 2022						NYMEX Henry Hub						300						4.32
January - December 2023 (closed) (1)						NYMEX Henry Hub						425						3.05
January - 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

(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
Period						Settlement Index						Volume (MMBtud in thousands)						Weighted Average Price Differential ($/MMBtu)
January - July 2022 (closed)						NYMEX Henry Hub Houston Ship Channel (HSC) Differential (1)						210						$	(0.01)
August - December 2022						NYMEX Henry Hub HSC Differential (1)						210						(0.01)
January - December 2023						NYMEX Henry Hub HSC Differential (1)						135						(0.01)
January - December 2024						NYMEX Henry Hub HSC Differential (1)						10						0.00
January - December 2025						NYMEX Henry Hub HSC Differential (1)						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.

In connection with its financial commodity derivative contracts, EOG had $1,529 million of collateral posted at August 3, 2022. EOG expects this collateral to be applied to the settlement of financial commodity derivative contracts if market prices remain above contract prices. The amount of posted collateral will increase or decrease based on fluctuations in forward NYMEX WTI and Henry Hub prices.

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Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q 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 forward‐looking 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 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 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 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. 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;

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• 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;

• 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, sand 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.

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PART I. FINANCIAL INFORMATION