filings.toolsItem 1. FINANCIAL STATEMENTS
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Item 1. FINANCIAL STATEMENTS
EOG RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In Millions, Except Per Share Data)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Operating Revenues and Other | |||||||||||||||||||||||
| Crude Oil and Condensate | $ | 4,109 | $ | 2,929 | $ | 12,697 | $ | 7,879 | |||||||||||||||
| Natural Gas Liquids | 693 | 548 | 2,151 | 1,229 | |||||||||||||||||||
| Natural Gas | 1,235 | 568 | 2,951 | 1,597 | |||||||||||||||||||
| Losses on Mark-to-Market Financial Commodity Derivative Contracts | (18) | (494) | (4,215) | (1,288) | |||||||||||||||||||
| Gathering, Processing and Marketing | 1,561 | 1,186 | 5,199 | 3,056 | |||||||||||||||||||
| Gains (Losses) on Asset Dispositions, Net | (21) | 1 | 101 | 46 | |||||||||||||||||||
| Other, Net | 34 | 27 | 99 | 79 | |||||||||||||||||||
| Total | 7,593 | 4,765 | 18,983 | 12,598 | |||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Lease and Well | 335 | 270 | 977 | 810 | |||||||||||||||||||
| Transportation Costs | 257 | 219 | 729 | 635 | |||||||||||||||||||
| Gathering and Processing Costs | 167 | 145 | 463 | 412 | |||||||||||||||||||
| Exploration Costs | 35 | 44 | 115 | 112 | |||||||||||||||||||
| Dry Hole Costs | 18 | 4 | 41 | 28 | |||||||||||||||||||
| Impairments | 94 | 82 | 240 | 170 | |||||||||||||||||||
| Marketing Costs | 1,621 | 1,184 | 5,031 | 3,013 | |||||||||||||||||||
| Depreciation, Depletion and Amortization | 906 | 927 | 2,664 | 2,741 | |||||||||||||||||||
| General and Administrative | 162 | 142 | 414 | 372 | |||||||||||||||||||
| Taxes Other Than Income | 334 | 277 | 1,196 | 731 | |||||||||||||||||||
| Total | 3,929 | 3,294 | 11,870 | 9,024 | |||||||||||||||||||
| Operating Income | 3,664 | 1,471 | 7,113 | 3,574 | |||||||||||||||||||
| Other Income, Net | 40 | 6 | 66 | — | |||||||||||||||||||
| Income Before Interest Expense and Income Taxes | 3,704 | 1,477 | 7,179 | 3,574 | |||||||||||||||||||
| Interest Expense, Net | 41 | 48 | 137 | 140 | |||||||||||||||||||
| Income Before Income Taxes | 3,663 | 1,429 | 7,042 | 3,434 | |||||||||||||||||||
| Income Tax Provision | 809 | 334 | 1,560 | 755 | |||||||||||||||||||
| Net Income | $ | 2,854 | $ | 1,095 | $ | 5,482 | $ | 2,679 | |||||||||||||||
| Net Income Per Share | |||||||||||||||||||||||
| Basic | $ | 4.90 | $ | 1.88 | $ | 9.40 | $ | 4.62 | |||||||||||||||
| Diluted | $ | 4.86 | $ | 1.88 | $ | 9.34 | $ | 4.59 | |||||||||||||||
| Average Number of Common Shares | |||||||||||||||||||||||
| Basic | 583 | 581 | 583 | 580 | |||||||||||||||||||
| Diluted | 587 | 584 | 587 | 584 | |||||||||||||||||||
| Comprehensive Income | |||||||||||||||||||||||
| Net Income | $ | 2,854 | $ | 1,095 | $ | 5,482 | $ | 2,679 | |||||||||||||||
| Other Comprehensive Income (Loss) | |||||||||||||||||||||||
| Foreign Currency Translation Adjustments | 5 | 2 | 6 | (1) | |||||||||||||||||||
| Other, Net of Tax | 1 | — | — | — | |||||||||||||||||||
| Other Comprehensive Income (Loss) | 6 | 2 | 6 | (1) | |||||||||||||||||||
| Comprehensive Income | $ | 2,860 | $ | 1,097 | $ | 5,488 | $ | 2,678 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
-3-
EOG RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Millions, Except Share Data)
(Unaudited)
| September 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and Cash Equivalents | $ | 5,272 | $ | 5,209 | |||||||
| Accounts Receivable, Net | 3,343 | 2,335 | |||||||||
| Inventories | 872 | 584 | |||||||||
| Income Taxes Receivable | 93 | — | |||||||||
| Other | 621 | 456 | |||||||||
| Total | 10,201 | 8,584 | |||||||||
| Property, Plant and Equipment | |||||||||||
| Oil and Gas Properties (Successful Efforts Method) | 67,065 | 67,644 | |||||||||
| Other Property, Plant and Equipment | 4,659 | 4,753 | |||||||||
| Total Property, Plant and Equipment | 71,724 | 72,397 | |||||||||
| Less: Accumulated Depreciation, Depletion and Amortization | (42,623) | (43,971) | |||||||||
| Total Property, Plant and Equipment, Net | 29,101 | 28,426 | |||||||||
| Deferred Income Taxes | 18 | 11 | |||||||||
| Other Assets | 1,167 | 1,215 | |||||||||
| Total Assets | $ | 40,487 | $ | 38,236 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Accounts Payable | $ | 2,718 | $ | 2,242 | |||||||
| Accrued Taxes Payable | 542 | 518 | |||||||||
| Dividends Payable | 437 | 436 | |||||||||
| Liabilities from Price Risk Management Activities | 243 | 269 | |||||||||
| Current Portion of Long-Term Debt | 1,282 | 37 | |||||||||
| Current Portion of Operating Lease Liabilities | 235 | 240 | |||||||||
| Other | 289 | 300 | |||||||||
| Total | 5,746 | 4,042 | |||||||||
| Long-Term Debt | 3,802 | 5,072 | |||||||||
| Other Liabilities | 2,573 | 2,193 | |||||||||
| Deferred Income Taxes | 4,517 | 4,749 | |||||||||
| Commitments and Contingencies (Note 8) | |||||||||||
| Stockholders' Equity | |||||||||||
| Common Stock, $0.01 Par, 1,280,000,000 Shares Authorized and 587,891,710 Shares Issued at September 30, 2022 and 585,521,512 Shares Issued at December 31, 2021 | 206 | 206 | |||||||||
| Additional Paid in Capital | 6,155 | 6,087 | |||||||||
| Accumulated Other Comprehensive Loss | (6) | (12) | |||||||||
| Retained Earnings | 17,563 | 15,919 | |||||||||
| Common Stock Held in Treasury, 646,861 Shares at September 30, 2022 and 257,268 Shares at December 31, 2021 | (69) | (20) | |||||||||
| Total Stockholders' Equity | 23,849 | 22,180 | |||||||||
| Total Liabilities and Stockholders' Equity | $ | 40,487 | $ | 38,236 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
-4-
EOG RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Millions, Except Per Share Data)
(Unaudited)
| Common Stock | Additional Paid In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Common Stock Held In Treasury | Total Stockholders' Equity | ||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | 206 | $ | 6,128 | $ | (12) | $ | 16,028 | $ | (38) | $ | 22,312 | |||||||||||||||||||||||
| Net Income | — | — | — | 2,854 | — | 2,854 | |||||||||||||||||||||||||||||
| Common Stock Dividends Declared, $2.25 Per Share | — | — | — | (1,319) | — | (1,319) | |||||||||||||||||||||||||||||
| Other Comprehensive Income | — | — | 6 | — | — | 6 | |||||||||||||||||||||||||||||
| Common Stock Issued Under Stock Plans | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Change in Treasury Stock - Stock Compensation Plans, Net | — | (5) | — | — | (33) | (38) | |||||||||||||||||||||||||||||
| Restricted Stock and Restricted Stock Units, Net | — | (2) | — | — | 2 | — | |||||||||||||||||||||||||||||
| Stock-Based Compensation Expenses | — | 34 | — | — | — | 34 | |||||||||||||||||||||||||||||
| Treasury Stock Issued as Compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | 206 | $ | 6,155 | $ | (6) | $ | 17,563 | $ | (69) | $ | 23,849 |
| Common Stock | Additional Paid In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Common Stock Held In Treasury | Total Stockholders' Equity | ||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | 206 | $ | 6,017 | $ | (15) | $ | 14,689 | $ | (16) | $ | 20,881 | |||||||||||||||||||||||
| Net Income | — | — | — | 1,095 | — | 1,095 | |||||||||||||||||||||||||||||
| Common Stock Dividends Declared, $0.4125 Per Share | — | — | — | (242) | — | (242) | |||||||||||||||||||||||||||||
| Other Comprehensive Income | — | — | 2 | — | — | 2 | |||||||||||||||||||||||||||||
| Common Stock Issued Under Stock Plans | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Change in Treasury Stock - Stock Compensation Plans, Net | — | (5) | — | — | (17) | (22) | |||||||||||||||||||||||||||||
| Restricted Stock and Restricted Stock Units, Net | — | (5) | — | — | 5 | — | |||||||||||||||||||||||||||||
| Stock-Based Compensation Expenses | — | 51 | — | — | — | 51 | |||||||||||||||||||||||||||||
| Treasury Stock Issued as Compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | 206 | $ | 6,058 | $ | (13) | $ | 15,542 | $ | (28) | $ | 21,765 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
-5-
EOG RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Millions, Except Per Share Data)
(Unaudited)
| Common Stock | Additional Paid In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Common Stock Held In Treasury | Total Stockholders' Equity | ||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | 206 | $ | 6,087 | $ | (12) | $ | 15,919 | $ | (20) | $ | 22,180 | |||||||||||||||||||||||
| Net Income | — | — | — | 5,482 | — | 5,482 | |||||||||||||||||||||||||||||
| Common Stock Dividends Declared, $6.55 Per Share | — | — | — | (3,838) | — | (3,838) | |||||||||||||||||||||||||||||
| Other Comprehensive Income | — | — | 6 | — | — | 6 | |||||||||||||||||||||||||||||
| Common Stock Issued Under Stock Plans | — | 13 | — | — | — | 13 | |||||||||||||||||||||||||||||
| Change in Treasury Stock - Stock Compensation Plans, Net | — | (40) | — | — | (53) | (93) | |||||||||||||||||||||||||||||
| Restricted Stock and Restricted Stock Units, Net | — | (4) | — | — | 4 | — | |||||||||||||||||||||||||||||
| Stock-Based Compensation Expenses | — | 99 | — | — | — | 99 | |||||||||||||||||||||||||||||
| Treasury Stock Issued as Compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | 206 | $ | 6,155 | $ | (6) | $ | 17,563 | $ | (69) | $ | 23,849 |
| Common Stock | Additional Paid In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Common Stock Held In Treasury | Total Stockholders' Equity | ||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | 206 | $ | 5,945 | $ | (12) | $ | 14,170 | $ | (7) | $ | 20,302 | |||||||||||||||||||||||
| Net Income | — | — | — | 2,679 | — | 2,679 | |||||||||||||||||||||||||||||
| Common Stock Dividends Declared, $2.2375 Per Share | — | — | — | (1,307) | — | (1,307) | |||||||||||||||||||||||||||||
| Other Comprehensive Loss | — | — | (1) | — | — | (1) | |||||||||||||||||||||||||||||
| Common Stock Issued Under Stock Plans | — | 9 | — | — | — | 9 | |||||||||||||||||||||||||||||
| Change in Treasury Stock - Stock Compensation Plans, Net | — | (7) | — | — | (27) | (34) | |||||||||||||||||||||||||||||
| Restricted Stock and Restricted Stock Units, Net | — | (6) | — | — | 6 | — | |||||||||||||||||||||||||||||
| Stock-Based Compensation Expenses | — | 117 | — | — | — | 117 | |||||||||||||||||||||||||||||
| Treasury Stock Issued as Compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | 206 | $ | 6,058 | $ | (13) | $ | 15,542 | $ | (28) | $ | 21,765 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
-6-
EOG RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
(Unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash Flows from Operating Activities | |||||||||||
| Reconciliation of Net Income to Net Cash Provided by Operating Activities: | |||||||||||
| Net Income | $ | 5,482 | $ | 2,679 | |||||||
| Items Not Requiring (Providing) Cash | |||||||||||
| Depreciation, Depletion and Amortization | 2,664 | 2,741 | |||||||||
| Impairments | 240 | 170 | |||||||||
| Stock-Based Compensation Expenses | 99 | 117 | |||||||||
| Deferred Income Taxes | (240) | (244) | |||||||||
| Gains on Asset Dispositions, Net | (101) | (46) | |||||||||
| Other, Net | (15) | 15 | |||||||||
| Dry Hole Costs | 41 | 28 | |||||||||
| Mark-to-Market Financial Commodity Derivative Contracts | |||||||||||
| Total Losses | 4,215 | 1,288 | |||||||||
| Net Cash Payments for Settlements of Financial Commodity Derivative Contracts | (3,257) | (516) | |||||||||
| Other, Net | 33 | 8 | |||||||||
| Changes in Components of Working Capital and Other Assets and Liabilities | |||||||||||
| Accounts Receivable | (1,008) | (639) | |||||||||
| Inventories | (311) | 95 | |||||||||
| Accounts Payable | 301 | 115 | |||||||||
| Accrued Taxes Payable | 24 | 286 | |||||||||
| Other Assets | (271) | (55) | |||||||||
| Other Liabilities | (548) | (317) | |||||||||
| Changes in Components of Working Capital Associated with Investing Activities | 301 | (100) | |||||||||
| Net Cash Provided by Operating Activities | 7,649 | 5,625 | |||||||||
| Investing Cash Flows | |||||||||||
| Additions to Oil and Gas Properties | (3,390) | (2,689) | |||||||||
| Additions to Other Property, Plant and Equipment | (248) | (147) | |||||||||
| Proceeds from Sales of Assets | 310 | 154 | |||||||||
| Other Investing Activities | (30) | — | |||||||||
| Changes in Components of Working Capital Associated with Investing Activities | (301) | 100 | |||||||||
| Net Cash Used in Investing Activities | (3,659) | (2,582) | |||||||||
| Financing Cash Flows | |||||||||||
| Long-Term Debt Repayments | — | (750) | |||||||||
| Dividends Paid | (3,821) | (1,278) | |||||||||
| Treasury Stock Purchased | (95) | (33) | |||||||||
| Proceeds from Stock Options Exercised and Employee Stock Purchase Plan | 17 | 9 | |||||||||
| Repayment of Finance Lease Liabilities | (27) | (27) | |||||||||
| Net Cash Used in Financing Activities | (3,926) | (2,079) | |||||||||
| Effect of Exchange Rate Changes on Cash | (1) | — | |||||||||
| Increase in Cash and Cash Equivalents | 63 | 964 | |||||||||
| Cash and Cash Equivalents at Beginning of Period | 5,209 | 3,329 | |||||||||
| Cash and Cash Equivalents at End of Period | $ | 5,272 | $ | 4,293 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
-7-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
General. The condensed consolidated financial statements of EOG Resources, Inc., together with its subsidiaries (collectively, EOG), included herein have been prepared by management without audit pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC). Accordingly, they reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the financial results for the interim periods presented. Certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations. However, management believes that the disclosures included either on the face of the financial statements or in these notes are sufficient to make the interim information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in 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).
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The operating results for the three and nine months ended September 30, 2022, are not necessarily indicative of the results to be expected for the full year.
Recently Issued Accounting Standards. In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, "Reference Rate Reform (Topic 848)" (ASU 2020-04), which provides optional expedients and exceptions for accounting treatment of contracts which are affected by the anticipated discontinuation of the London InterBank Offered Rate (LIBOR) and other rates resulting from rate reform. Contract terms that are modified due to the replacement of a reference rate are not required to be remeasured or reassessed under relevant accounting standards. Early adoption is permitted. ASU 2020-04 covers certain contracts which reference these rates and that are entered into on or before December 31, 2022. EOG has evaluated the provisions of ASU 2020-04 and has concluded that the application of ASU 2020-04 will not have a material impact on its consolidated financial statements and related disclosures related to its $2.0 billion senior unsecured Revolving Credit Agreement.
-8-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
2. Stock-Based Compensation
As more fully discussed in Note 7 to the Consolidated Financial Statements included in EOG's 2021 Annual Report, EOG maintains various stock-based compensation plans. Stock-based compensation expense is included on the Condensed Consolidated Statements of Income and Comprehensive Income based upon the job function of the employees receiving the grants as follows (in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Lease and Well | $ | 6 | $ | 11 | $ | 29 | $ | 36 | |||||||||||||||
| Gathering and Processing Costs | 1 | 1 | 3 | 2 | |||||||||||||||||||
| Exploration Costs | — | 4 | 10 | 15 | |||||||||||||||||||
| General and Administrative | 27 | 35 | 57 | 64 | |||||||||||||||||||
| Total | $ | 34 | $ | 51 | $ | 99 | $ | 117 |
The Amended and Restated EOG Resources, Inc. 2008 Omnibus Equity Compensation Plan (2008 Plan) provided for grants of stock options, stock-settled stock appreciation rights (SARs), restricted stock and restricted stock units, performance units and other stock-based awards.
EOG's stockholders approved the EOG Resources, Inc. 2021 Omnibus Equity Compensation Plan (2021 Plan) at the 2021 Annual Meeting of Stockholders. Therefore, no further grants were made from the 2008 Plan from and after the April 29, 2021 effective date of the 2021 Plan. The 2021 Plan provides for grants of stock options, SARs, restricted stock and restricted stock units, restricted stock units with performance-based conditions (together with the performance units granted under the 2008 Plan, Performance Units) and other stock-based awards, up to an aggregate maximum of 20 million shares of common stock, plus any shares that are subject to outstanding awards under the 2008 Plan as of April 29, 2021, that are subsequently canceled, forfeited, expire or are otherwise not issued or are settled in cash. Under the 2021 Plan, grants may be made to employees and non-employee members of EOG's Board of Directors (Board).
At September 30, 2022, approximately 16 million common shares remained available for grant under the 2021 Plan. EOG's policy is to issue shares related to the 2021 Plan grants from previously authorized unissued shares or treasury shares to the extent treasury shares are available.
Stock Options and Stock-Settled Stock Appreciation Rights and Employee Stock Purchase Plan*.* The fair value of stock option grants and SAR grants is estimated using the Hull-White II binomial option pricing model. The fair value of Employee Stock Purchase Plan (ESPP) grants is estimated using the Black-Scholes-Merton model. Stock-based compensation expense related to stock option, SAR and ESPP grants totaled $11 million and $20 million during the three months ended September 30, 2022 and 2021, respectively, and $28 million and $39 million during the nine months ended September 30, 2022 and 2021, respectively.
Weighted average fair values and valuation assumptions used to value stock option, SAR and ESPP grants during the nine-month periods ended September 30, 2022 and 2021 are as follows:
| Stock Options/SARs | ESPP | ||||||||||||||||||||||
| Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Weighted Average Fair Value of Grants | $ | 28.30 | $ | 24.92 | $ | 26.71 | $ | 18.15 | |||||||||||||||
| Expected Volatility | 42.20 | % | 42.24 | % | 43.08 | % | 51.23 | % | |||||||||||||||
| Risk-Free Interest Rate | 0.89 | % | 0.50 | % | 1.33 | % | 0.07 | % | |||||||||||||||
| Dividend Yield | 3.28 | % | 2.25 | % | 2.88 | % | 2.88 | % | |||||||||||||||
| Expected Life | 5.3 years | 5.2 years | 0.5 years | 0.5 years |
-9-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
Expected volatility is based on an equal weighting of historical volatility and implied volatility from traded options in EOG's common stock. The risk-free interest rate is based upon United States Treasury yields in effect at the time of grant. The expected life is based upon historical experience and contractual terms of stock option, SAR and ESPP grants.
The following table sets forth stock option and SAR transactions for the nine-month periods ended September 30, 2022 and 2021 (stock options and SARs in thousands):
| Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 | ||||||||||||||||||||||
| Number of Stock Options/SARs | Weighted Average Exercise Price | Number of Stock Options/SARs | Weighted Average Exercise Price | ||||||||||||||||||||
| Outstanding at January 1 | 9,969 | $ | 84.37 | 10,186 | $ | 84.08 | |||||||||||||||||
| Granted | 2 | 97.64 | 1,976 | 81.66 | |||||||||||||||||||
| Exercised (1) | (4,282) | 91.63 | (448) | 64.18 | |||||||||||||||||||
| Forfeited | (192) | 84.26 | (984) | 98.64 | |||||||||||||||||||
| Outstanding at September 30 (2) | 5,497 | $ | 78.73 | 10,730 | $ | 83.13 | |||||||||||||||||
| Vested or Expected to Vest (3) | 5,344 | $ | 79.05 | 10,407 | $ | 83.65 | |||||||||||||||||
| Exercisable at September 30 (4) | 3,686 | $ | 84.18 | 6,906 | $ | 92.39 |
(1)The total intrinsic value of stock options/SARs exercised during the nine months ended September 30, 2022 and 2021 was $122 million and $8 million, respectively. The intrinsic value is based upon the difference between the market price of EOG's common stock on the date of exercise and the exercise price of the stock options/SARs.
(2)The total intrinsic value of stock options/SARs outstanding at September 30, 2022 and 2021 was $194 million and $95 million, respectively. At both September 30, 2022 and 2021, the weighted average remaining contractual life was 4.3 years.
(3)The total intrinsic value of stock options/SARs vested or expected to vest at September 30, 2022 and 2021 was $187 million and $90 million, respectively. At both September 30, 2022 and 2021, the weighted average remaining contractual life was 4.3 years.
(4)The total intrinsic value of stock options/SARs exercisable at September 30, 2022 and 2021 was $114 million and $38 million, respectively. At September 30, 2022 and 2021, the weighted average remaining contractual life was 3.7 years and 3.2 years, respectively.
At September 30, 2022, unrecognized compensation expense related to non-vested stock option, SAR and ESPP grants totaled $38 million. Such unrecognized expense will be amortized on a straight-line basis over a weighted average period of 1.7 years.
Restricted Stock and Restricted Stock Units. Employees may be granted restricted (non-vested) stock and/or restricted stock units without cost to them. Stock-based compensation expense related to restricted stock and restricted stock units totaled $18 million and $20 million for the three months ended September 30, 2022 and 2021, respectively, and $63 million and $65 million for the nine months ended September 30, 2022 and 2021, respectively.
-10-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
The following table sets forth restricted stock and restricted stock unit transactions for the nine-month periods ended September 30, 2022 and 2021 (shares and units in thousands):
| Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 | ||||||||||||||||||||||
| Number of Shares and Units | Weighted Average Grant Date Fair Value | Number of Shares and Units | Weighted Average Grant Date Fair Value | ||||||||||||||||||||
| Outstanding at January 1 | 4,680 | $ | 69.37 | 4,742 | $ | 74.97 | |||||||||||||||||
| Granted | 1,623 | 113.03 | 1,409 | 81.44 | |||||||||||||||||||
| Released (1) | (1,953) | 82.05 | (1,321) | 101.63 | |||||||||||||||||||
| Forfeited | (130) | 65.44 | (65) | 68.49 | |||||||||||||||||||
| Outstanding at September 30 (2) | 4,220 | $ | 80.41 | 4,765 | $ | 69.58 |
(1)The total intrinsic value of restricted stock and restricted stock units released during the nine months ended September 30, 2022 and 2021 was $215 million and $104 million, respectively. The intrinsic value is based upon the closing price of EOG's common stock on the date the restricted stock and restricted stock units are released.
(2)The total intrinsic value of restricted stock and restricted stock units outstanding at September 30, 2022 and 2021 was $472 million and $383 million, respectively.
At September 30, 2022, unrecognized compensation expense related to restricted stock and restricted stock units totaled $313 million. Such unrecognized expense will be amortized on a straight-line basis over a weighted average period of 2.0 years.
Performance Units. EOG grants Performance Units annually to its executive officers without cost to them. For the grants made prior to September 2022, as more fully discussed in the grant agreements, the applicable performance metric is EOG's total shareholder return (TSR) over a three-year performance period relative to the TSR over the same period of a designated group of peer companies. Upon the application of the applicable performance multiple at the completion of the three-year performance period, a minimum of 0% and a maximum of 200% of the Performance Units granted could be outstanding.
For the grants made beginning in September 2022, as more fully discussed in the grant agreements, the applicable performance metrics are 1) EOG's TSR over a three-year performance period relative to the TSR over the same period of a designated group of peer companies and 2) EOG's average return on capital employed (ROCE) over the three-year performance period. At the end of the three-year performance period, a performance multiple based on EOGs relative TSR ranking will be determined, with a minimum performance multiple of 0% and a maximum performance multiple of 200%. A specified modifier ranging from -70% to +70% will then be applied to the performance multiple based on EOG's average ROCE over the three-year performance period, provided that in no event shall the performance multiple, after applying the ROCE modifier, be less than 0% or exceed 200%. Furthermore, if EOG's TSR over the three-year performance period is negative (i.e., less than 0%), the performance multiple will be capped at 100%, regardless of EOG's relative TSR ranking or three-year average ROCE.
The fair value of the Performance Units is estimated using a Monte Carlo simulation. Stock-based compensation expense related to the Performance Unit grants totaled $5 million and $11 million for the three months ended September 30, 2022 and 2021, respectively, and $8 million and $13 million for the nine months ended September 30, 2022 and 2021, respectively.
-11-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
The following table sets forth the Performance Unit transactions for the nine-month periods ended September 30, 2022 and 2021 (units in thousands):
| Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2021 | ||||||||||||||||||||||
| Number of Units | Weighted Average Grant Date Fair Value | Number of Units | Weighted Average Grant Date Fair Value | ||||||||||||||||||||
| Outstanding at January 1 | 679 | $ | 84.97 | 613 | $ | 88.38 | |||||||||||||||||
| Granted | 122 | 126.55 | 222 | 90.94 | |||||||||||||||||||
| Granted for Performance Multiple (1) | — | — | 19 | 113.81 | |||||||||||||||||||
| Released (2) | (57) | 136.74 | (175) | 113.06 | |||||||||||||||||||
| Forfeited for Performance Multiple (3) | (56) | 136.74 | — | — | |||||||||||||||||||
| Outstanding at September 30 (4) | 688 | (5) | $ | 83.82 | 679 | $ | 83.59 |
(1)Upon completion of the Performance Period for the Performance Units granted in 2017, a performance multiple of 125% was applied to the grants resulting in an additional grant of Performance Units in February 2021.
(2)The total intrinsic value of Performance Units released was $7 million and $13 million for the nine months ended September 30, 2022 and 2021, respectively. The intrinsic value is based upon the closing price of EOG's common stock on the date the Performance Units are released.
(3)Upon completion of the Performance Period for the Performance Units granted in 2018, a performance multiple of 50% was applied to the grants resulting in a forfeiture of Performance Units in February 2022.
(4)The total intrinsic value of Performance Units outstanding at September 30, 2022 and 2021 was approximately $77 million and $55 million, respectively.
(5)Upon the application of the relevant performance multiple at the completion of each of the remaining Performance Periods, a minimum of zero and a maximum of 1,376 Performance Units could be outstanding.
At September 30, 2022, unrecognized compensation expense related to Performance Units totaled $20 million. Such unrecognized expense will be amortized on a straight-line basis over a weighted average period of 1.8 years.
3. Net Income Per Share
The following table sets forth the computation of Net Income Per Share for the three-month and nine-month periods ended September 30, 2022 and 2021 (in millions, except per share data):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Numerator for Basic and Diluted Earnings Per Share - | |||||||||||||||||||||||
| Net Income | $ | 2,854 | $ | 1,095 | $ | 5,482 | $ | 2,679 | |||||||||||||||
| Denominator for Basic Earnings Per Share - | |||||||||||||||||||||||
| Weighted Average Shares | 583 | 581 | 583 | 580 | |||||||||||||||||||
| Potential Dilutive Common Shares - | |||||||||||||||||||||||
| Stock Options/SARs/ESPP | 1 | 1 | 2 | 1 | |||||||||||||||||||
| Restricted Stock/Units and Performance Units | 3 | 2 | 2 | 3 | |||||||||||||||||||
| Denominator for Diluted Earnings Per Share - | |||||||||||||||||||||||
| Adjusted Diluted Weighted Average Shares | 587 | 584 | 587 | 584 | |||||||||||||||||||
| Net Income Per Share | |||||||||||||||||||||||
| Basic | $ | 4.90 | $ | 1.88 | $ | 9.40 | $ | 4.62 | |||||||||||||||
| Diluted | $ | 4.86 | $ | 1.88 | $ | 9.34 | $ | 4.59 |
-12-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
The diluted earnings per share calculation excludes stock option, SAR and ESPP grants that were anti-dilutive. Shares underlying the excluded stock option, SAR and ESPP grants were 1 million and 7 million for the three-month periods ended September 30, 2022 and 2021, respectively, and were 1 million and 7 million shares for the nine-month periods ended September 30, 2022 and 2021, respectively.
4. Supplemental Cash Flow Information
Net cash paid for interest and income taxes was as follows for the nine-month periods ended September 30, 2022 and 2021 (in millions):
| Nine Months Ended September 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Interest (1) | $ | 123 | $ | 134 | |||||||
| Income Taxes, Net of Refunds Received | $ | 2,059 | $ | 775 |
(1)Net of capitalized interest of $26 million and $24 million for the nine months ended September 30, 2022 and 2021, respectively.
EOG's accrued capital expenditures at September 30, 2022 and 2021 were $575 million and $405 million, respectively.
Non-cash investing activities for the nine months ended September 30, 2022 and 2021, included additions of $113 million and $41 million, respectively, to EOG's oil and gas properties as a result of property exchanges. Non-cash investing activities for the nine months ended September 30, 2021, also included additions of $74 million to EOG's other property, plant and equipment made in connection with finance lease transactions for storage facilities.
Operating activities for the nine months ended September 30, 2022 and 2021, included the net use of cash of $546 million and $308 million, respectively, related to collateral posted for financial commodity derivative contracts. For related discussion, see Note 12. This amount is reflected in Other Liabilities within the Changes in Components of Working Capital and Other Assets and Liabilities line item on the Condensed Consolidated Statements of Cash Flows.
-13-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
5. Segment Information
Selected financial information by reportable segment is presented below for the three-month and nine-month periods ended September 30, 2022 and 2021 (in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Operating Revenues and Other | |||||||||||||||||||||||
| United States | $ | 7,481 | $ | 4,692 | $ | 18,733 | $ | 12,293 | |||||||||||||||
| Trinidad | 111 | 72 | 249 | 229 | |||||||||||||||||||
| Other International (1) | 1 | 1 | 1 | 76 | |||||||||||||||||||
| Total | $ | 7,593 | $ | 4,765 | $ | 18,983 | $ | 12,598 | |||||||||||||||
| Operating Income (Loss) | |||||||||||||||||||||||
| United States | $ | 3,606 | $ | 1,455 | $ | 7,010 | $ | 3,422 | |||||||||||||||
| Trinidad | 73 | 37 | 132 | 121 | |||||||||||||||||||
| Other International (1) (2) | (15) | (21) | (29) | 31 | |||||||||||||||||||
| Total | 3,664 | 1,471 | 7,113 | 3,574 | |||||||||||||||||||
| Reconciling Items | |||||||||||||||||||||||
| Other Income, Net | 40 | 6 | 66 | — | |||||||||||||||||||
| Interest Expense, Net | (41) | (48) | (137) | (140) | |||||||||||||||||||
| Income Before Income Taxes | $ | 3,663 | $ | 1,429 | $ | 7,042 | $ | 3,434 |
(1) Other International primarily consists of EOG's China and Canada operations. The China operations were sold in the second quarter of 2021. EOG began exploration programs in Australia in the third quarter of 2021 and in Oman in the third quarter of 2020. The decision was reached in the fourth quarter of 2021 to exit Block 36 and Block 49 in Oman.
(2) EOG recorded pretax impairment charges of $10 million and $13 million for the three months ended September 30, 2022 and 2021, respectively, and $12 million and $15 million for the nine months ended September 30, 2022 and 2021, respectively, for proved oil and gas properties and firm commitment contracts related to its decision to exit the Horn River Basin in British Columbia, Canada.
Total assets by reportable segment are presented below at September 30, 2022 and December 31, 2021 (in millions):
| At September 30, 2022 | At December 31, 2021 | ||||||||||
| Total Assets | |||||||||||
| United States | $ | 39,521 | $ | 37,436 | |||||||
| Trinidad | 831 | 637 | |||||||||
| Other International (1) | 135 | 163 | |||||||||
| Total | $ | 40,487 | $ | 38,236 |
(1) Other International primarily consists of EOG's China and Canada operations. The China operations were sold in the second quarter of 2021. EOG began exploration programs in Australia in the third quarter of 2021 and in Oman in the third quarter of 2020. The decision was reached in the fourth quarter of 2021 to exit Block 36 and Block 49 in Oman.
-14-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
6. Asset Retirement Obligations
The following table presents the reconciliation of the beginning and ending aggregate carrying amounts of short-term and long-term legal obligations associated with the retirement of property, plant and equipment for the nine-month periods ended September 30, 2022 and 2021 (in millions):
| Nine Months Ended September 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Carrying Amount at January 1 | $ | 1,231 | $ | 1,217 | |||||||
| Liabilities Incurred | 83 | 55 | |||||||||
| Liabilities Settled (1) | (178) | (83) | |||||||||
| Accretion | 32 | 33 | |||||||||
| Revisions | 102 | (7) | |||||||||
| Foreign Currency Translation | (5) | — | |||||||||
| Carrying Amount at September 30 | $ | 1,265 | $ | 1,215 | |||||||
| Current Portion | $ | 38 | $ | 54 | |||||||
| Noncurrent Portion | $ | 1,227 | $ | 1,161 |
(1)Includes settlements related to asset sales.
The current and noncurrent portions of EOG's asset retirement obligations are included in Current Liabilities - Other and Other Liabilities, respectively, on the Condensed Consolidated Balance Sheets.
7. Exploratory Well Costs
EOG's net changes in capitalized exploratory well costs for the nine-month period ended September 30, 2022, are presented below (in millions):
| Nine Months Ended September 30, 2022 | |||||
| Balance at January 1 | $ | 7 | |||
| Additions Pending the Determination of Proved Reserves | 93 | ||||
| Reclassifications to Proved Properties | (12) | ||||
| Costs Charged to Expense (1) | (35) | ||||
| Balance at September 30 | $ | 53 |
(1)Includes capitalized exploratory well costs charged to either dry hole costs or impairments.
At September 30, 2022, all capitalized exploratory well costs had been capitalized for periods of less than one year.
8. Commitments and Contingencies
There are currently various suits and claims pending against EOG that have arisen in the ordinary course of EOG's business, including contract disputes, personal injury and property damage claims and title disputes. While the ultimate outcome and impact on EOG cannot be predicted, management believes that the resolution of these suits and claims will not, individually or in the aggregate, have a material adverse effect on EOG's consolidated financial position, results of operations or cash flow. EOG records reserves for contingencies when information available indicates that a loss is probable and the amount of the loss can be reasonably estimated.
-15-
EOG RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
9. Pension and Postretirement Benefits
Pension Plans. EOG has a defined contribution pension plan in place for most of its employees in the United States. EOG's contributions to the pension plan are based on various percentages of compensation and, in some instances, are based upon the amount of the employees' contributions. EOG's total costs recognized for the pension plan were $37 million and $36 million for the nine months ended September 30, 2022 and 2021. In addition, EOG's Trinidadian subsidiary maintains a contributory defined benefit pension plan and a matched savings plan, both of which are available to most of the employees of the Trinidadian subsidiary, the costs of which are not material.
Postretirement Health Care. EOG has postretirement medical and dental benefits in place for eligible United States and Trinidad employees and their eligible dependents, the costs of which are not material.
10. Long-Term Debt and Common Stock
Long-Term Debt. EOG had no outstanding commercial paper borrowings at September 30, 2022 and December 31, 2021, and did not utilize any commercial paper borrowings during the nine months ended September 30, 2022 and 2021.
At September 30, 2022, the $1,250 million aggregate principal amount of EOG's 2.625% Senior Notes due 2023 were classified as Current Portion of Long-Term Debt on the Condensed Consolidated Balance Sheets.
EOG currently has a $2.0 billion senior unsecured Revolving Credit Agreement (Agreement) with domestic and foreign lenders (Banks). The Agreement has a scheduled maturity date of June 27, 2024, and includes an option for EOG to extend, on up to two occasions, the term for successive one-year periods subject to certain terms and conditions. The Agreement (i) commits the Banks to provide advances up to an aggregate principal amount of $2.0 billion at any one time outstanding, with an option for EOG to request increases in the aggregate commitments to an amount not to exceed $3.0 billion, subject to certain terms and conditions and (ii) includes a swingline subfacility and a letter of credit subfacility. Advances under the Agreement will accrue interest based, at EOG's option, on either LIBOR plus an applicable margin (Eurodollar rate) or the base rate (as defined in the Agreement) plus an applicable margin. The Agreement contains representations, warranties, covenants and events of default that EOG believes are customary for investment-grade, senior unsecured commercial bank credit agreements, including a financial covenant for the maintenance of a ratio of total debt-to-capitalization (as such terms are defined in the Agreement) of no greater than 65%. At September 30, 2022, EOG was in compliance with this financial covenant. At September 30, 2022 and December 31, 2021, there were no borrowings or letters of credit outstanding under the Agreement. The Eurodollar rate and base rate (inclusive of the applicable margin), had there been any amounts borrowed under the Agreement at September 30, 2022, would have been 4.04% and 6.25%, respectively.
Common Stock. On February 24, 2022, the 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 paid on September 29, 2022, to stockholders of record as of September 15, 2022.
On September 29, 2022, the Board declared a quarterly cash dividend on the common stock of $0.75 per share payable on October 31, 2022, to stockholders of record as of October 17, 2022. At September 30, 2022, this quarterly cash dividend was accrued as Dividends Payable on the Condensed Consolidated Balance Sheets.
On November 3, 2022, the Board (i) increased the quarterly cash dividend on the common stock from the previous $0.75 per share to $0.825 per share, effective beginning with the dividend payable on January 31, 2023, to stockholders of record as of January 17, 2023, and (ii) declared a special cash dividend on the common stock of $1.50 per share, payable on December 30, 2022, to stockholders of record as of December 15, 2022.
-16-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
11. Fair Value Measurements
Recurring Fair Value Measurements. As more fully discussed in Note 13 to the Consolidated Financial Statements included in EOG's 2021 Annual Report, certain of EOG's financial and nonfinancial assets and liabilities are reported at fair value on the Condensed Consolidated Balance Sheets. The following table provides fair value measurement information within the fair value hierarchy for certain of EOG's financial assets and liabilities carried at fair value on a recurring basis at September 30, 2022 and December 31, 2021 (in millions):
| Fair Value Measurements Using: | |||||||||||||||||||||||
| Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
| At September 30, 2022 | |||||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||
| Natural Gas Basis Swaps | $ | — | $ | 29 | $ | — | $ | 29 | |||||||||||||||
| Financial Liabilities: | |||||||||||||||||||||||
| Crude Oil Swaps | — | 297 | — | 297 | |||||||||||||||||||
| Natural Gas Swaps | — | 1,052 | — | 1,052 | |||||||||||||||||||
| Crude Oil Roll Differential Swaps | — | 8 | — | 8 | |||||||||||||||||||
| At December 31, 2021 | |||||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||
| Natural Gas Swaps | $ | — | $ | 29 | $ | — | $ | 29 | |||||||||||||||
| Natural Gas Basis Swaps | — | 2 | — | 2 | |||||||||||||||||||
| Crude Oil Swaps | — | 15 | — | 15 | |||||||||||||||||||
| Financial Liabilities: | |||||||||||||||||||||||
| Crude Oil Roll Differential Swaps | — | 24 | — | 24 | |||||||||||||||||||
| Natural Gas Swaps | — | 121 | — | 121 | |||||||||||||||||||
| Crude Oil Swaps | — | 340 | — | 340 | |||||||||||||||||||
| Natural Gas Basis Swaps | — | 1 | — | 1 |
See Note 12 for the balance sheet amounts and classification of EOG's financial commodity derivative instruments at September 30, 2022 and December 31, 2021.
The estimated fair value of financial commodity derivative contracts was based upon forward commodity price curves based on quoted market prices. Financial commodity derivative contracts were valued by utilizing an independent third-party derivative valuation provider who uses various types of valuation models, as applicable.
Non-Recurring Fair Value Measurements. The initial measurement of asset retirement obligations at fair value is calculated using discounted cash flow techniques and is based on internal estimates of future retirement costs associated with property, plant and equipment. Significant Level 3 inputs used in the calculation of asset retirement obligations include plugging costs and reserve lives. A reconciliation of EOG's asset retirement obligations is presented in Note 6.
-17-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
When circumstances indicate that proved oil and gas properties may be impaired, EOG compares expected undiscounted future cash flows at a depreciation, depletion and amortization group level to the unamortized capitalized cost of the asset. If the expected undiscounted future cash flows, based on EOG's estimate of (and assumptions regarding) significant Level 3 inputs, including future crude oil, natural gas liquids (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 using the Income Approach described in the FASB's Fair Value Measurement Topic of the Accounting Standards Codification. In certain instances, EOG utilizes accepted offers from third-party purchasers as the basis for determining fair value.
EOG utilized average prices per acre from comparable market transactions and estimated discounted cash flows as the basis for determining the fair value of unproved and proved properties, respectively, received in non-cash property exchanges. See Note 4.
Fair Value Disclosures. EOG's financial instruments, other than financial commodity derivative contracts, consist of cash and cash equivalents, accounts receivable, accounts payable and current and long-term debt. The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate fair value.
At both September 30, 2022 and December 31, 2021, EOG had outstanding $4,890 million aggregate principal amount of senior notes, which had estimated fair values at such dates of approximately $4,667 million and $5,577 million, respectively. The estimated fair value of debt was based upon quoted market prices and, where such prices were not available, other observable (Level 2) inputs regarding interest rates available to EOG at the end of each respective period.
-18-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
12. Risk Management Activities
Commodity Price Risk*.* As more fully discussed in Note 12 to the Consolidated Financial Statements included in EOG's 2021 Annual Report, EOG engages in price risk management activities from time to time. These activities are intended to manage EOG's exposure to fluctuations in commodity prices for crude oil, NGLs and natural gas. EOG utilizes financial commodity derivative instruments, primarily price swap, option, swaption, collar and basis swap contracts, as a means to manage this price risk. EOG has not designated any of its financial commodity derivative contracts as accounting hedges and, accordingly, accounts for financial commodity derivative contracts using the mark-to-market accounting method.
Financial Commodity Derivative Contracts. Presented below is a comprehensive summary of EOG's financial commodity derivative contracts settled during the nine-month period ended September 30, 2022 (closed) and outstanding as of September 30, 2022. Crude oil volumes are presented in thousand barrels per day (MBbld) and prices are presented in dollars per barrel ($/Bbl). Natural gas volumes are presented in million British Thermal Units per day (MMBtud) and prices are presented in dollars per million British Thermal Units ($/MMBtu).
| Crude Oil Financial Price Swap Contracts | ||||||||||||||||||||||||||||||||
| Contracts Sold | Contracts Purchased | |||||||||||||||||||||||||||||||
| Period | Settlement Index | Volume (MBbld) | Weighted Average Price ($/Bbl) | Volume (MBbld) | Weighted Average Price ($/Bbl) | |||||||||||||||||||||||||||
| January - March 2022 (closed) | New York Mercantile Exchange (NYMEX) West Texas Intermediate (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 | 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 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.
(2) In the third quarter of 2022, EOG executed the early termination provision granting EOG the right to terminate certain of its January 2023 - March 2023 crude oil financial price swap contracts which were open at that time. EOG paid net cash of $63 million for the settlement of these contracts.
-19-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
| Crude Oil Basis Swap Contracts | ||||||||||||||||||||
| Contracts Sold | ||||||||||||||||||||
| Period | Settlement Index | Volume (MBbld) | Weighted Average Price Differential ($/Bbl) | |||||||||||||||||
| January - October 2022 (closed) | NYMEX WTI Roll Differential (1) | 125 | $ | 0.15 | ||||||||||||||||
| November - 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.
| Natural Gas Financial Price Swap Contracts | ||||||||||||||||||||
| Contracts Sold | ||||||||||||||||||||
| Period | Settlement Index | Volume (MMBtud in thousands) | Weighted Average Price ($/MMBtu) | |||||||||||||||||
| January - September 2022 (closed) | NYMEX Henry Hub | 725 | $ | 3.57 | ||||||||||||||||
| October - December 2022 (closed) (1) | NYMEX Henry Hub | 425 | 3.05 | |||||||||||||||||
| October (closed) | NYMEX Henry Hub | 300 | 4.32 | |||||||||||||||||
| November - 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 - September 2022 (closed) | NYMEX Henry Hub Houston Ship Channel (HSC) Differential (1) | 210 | $ | 0.01 | ||||||||||||||||
| October - 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.
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EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Concluded)
(Unaudited)
Financial Commodity Derivatives Location on Balance Sheet. The following table sets forth the amounts and classification of EOG's outstanding financial commodity derivative instruments at September 30, 2022 and December 31, 2021. Certain amounts may be presented on a net basis on the Condensed Consolidated Financial Statements when such amounts are with the same counterparty and subject to a master netting arrangement (in millions):
| Fair Value at | ||||||||||||||||||||
| Description | Location on Balance Sheet | September 30, 2022 | December 31, 2021 | |||||||||||||||||
| Asset Derivatives | ||||||||||||||||||||
| Crude oil and natural gas derivative contracts - | ||||||||||||||||||||
| Noncurrent Portion | Other Assets (1) | $ | — | $ | 6 | |||||||||||||||
| Liability Derivatives | ||||||||||||||||||||
| Crude oil and natural gas derivative contracts - | ||||||||||||||||||||
| Current portion | Liabilities from Price Risk Management Activities (2) | 243 | 269 | |||||||||||||||||
| Noncurrent portion | Other Liabilities (3) | 399 | 37 |
(1) The noncurrent portion of Assets from Price Risk Management Activities consists of gross assets of $7 million, partially offset by gross liabilities of $1 million at December 31, 2021.
(2) The current portion of Liabilities from Price Risk Management Activities consists of gross liabilities of $547 million, partially offset by gross assets of $25 million and collateral posted with counterparties of $279 million at September 30, 2022. The current portion of Liabilities from Price Risk Management Activities consists of gross liabilities of $421 million, partially offset by gross assets of $29 million and collateral posted with counterparties of $123 million, at December 31, 2021.
(3) The noncurrent portion of Liabilities from Price Risk Management Activities consists of gross liabilities of $810 million, partially offset by gross assets of $4 million and collateral posted with counterparties of $407 million at September 30, 2022. The noncurrent portion of Liabilities from Price Risk Management Activities consists of gross liabilities of $64 million, partially offset by gross assets of $10 million and collateral posted with counterparties of $17 million, at December 31, 2021.
Credit Risk. Notional contract amounts are used to express the magnitude of a financial derivative. The amounts potentially subject to credit risk, in the event of nonperformance by the counterparties, are equal to the fair value of such contracts (see Note 11). EOG evaluates its exposures to significant counterparties on an ongoing basis, including those arising from physical and financial transactions. In some instances, EOG renegotiates payment terms and/or requires collateral, parent guarantees or letters of credit to minimize credit risk.
All of EOG's derivative instruments are covered by International Swap Dealers Association Master Agreements (ISDAs) with counterparties. The ISDAs may contain provisions that require EOG, if it is the party in a net liability position, to post collateral when the amount of the net liability exceeds the threshold level specified for EOG's then-current credit ratings. In addition, the ISDAs may also provide that as a result of certain circumstances, including certain events that cause EOG's credit ratings to become materially weaker than its then-current ratings, the counterparty may require all outstanding derivatives under the ISDAs to be settled immediately. See Note 11 for the aggregate fair value of all derivative instruments that were in a net liability position at both September 30, 2022 and December 31, 2021. EOG had $686 million of collateral posted and no collateral held at September 30, 2022. EOG had $140 million of collateral posted and no collateral held at December 31, 2021. Due to changes in contracted volumes and commodity prices subsequent to September 30, 2022, EOG had $623 million of collateral posted at November 2, 2022.
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13. Acquisitions and Divestitures
During the nine months ended September 30, 2022, EOG paid cash for property acquisitions of $392 million in the United States. Additionally, during the nine months ended September 30, 2022, EOG recognized net gains on asset dispositions of $101 million and received proceeds of approximately $310 million, primarily due to the sale of certain legacy natural gas assets in the Rocky Mountain area, unproved leasehold in Texas and producing properties in the Mid-Continent area.
During the nine months ended September 30, 2021, EOG paid cash for property acquisitions of $95 million in the United States. Additionally, during the nine months ended September 30, 2021, EOG recognized net gains on asset dispositions of $46 million and received proceeds of approximately $154 million, primarily due to the sale of its China operations during the second quarter of 2021.
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PART I. FINANCIAL INFORMATION
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