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, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Operating Revenues and Other | |||||||||||||||||||||||
| Crude Oil and Condensate | $ | 3,717 | $ | 4,109 | $ | 10,151 | $ | 12,697 | |||||||||||||||
| Natural Gas Liquids | 501 | 693 | 1,400 | 2,151 | |||||||||||||||||||
| Natural Gas | 417 | 1,235 | 1,268 | 2,951 | |||||||||||||||||||
| Gains (Losses) on Mark-to-Market Financial Commodity Derivative Contracts | 43 | (18) | 520 | (4,215) | |||||||||||||||||||
| Gathering, Processing and Marketing | 1,478 | 1,561 | 4,333 | 5,199 | |||||||||||||||||||
| Gains (Losses) on Asset Dispositions, Net | 35 | (21) | 95 | 101 | |||||||||||||||||||
| Other, Net | 21 | 34 | 62 | 99 | |||||||||||||||||||
| Total | 6,212 | 7,593 | 17,829 | 18,983 | |||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Lease and Well | 369 | 335 | 1,076 | 977 | |||||||||||||||||||
| Transportation Costs | 240 | 257 | 712 | 729 | |||||||||||||||||||
| Gathering and Processing Costs | 166 | 167 | 485 | 463 | |||||||||||||||||||
| Exploration Costs | 43 | 35 | 140 | 115 | |||||||||||||||||||
| Dry Hole Costs | — | 18 | 1 | 41 | |||||||||||||||||||
| Impairments | 54 | 94 | 123 | 240 | |||||||||||||||||||
| Marketing Costs | 1,383 | 1,621 | 4,200 | 5,031 | |||||||||||||||||||
| Depreciation, Depletion and Amortization | 898 | 906 | 2,562 | 2,664 | |||||||||||||||||||
| General and Administrative | 161 | 162 | 448 | 414 | |||||||||||||||||||
| Taxes Other Than Income | 341 | 334 | 983 | 1,196 | |||||||||||||||||||
| Total | 3,655 | 3,929 | 10,730 | 11,870 | |||||||||||||||||||
| Operating Income | 2,557 | 3,664 | 7,099 | 7,113 | |||||||||||||||||||
| Other Income, Net | 52 | 40 | 168 | 66 | |||||||||||||||||||
| Income Before Interest Expense and Income Taxes | 2,609 | 3,704 | 7,267 | 7,179 | |||||||||||||||||||
| Interest Expense, Net | 36 | 41 | 113 | 137 | |||||||||||||||||||
| Income Before Income Taxes | 2,573 | 3,663 | 7,154 | 7,042 | |||||||||||||||||||
| Income Tax Provision | 543 | 809 | 1,548 | 1,560 | |||||||||||||||||||
| Net Income | $ | 2,030 | $ | 2,854 | $ | 5,606 | $ | 5,482 | |||||||||||||||
| Net Income Per Share | |||||||||||||||||||||||
| Basic | $ | 3.51 | $ | 4.90 | $ | 9.65 | $ | 9.40 | |||||||||||||||
| Diluted | $ | 3.48 | $ | 4.86 | $ | 9.60 | $ | 9.34 | |||||||||||||||
| Average Number of Common Shares | |||||||||||||||||||||||
| Basic | 579 | 583 | 581 | 583 | |||||||||||||||||||
| Diluted | 583 | 587 | 584 | 587 | |||||||||||||||||||
| Comprehensive Income | |||||||||||||||||||||||
| Net Income | $ | 2,030 | $ | 2,854 | $ | 5,606 | $ | 5,482 | |||||||||||||||
| Other Comprehensive Income | |||||||||||||||||||||||
| Foreign Currency Translation Adjustments | 2 | 5 | 1 | 6 | |||||||||||||||||||
| Other, Net of Tax | — | 1 | — | — | |||||||||||||||||||
| Other Comprehensive Income | 2 | 6 | 1 | 6 | |||||||||||||||||||
| Comprehensive Income | $ | 2,032 | $ | 2,860 | $ | 5,607 | $ | 5,488 |
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, 2023 | December 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| Current Assets | |||||||||||
| Cash and Cash Equivalents | $ | 5,326 | $ | 5,972 | |||||||
| Accounts Receivable, Net | 2,927 | 2,774 | |||||||||
| Inventories | 1,379 | 1,058 | |||||||||
| Income Taxes Receivable | — | 97 | |||||||||
| Other | 626 | 574 | |||||||||
| Total | 10,258 | 10,475 | |||||||||
| Property, Plant and Equipment | |||||||||||
| Oil and Gas Properties (Successful Efforts Method) | 70,730 | 67,322 | |||||||||
| Other Property, Plant and Equipment | 5,355 | 4,786 | |||||||||
| Total Property, Plant and Equipment | 76,085 | 72,108 | |||||||||
| Less: Accumulated Depreciation, Depletion and Amortization | (44,362) | (42,679) | |||||||||
| Total Property, Plant and Equipment, Net | 31,723 | 29,429 | |||||||||
| Deferred Income Taxes | 33 | 33 | |||||||||
| Other Assets | 1,633 | 1,434 | |||||||||
| Total Assets | $ | 43,647 | $ | 41,371 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Accounts Payable | $ | 2,464 | $ | 2,532 | |||||||
| Accrued Taxes Payable | 605 | 405 | |||||||||
| Dividends Payable | 478 | 482 | |||||||||
| Liabilities from Price Risk Management Activities | 22 | 169 | |||||||||
| Current Portion of Long-Term Debt | 34 | 1,283 | |||||||||
| Current Portion of Operating Lease Liabilities | 337 | 296 | |||||||||
| Other | 285 | 346 | |||||||||
| Total | 4,225 | 5,513 | |||||||||
| Long-Term Debt | 3,772 | 3,795 | |||||||||
| Other Liabilities | 2,698 | 2,574 | |||||||||
| Deferred Income Taxes | 5,194 | 4,710 | |||||||||
| Commitments and Contingencies (Note 8) | |||||||||||
| Stockholders' Equity | |||||||||||
| Common Stock, $0.01 Par, 1,280,000,000 Shares Authorized and 588,651,638 Shares Issued at September 30, 2023 and 588,396,757 Shares Issued at December 31, 2022 | 206 | 206 | |||||||||
| Additional Paid in Capital | 6,133 | 6,187 | |||||||||
| Accumulated Other Comprehensive Loss | (7) | (8) | |||||||||
| Retained Earnings | 22,047 | 18,472 | |||||||||
| Common Stock Held in Treasury, 5,602,445 Shares at September 30, 2023 and 700,281 Shares at December 31, 2022 | (621) | (78) | |||||||||
| Total Stockholders' Equity | 27,758 | 24,779 | |||||||||
| Total Liabilities and Stockholders' Equity | $ | 43,647 | $ | 41,371 |
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, 2023 | $ | 206 | $ | 6,257 | $ | (9) | $ | 20,497 | $ | (694) | $ | 26,257 | |||||||||||||||||||||||
| Net Income | — | — | — | 2,030 | — | 2,030 | |||||||||||||||||||||||||||||
| Common Stock Dividends Declared, $0.825 Per Share | — | — | — | (480) | — | (480) | |||||||||||||||||||||||||||||
| Other Comprehensive Income | — | — | 2 | — | — | 2 | |||||||||||||||||||||||||||||
| Common Stock Issued Under Stock Plans | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Restricted Stock and Restricted Stock Units, Net | — | (154) | — | — | 154 | — | |||||||||||||||||||||||||||||
| Stock-Based Compensation Expenses | — | 57 | — | — | — | 57 | |||||||||||||||||||||||||||||
| Treasury Stock Repurchased | — | — | — | — | (61) | (61) | |||||||||||||||||||||||||||||
| Change in Treasury Stock - Stock Compensation Plans, Net | — | (27) | — | — | (20) | (47) | |||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | 206 | $ | 6,133 | $ | (7) | $ | 22,047 | $ | (621) | $ | 27,758 |
| 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 | |||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | 206 | $ | 6,155 | $ | (6) | $ | 17,563 | $ | (69) | $ | 23,849 |
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, 2022 | $ | 206 | $ | 6,187 | $ | (8) | $ | 18,472 | $ | (78) | $ | 24,779 | |||||||||||||||||||||||
| Net Income | — | — | — | 5,606 | — | 5,606 | |||||||||||||||||||||||||||||
| Common Stock Dividends Declared, $3.475 Per Share | — | — | — | (2,031) | — | (2,031) | |||||||||||||||||||||||||||||
| Other Comprehensive Income | — | — | 1 | — | — | 1 | |||||||||||||||||||||||||||||
| Common Stock Issued Under Stock Plans | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Restricted Stock and Restricted Stock Units, Net | — | (156) | — | — | 156 | — | |||||||||||||||||||||||||||||
| Stock-Based Compensation Expenses | — | 126 | — | — | — | 126 | |||||||||||||||||||||||||||||
| Treasury Stock Repurchased | — | — | — | — | (676) | (676) | |||||||||||||||||||||||||||||
| Change in Treasury Stock - Stock Compensation Plans, Net | — | (24) | — | — | (23) | (47) | |||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | 206 | $ | 6,133 | $ | (7) | $ | 22,047 | $ | (621) | $ | 27,758 |
| 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 |
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, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash Flows from Operating Activities | |||||||||||
| Reconciliation of Net Income to Net Cash Provided by Operating Activities: | |||||||||||
| Net Income | $ | 5,606 | $ | 5,482 | |||||||
| Items Not Requiring (Providing) Cash | |||||||||||
| Depreciation, Depletion and Amortization | 2,562 | 2,664 | |||||||||
| Impairments | 123 | 240 | |||||||||
| Stock-Based Compensation Expenses | 126 | 99 | |||||||||
| Deferred Income Taxes | 484 | (240) | |||||||||
| Gains on Asset Dispositions, Net | (95) | (101) | |||||||||
| Other, Net | 5 | (15) | |||||||||
| Dry Hole Costs | 1 | 41 | |||||||||
| Mark-to-Market Financial Commodity Derivative Contracts | |||||||||||
| (Gains) Losses, Net | (520) | 4,215 | |||||||||
| Net Cash Payments for Settlements of Financial Commodity Derivative Contracts | (130) | (3,257) | |||||||||
| Other, Net | (2) | 33 | |||||||||
| Changes in Components of Working Capital and Other Assets and Liabilities | |||||||||||
| Accounts Receivable | (239) | (1,008) | |||||||||
| Inventories | (331) | (311) | |||||||||
| Accounts Payable | (70) | 301 | |||||||||
| Accrued Taxes Payable | 200 | 24 | |||||||||
| Other Assets | 3 | (271) | |||||||||
| Other Liabilities | 200 | (548) | |||||||||
| Changes in Components of Working Capital Associated with Investing Activities | 313 | 301 | |||||||||
| Net Cash Provided by Operating Activities | 8,236 | 7,649 | |||||||||
| Investing Cash Flows | |||||||||||
| Additions to Oil and Gas Properties | (4,025) | (3,390) | |||||||||
| Additions to Other Property, Plant and Equipment | (638) | (248) | |||||||||
| Proceeds from Sales of Assets | 135 | 310 | |||||||||
| Other Investing Activities | — | (30) | |||||||||
| Changes in Components of Working Capital Associated with Investing Activities | (313) | (301) | |||||||||
| Net Cash Used in Investing Activities | (4,841) | (3,659) | |||||||||
| Financing Cash Flows | |||||||||||
| Long-Term Debt Repayments | (1,250) | — | |||||||||
| Dividends Paid | (2,041) | (3,821) | |||||||||
| Treasury Stock Purchased | (728) | (95) | |||||||||
| Proceeds from Stock Options Exercised and Employee Stock Purchase Plan | 10 | 17 | |||||||||
| Debt Issuance Costs | (8) | — | |||||||||
| Repayment of Finance Lease Liabilities | (24) | (27) | |||||||||
| Net Cash Used in Financing Activities | (4,041) | (3,926) | |||||||||
| Effect of Exchange Rate Changes on Cash | — | (1) | |||||||||
| Increase (Decrease) in Cash and Cash Equivalents | (646) | 63 | |||||||||
| Cash and Cash Equivalents at Beginning of Period | 5,972 | 5,209 | |||||||||
| Cash and Cash Equivalents at End of Period | $ | 5,326 | $ | 5,272 |
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, 2022, filed on February 23, 2023 (EOG's 2022 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, 2023, are not necessarily indicative of the results to be expected for the full year.
2. Stock-Based Compensation
As more fully discussed in Note 7 to the Consolidated Financial Statements included in EOG's 2022 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, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Lease and Well | $ | 16 | $ | 6 | $ | 39 | $ | 29 | |||||||||||||||
| Gathering and Processing Costs | 1 | 1 | 3 | 3 | |||||||||||||||||||
| Exploration Costs | 8 | — | 18 | 10 | |||||||||||||||||||
| General and Administrative | 32 | 27 | 66 | 57 | |||||||||||||||||||
| Total | $ | 57 | $ | 34 | $ | 126 | $ | 99 |
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 Amended and Restated EOG Resources, Inc. 2008 Omnibus Equity Compensation Plan (2008 Plan) from and after the April 29, 2021 effective date of the 2021 Plan. The 2021 Plan provides for grants of stock options, stock-settled stock appreciation rights (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 were 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, 2023, approximately 15 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.
-8-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
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 $8 million and $11 million during the three months ended September 30, 2023 and 2022, respectively, and $20 million and $28 million during the nine months ended September 30, 2023 and 2022, respectively.
EOG did not grant any stock options or SARs during the nine-month period ended September 30, 2023. Weighted average fair values and valuation assumptions used to value stock options and SARs granted during the nine-month period ended September 30, 2022 and ESPP grants during the nine-month periods ended September 30, 2023 and 2022 are as follows:
| Stock Options/SARs | ESPP | ||||||||||||||||||||||
| Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2023 | 2022 | |||||||||||||||||||||
| Weighted Average Fair Value of Grants | $ | 28.30 | $ | 29.39 | $ | 26.71 | |||||||||||||||||
| Expected Volatility | 42.20 | % | 38.07 | % | 43.08 | % | |||||||||||||||||
| Risk-Free Interest Rate | 0.89 | % | 5.02 | % | 1.33 | % | |||||||||||||||||
| Dividend Yield | 3.28 | % | 2.67 | % | 2.88 | % | |||||||||||||||||
| Expected Life | 5.3 years | 0.5 years | 0.5 years |
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, 2023 and 2022 (stock options and SARs in thousands):
| Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 | ||||||||||||||||||||||
| Number of Stock Options/SARs | Weighted Average Exercise Price | Number of Stock Options/SARs | Weighted Average Exercise Price | ||||||||||||||||||||
| Outstanding at January 1 | 4,225 | $ | 77.49 | 9,969 | $ | 84.37 | |||||||||||||||||
| Granted | — | — | 2 | 97.64 | |||||||||||||||||||
| Exercised (1) | (924) | 76.88 | (4,282) | 91.63 | |||||||||||||||||||
| Forfeited | (78) | 86.69 | (192) | 84.26 | |||||||||||||||||||
| Outstanding at September 30 (2) | 3,223 | $ | 77.45 | 5,497 | $ | 78.73 | |||||||||||||||||
| Vested or Expected to Vest (3) | 3,175 | $ | 77.38 | 5,344 | $ | 79.05 | |||||||||||||||||
| Exercisable at September 30 (4) | 2,646 | $ | 76.53 | 3,686 | $ | 84.18 |
(1)The total intrinsic value of stock options/SARs exercised during the nine months ended September 30, 2023 and 2022 was $46 million and $122 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, 2023 and 2022 was $159 million and $194 million, respectively. At September 30, 2023 and 2022, the weighted average remaining contractual life was 3.6 years and 4.3 years, respectively.
(3)The total intrinsic value of stock options/SARs vested or expected to vest at September 30, 2023 and 2022 was $157 million and $187 million, respectively. At September 30, 2023 and 2022, the weighted average remaining contractual life was 3.6 years and 4.3 years, respectively.
(4)The total intrinsic value of stock options/SARs exercisable at September 30, 2023 and 2022 was $133 million and $114 million, respectively. At September 30, 2023 and 2022, the weighted average remaining contractual life was 3.3 years and 3.7 years, respectively.
-9-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
At September 30, 2023, unrecognized compensation expense related to non-vested stock option, SAR and ESPP grants totaled $17 million. Such unrecognized expense will be amortized on a straight-line basis over a weighted average period of 0.9 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 $43 million and $18 million for the three months ended September 30, 2023 and 2022, respectively, and $95 million and $63 million for the nine months ended September 30, 2023 and 2022, respectively.
The following table sets forth restricted stock and restricted stock unit transactions for the nine-month periods ended September 30, 2023 and 2022 (shares and units in thousands):
| Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 | ||||||||||||||||||||||
| 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 | 4,113 | $ | 80.77 | 4,680 | $ | 69.37 | |||||||||||||||||
| Granted | 1,629 | 131.33 | 1,623 | 113.03 | |||||||||||||||||||
| Released (1) | (1,208) | 40.27 | (1,953) | 82.05 | |||||||||||||||||||
| Forfeited | (85) | 84.25 | (130) | 65.44 | |||||||||||||||||||
| Outstanding at September 30 (2) | 4,449 | $ | 110.21 | 4,220 | $ | 80.41 |
(1)The total intrinsic value of restricted stock and restricted stock units released during the nine months ended September 30, 2023 and 2022, was $156 million and $215 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, 2023 and 2022, was $564 million and $472 million, respectively.
At September 30, 2023, unrecognized compensation expense related to restricted stock and restricted stock units totaled $398 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 EOG's 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 $6 million and $5 million for the three months ended September 30, 2023 and 2022, respectively, and $11 million and $8 million for the nine months ended September 30, 2023 and 2022, respectively.
-10-
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, 2023 and 2022 (units in thousands):
| Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 | ||||||||||||||||||||||
| Number of Units | Weighted Average Grant Date Fair Value | Number of Units | Weighted Average Grant Date Fair Value | ||||||||||||||||||||
| Outstanding at January 1 | 688 | $ | 83.82 | 679 | $ | 84.97 | |||||||||||||||||
| Granted | 109 | 141.59 | 122 | 126.55 | |||||||||||||||||||
| Released (1) | (86) | 79.98 | (57) | 136.74 | |||||||||||||||||||
| Forfeited for Performance Multiple (2) | (86) | 79.98 | (56) | 136.74 | |||||||||||||||||||
| Outstanding at September 30 (3) | 625 | (4) | $ | 94.94 | 688 | $ | 83.82 |
(1)The total intrinsic value of Performance Units released was $10 million and $7 million for the nine months ended September 30, 2023 and 2022, respectively. The intrinsic value is based upon the closing price of EOG's common stock on the date the Performance Units are released.
(2)Upon completion of the Performance Period for the Performance Units granted in 2019 and 2018, a performance multiple of 50% was applied to each of the grants resulting in a forfeiture of Performance Units in both February 2023 and February 2022.
(3)The total intrinsic value of Performance Units outstanding at September 30, 2023 and 2022, was approximately $79 million and $77 million, respectively.
(4)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 1,249 Performance Units could be outstanding.
At September 30, 2023, unrecognized compensation expense related to Performance Units totaled $22 million. Such unrecognized expense will be amortized on a straight-line basis over a weighted average period of 1.9 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, 2023 and 2022 (in millions, except per share data):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Numerator for Basic and Diluted Earnings Per Share - | |||||||||||||||||||||||
| Net Income | $ | 2,030 | $ | 2,854 | $ | 5,606 | $ | 5,482 | |||||||||||||||
| Denominator for Basic Earnings Per Share - | |||||||||||||||||||||||
| Weighted Average Shares | 579 | 583 | 581 | 583 | |||||||||||||||||||
| Potential Dilutive Common Shares - | |||||||||||||||||||||||
| Stock Options/SARs/ESPP | 1 | 1 | 1 | 2 | |||||||||||||||||||
| Restricted Stock/Units and Performance Units | 3 | 3 | 2 | 2 | |||||||||||||||||||
| Denominator for Diluted Earnings Per Share - | |||||||||||||||||||||||
| Adjusted Diluted Weighted Average Shares | 583 | 587 | 584 | 587 | |||||||||||||||||||
| Net Income Per Share | |||||||||||||||||||||||
| Basic | $ | 3.51 | $ | 4.90 | $ | 9.65 | $ | 9.40 | |||||||||||||||
| Diluted | $ | 3.48 | $ | 4.86 | $ | 9.60 | $ | 9.34 |
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 zero and 1 million for the three-month periods ended September 30, 2023 and 2022, respectively, and were 1 million for both the nine-month periods ended September 30, 2023 and 2022.
-11-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
4. Supplemental Cash Flow Information
Net cash paid for interest and income taxes was as follows for the nine-month periods ended September 30, 2023 and 2022 (in millions):
| Nine Months Ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Interest (1) | $ | 110 | $ | 123 | |||||||
| Income Taxes, Net of Refunds Received | $ | 876 | $ | 2,059 |
(1)Net of capitalized interest of $24 million and $26 million for the nine months ended September 30, 2023 and 2022, respectively.
EOG's accrued capital expenditures and amounts recorded within accounts payable at September 30, 2023 and 2022 were $716 million and $575 million, respectively.
Non-cash investing activities for the nine months ended September 30, 2023 and 2022, included additions of $154 million and $113 million, respectively, to EOG's oil and gas properties as a result of property exchanges.
Operating activities for the nine months ended September 30, 2023 and 2022, included net cash received of $324 million and net cash used of $546 million, respectively, related to the change in collateral posted for financial commodity derivative contracts. For related discussion, see Note 12. These amounts are 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.
-12-
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, 2023 and 2022 (in millions):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Operating Revenues and Other | |||||||||||||||||||||||
| United States | $ | 6,164 | $ | 7,481 | $ | 17,625 | $ | 18,733 | |||||||||||||||
| Trinidad | 48 | 111 | 203 | 249 | |||||||||||||||||||
| Other International (1) | — | 1 | 1 | 1 | |||||||||||||||||||
| Total | $ | 6,212 | $ | 7,593 | $ | 17,829 | $ | 18,983 | |||||||||||||||
| Operating Income (Loss) | |||||||||||||||||||||||
| United States | $ | 2,559 | $ | 3,606 | $ | 7,032 | $ | 7,010 | |||||||||||||||
| Trinidad | 17 | 73 | 99 | 132 | |||||||||||||||||||
| Other International (1) (2) | (19) | (15) | (32) | (29) | |||||||||||||||||||
| Total | 2,557 | 3,664 | 7,099 | 7,113 | |||||||||||||||||||
| Reconciling Items | |||||||||||||||||||||||
| Other Income, Net | 52 | 40 | 168 | 66 | |||||||||||||||||||
| Interest Expense, Net | (36) | (41) | (113) | (137) | |||||||||||||||||||
| Income Before Income Taxes | $ | 2,573 | $ | 3,663 | $ | 7,154 | $ | 7,042 |
(1) Other International primarily consists of EOG's international exploration programs and Canada operations. 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 $14 million and $10 million for the three months ended September 30, 2023 and 2022, respectively, and $18 million and $12 million for the nine months ended September 30, 2023 and 2022, 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, 2023 and December 31, 2022 (in millions):
| At September 30, 2023 | At December 31, 2022 | ||||||||||
| Total Assets | |||||||||||
| United States | $ | 42,532 | $ | 40,349 | |||||||
| Trinidad | 989 | 879 | |||||||||
| Other International (1) | 126 | 143 | |||||||||
| Total | $ | 43,647 | $ | 41,371 |
(1) Other International primarily consists of EOG's international exploration programs and Canada operations. 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.
-13-
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, 2023 and 2022 (in millions):
| Nine Months Ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Carrying Amount at January 1 | $ | 1,328 | $ | 1,231 | |||||||
| Liabilities Incurred | 49 | 83 | |||||||||
| Liabilities Settled (1) | (80) | (178) | |||||||||
| Accretion | 37 | 32 | |||||||||
| Revisions | 166 | 102 | |||||||||
| Foreign Currency Translation | — | (5) | |||||||||
| Carrying Amount at September 30 | $ | 1,500 | $ | 1,265 | |||||||
| Current Portion | $ | 42 | $ | 38 | |||||||
| Noncurrent Portion | $ | 1,458 | $ | 1,227 |
(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, 2023, are presented below (in millions):
| Nine Months Ended September 30, 2023 | |||||
| Balance at January 1 | $ | 15 | |||
| Additions Pending the Determination of Proved Reserves | 133 | ||||
| Reclassifications to Proved Properties | (35) | ||||
| Costs Charged to Expense | (1) | ||||
| Balance at September 30 | $ | 112 |
| Nine Months Ended September 30, 2023 | |||||
| Capitalized exploratory well costs that have been capitalized for a period of one year or less | $ | 109 | |||
| Capitalized exploratory well costs that have been capitalized for a period greater than one year (1) | 3 | ||||
| Balance at September 30 | $ | 112 | |||
| Number of exploratory wells that have been capitalized for a period greater than one year | 2 |
(1)Consists of costs related to projects in the United States at September 30, 2023.
-14-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
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.
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 $42 million and $37 million for the nine months ended September 30, 2023 and 2022, respectively. 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, 2023 and December 31, 2022, and did not utilize any commercial paper borrowings during the nine months ended September 30, 2023 and 2022.
On March 15, 2023, EOG repaid upon maturity the $1,250 million aggregate principal amount of its 2.625% Senior Notes due 2023.
On June 7, 2023, EOG entered into a $1.9 billion senior unsecured Revolving Credit Agreement (New Facility) with domestic and foreign lenders (Banks). The New Facility replaced EOG's $2.0 billion senior unsecured Revolving Credit Agreement, dated as of June 27, 2019, with domestic and foreign lenders (2019 Facility), which had a scheduled maturity date of June 27, 2024 and was terminated by EOG (without penalty), effective as of June 7, 2023, in connection with the completion of the New Facility.
The New Facility has a scheduled maturity date of June 7, 2028 and includes an option for EOG to extend, on up to two occasions, the term for successive one-year periods, subject to, among certain other terms and conditions, the consent of the Banks holding greater than 50% of the commitments then outstanding under the New Facility. The New Facility commits the Banks to provide advances up to an aggregate principal amount of $1.9 billion outstanding at any given time, 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. The New Facility also includes a swingline subfacility and a letter of credit subfacility. Advances under the New Facility will accrue interest based, at EOG's option, on either the Secured Overnight Financing Rate (SOFR) plus 0.1% plus an applicable margin, or the Base Rate (as defined in the New Facility) plus an applicable margin. The applicable margin used in connection with interest rates and fees will be based on EOG's credit rating for its senior unsecured long-term debt at the applicable time.
Consistent with the terms of the 2019 Facility, the New Facility 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 Total Capitalization (as such terms are defined in the New Facility) of no greater than 65%. At September 30, 2023, EOG was in compliance with this financial covenant.
There were no borrowings or letters of credit outstanding under the 2019 Facility as of (i) December 31, 2022 or (ii) the June 7, 2023 effective date of the closing of the New Facility and termination of the 2019 Facility. Further, at September 30, 2023, there were no borrowings or letters of credit outstanding under the New Facility. The SOFR and Base Rate (inclusive of the applicable margins), had there been any amounts borrowed under the New Facility at September 30, 2023, would have been 6.32% and 8.50%, respectively.
-15-
EOG RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
Common Stock. In November 2021, the Board established a new share repurchase authorization that allows for the repurchase by EOG of up to $5 billion of its common stock (November 2021 Authorization). Under the November 2021 Authorization, EOG may repurchase shares from time to time, at management's discretion, in accordance with applicable securities laws, including through open market transactions, privately negotiated transactions or any combination thereof. The timing and amount of repurchases is at the discretion of EOG's management and depends on a variety of factors, including the trading price of EOG's common stock, corporate and regulatory requirements, and other market and economic conditions. Repurchased shares are held as treasury shares and are available for general corporate purposes. The November 2021 Authorization has no time limit, does not require EOG to repurchase a specific number of shares and may be modified, suspended, or terminated by the Board at any time. During the three and nine months ended September 30, 2023, EOG repurchased 0.5 million and 6.2 million shares of common stock, respectively, for approximately $60.9 million and $671.1 million (inclusive of transaction fees and commissions), respectively, pursuant to the November 2021 Authorization. As of September 30, 2023, approximately $4.3 billion remained available for repurchases under the November 2021 Authorization. Included in the Treasury Stock Repurchased amounts on the Condensed Consolidated Statements of Stockholders' Equity for the nine months ended September 30, 2023, is $5.2 million of estimated federal excise taxes.
On February 23, 2023, the Board declared a quarterly cash dividend on the common stock of $0.825 per share, paid on April 28, 2023, to stockholders of record as of April 14, 2023. The Board also declared on such date a special cash dividend on the common stock of $1.00 per share, paid on March 30, 2023, to stockholders of record as of March 16, 2023.
On May 4, 2023, the Board declared a quarterly cash dividend on the common stock of $0.825 per share paid on July 31, 2023, to stockholders of record as of July 17, 2023.
On August 3, 2023, the Board declared a quarterly cash dividend on the common stock of $0.825 per share paid on October 31, 2023, to stockholders of record as of October 17, 2023.
On November 2, 2023, the Board (i) increased the quarterly cash dividend on the common stock from the previous $0.825 per share to $0.91 per share, effective beginning with the dividend payable on January 31, 2024, to stockholders of record as of January 17, 2024, and (ii) declared a special cash dividend on the common stock of $1.50 per share, payable on December 29, 2023, to stockholders of record as of December 15, 2023.
-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 2022 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, 2023 and December 31, 2022 (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, 2023 | |||||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||
| Natural Gas Basis Swaps | $ | — | $ | 5 | $ | — | $ | 5 | |||||||||||||||
| Financial Liabilities: | |||||||||||||||||||||||
| Natural Gas Swaps | — | 282 | — | 282 | |||||||||||||||||||
| At December 31, 2022 | |||||||||||||||||||||||
| Financial Assets: | |||||||||||||||||||||||
| Natural Gas Basis Swaps | $ | — | $ | 29 | $ | — | $ | 29 | |||||||||||||||
| Financial Liabilities: | |||||||||||||||||||||||
| Natural Gas Swaps | — | 703 | — | 703 | |||||||||||||||||||
| Crude Oil Swaps | — | 190 | — | 190 |
See Note 12 for the balance sheet amounts and classification of EOG's financial commodity derivative instruments at September 30, 2023 and December 31, 2022.
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.
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.
-17-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
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 September 30, 2023 and December 31, 2022, respectively, EOG had outstanding $3,640 million and $4,890 million aggregate principal amount of senior notes, which had estimated fair values at such dates of approximately $3,373 million and $4,740 million, respectively. The estimated fair value of debt was based upon quoted market prices and, where such prices were not available, other observable (Level 2) inputs regarding interest rates available to EOG at the end of each respective period.
12. Risk Management Activities
Commodity Price Risk**.** As more fully discussed in Note 12 to the Consolidated Financial Statements included in EOG's 2022 Annual Report, EOG engages in price risk management activities from time to time. These activities are intended to manage EOG's exposure to fluctuations in commodity prices for crude oil, NGLs and natural gas. EOG utilizes financial commodity derivative instruments, primarily price swap, option, swaption, collar and basis swap contracts, as a means to manage this price risk. EOG has not designated any of its financial commodity derivative contracts as accounting hedges and, accordingly, accounts for financial commodity derivative contracts using the mark-to-market accounting method.
Financial Commodity Derivative Contracts. Presented below is a comprehensive summary of EOG's financial commodity derivative contracts settled during the nine-month period ended September 30, 2023 (closed) and outstanding as of September 30, 2023. Crude oil volumes are presented in thousand barrels per day (MBbld) and prices are presented in dollars per barrel ($/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 2023 (closed) | New York Mercantile Exchange (NYMEX) West Texas Intermediate (WTI) | 95 | $ | 67.90 | 6 | $ | 102.26 | |||||||||||||||||||||||||
| April - May 2023 (closed) | NYMEX WTI | 91 | 67.63 | 2 | 98.15 | |||||||||||||||||||||||||||
| June 2023 (closed) | NYMEX WTI | 2 | 69.10 | 2 | 98.15 |
| Natural Gas Financial Price Swap Contracts | ||||||||||||||||||||
| Contracts Sold | ||||||||||||||||||||
| Period | Settlement Index | Volume (MMBtud in thousands) | Weighted Average Price ($/MMBtu) | |||||||||||||||||
| January - October 2023 (closed) | NYMEX Henry Hub | 300 | $ | 3.36 | ||||||||||||||||
| November - 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 |
-18-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
| Natural Gas Basis Swap Contracts | ||||||||||||||||||||
| Contracts Sold | ||||||||||||||||||||
| Period | Settlement Index | Volume (MMBtud in thousands) | Weighted Average Price Differential ($/MMBtu) | |||||||||||||||||
| January - September 2023 (closed) | NYMEX Henry Hub Houston Ship Channel (HSC) Differential (1) | 135 | $ | 0.01 | ||||||||||||||||
| October - December 2023 | NYMEX Henry Hub HSC Differential | 135 | 0.01 | |||||||||||||||||
| January - December 2024 | NYMEX Henry Hub HSC Differential | 10 | 0.00 | |||||||||||||||||
| January - December 2025 | NYMEX Henry Hub HSC Differential | 10 | 0.00 |
(1) This settlement index is used to fix the differential between pricing at the Houston Ship Channel and NYMEX Henry Hub prices.
Financial Commodity Derivative Instruments Location on Balance Sheet. The following table sets forth the amounts and classification of EOG's outstanding financial commodity derivative instruments at September 30, 2023 and December 31, 2022. 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, 2023 | December 31, 2022 | |||||||||||||||||
| Liability Derivatives | ||||||||||||||||||||
| Crude oil, NGLs and natural gas derivative contracts - | ||||||||||||||||||||
| Current portion | Liabilities from Price Risk Management Activities (1) | $ | 22 | $ | 169 | |||||||||||||||
| Noncurrent portion | Other Liabilities (2) | 255 | 371 |
(1) The current portion of Liabilities from Price Risk Management Activities consists of gross liabilities of $26 million, partially offset by gross assets of $4 million and no collateral posted, at September 30, 2023. The current portion of Liabilities from Price Risk Management Activities consists of gross liabilities of $287 million, partially offset by gross assets of $26 million and collateral posted with counterparties of $92 million, at December 31, 2022.
(2) The noncurrent portion of Liabilities from Price Risk Management Activities consists of gross liabilities of $256 million, partially offset by gross assets of $1 million and no collateral posted at September 30, 2023. The noncurrent portion of Liabilities from Price Risk Management Activities consists of gross liabilities of $606 million, partially offset by gross assets of $3 million and collateral posted with counterparties of $232 million, at December 31, 2022.
-19-
EOG RESOURCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Concluded)
(Unaudited)
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, 2023 and December 31, 2022. EOG had no collateral posted and no collateral held at September 30, 2023. EOG had $324 million of collateral posted and no collateral held at December 31, 2022. EOG had no collateral posted and no collateral held at November 1, 2023.
13. Acquisitions and Divestitures
During the nine months ended September 30, 2023, EOG paid cash of $134 million, primarily to acquire a gathering and processing system in the Powder River Basin. Additionally, during the nine months ended September 30, 2023, EOG recognized net gains on asset dispositions of $95 million and received proceeds of $135 million, primarily due to the sale of EOG's equity interest in ammonia plant investments in Trinidad, the sale of certain legacy assets in the Texas Panhandle, the sale of certain gathering and processing assets and the sale of certain other assets.
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.
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PART I. FINANCIAL INFORMATION
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