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| EOG > SEC Filings for EOG > Form 8-K on 17-Oct-2008 | All Recent SEC Filings |
17-Oct-2008
Regulation FD Disclosure
I. Price Risk Management
With the objective of enhancing the certainty of future revenues, from time to time EOG Resources, Inc. (EOG) enters into New York Mercantile Exchange (NYMEX) related financial collar, price swap and basis swap contracts. EOG accounts for these financial commodity derivative contracts using the mark-to-market accounting method. In addition to financial transactions, EOG is a party to various physical commodity contracts for the sale of hydrocarbons that cover varying periods of time and have varying pricing provisions. The financial impact of these physical commodity contracts is included in revenues at the time of settlement, which in turn affects average realized hydrocarbon prices.
For the third quarter of 2008, EOG anticipates a net gain of $1,381.7 million from its natural gas and crude oil financial collar, price swap and basis swap contracts, comprised of $1,313.5 million from its natural gas financial collar, price swap and basis swap contracts and $68.2 million from its crude oil financial price swap contracts. During the third quarter of 2008, net cash outflow related to settled natural gas and crude oil financial price swap contracts was $122.5 million, comprised of $76.4 million related to settled natural gas financial price swap contracts and $46.1 million related to crude oil financial price swap contracts.
II. Natural Gas Financial Collar, Price Swap and Basis Swap Contracts
Since EOG filed its Quarterly Report on Form 10-Q on July 29, 2008 (Second Quarter 2008 Form 10-Q), EOG has not entered into any natural gas financial collar or price swap contracts. Presented below is a comprehensive summary of EOG's natural gas financial collar and price swap contracts as of October 14, 2008, with notional volumes expressed in million British thermal units per day (MMBtud) and prices expressed in dollars per million British thermal units ($/MMBtu).
The average floor price of EOG's outstanding natural gas financial collar contracts is $10.00 per million British thermal units (MMBtu) and the average ceiling price is $12.32 per MMBtu.
Natural Gas Financial Collar Contracts
Floor Price Ceiling Price
Weighted Weighted
Average Ceiling Average
Volume Floor Range Price Range Price
(MMBtud) ($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu)
2010
January 40,000 $11.44 - 11.47 $11.45 $13.79 - 13.90 $13.85
February 40,000 11.38 - 11.41 11.40 13.75 - 13.85 13.80
March 40,000 11.13 - 11.15 11.14 13.50 - 13.60 13.55
April 40,000 9.40 - 9.45 9.42 11.55 - 11.65 11.60
May 40,000 9.24 - 9.29 9.26 11.41 - 11.55 11.48
June 40,000 9.31 - 9.36 9.34 11.49 - 11.60 11.55
July 40,000 9.40 - 9.45 9.43 11.60 - 11.70 11.65
August 40,000 9.47 - 9.52 9.50 11.68 - 11.80 11.74
September 40,000 9.50 - 9.55 9.52 11.73 - 11.85 11.79
October 40,000 9.58 - 9.63 9.61 11.83 - 11.95 11.89
November 40,000 9.88 - 9.93 9.91 12.30 - 12.40 12.35
December 40,000 9.87 - 10.30 10.09 12.55 - 12.71 12.63
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The average price of EOG's outstanding natural gas financial price swap contracts for 2008 is $9.03 per MMBtu, for 2009 is $9.71 per MMBtu and for 2010 is $9.87 per MMBtu.
Financial Price Swap Contracts
Natural Gas
Weighted
Volume Average Price
(MMBtud) ($/MMBtu)
2008
January (closed) 385,000 $ 8.92
February (closed) 420,000 8.88
March (closed) 455,000 8.64
April (closed) 455,000 8.11
May (closed) 455,000 8.10
June (closed) 455,000 8.18
July (closed) 455,000 8.26
August (closed) 455,000 8.33
September (closed) 455,000 8.36
October (closed) 455,000 8.44
November 455,000 8.83
December 455,000 9.23
2009
January 585,000 $10.76
February 585,000 10.74
March 585,000 10.50
April 610,000 9.24
May 610,000 9.16
June 610,000 9.21
July 610,000 9.29
August 610,000 9.34
September 610,000 9.36
October 610,000 9.42
November 610,000 9.66
December 610,000 9.98
2010
January 20,000 $11.20
February 20,000 11.15
March 20,000 10.89
April 20,000 9.29
May 20,000 9.13
June 20,000 9.21
July 20,000 9.31
August 20,000 9.38
September 20,000 9.40
October 20,000 9.49
November 20,000 9.80
December 20,000 10.21
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Prices received by EOG for its natural gas production generally vary from NYMEX prices due to adjustments for delivery location (basis) and other factors. Since filing its Second Quarter 2008 Form 10-Q, EOG has entered into natural gas financial basis swap contracts covering a portion of its production in the Rocky Mountain area in order to fix the differential between prices in the Rocky Mountain area and NYMEX Henry Hub prices. Presented below is a comprehensive summary of EOG's natural gas financial basis swap contracts outstanding as of October 14, 2008. The weighted average price differential represents the amount of reduction to NYMEX gas prices per MMBtu for the notional volumes covered by the basis swap.
Financial Basis Swap Contracts
Natural Gas
Weighted
Average Price
Volume Differential
(MMBtud) ($/MMBtu)
2009
Second Quarter 45,000 $(2.55)
Third Quarter 45,000 (2.75)
Fourth Quarter 45,000 (3.24)
2010
First Quarter 45,000 $(1.77)
Second Quarter 55,000 (2.63)
Third Quarter 55,000 (3.29)
Fourth Quarter 55,000 (3.84)
2011
First Quarter 55,000 $(1.97)
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III. Crude Oil Financial Price Swap Contracts
Since filing its Second Quarter 2008 Form 10-Q, EOG has not entered into any crude oil financial price swap contracts. Presented below is a comprehensive summary of EOG's crude oil financial price swap contracts as of October 14, 2008, with notional volumes expressed in barrels per day (Bbld) and prices expressed in dollars per barrel ($/Bbl). The average price of EOG's outstanding crude oil financial price swap contracts is $92.17 per barrel.
Financial Price Swap Contracts
Crude Oil
Weighted
Volume Average Price
(Bbld) ($/Bbl)
2008
January (closed) - $ -
February (closed) 6,000 90.86
March (closed) 10,000 91.02
April (closed) 14,000 92.20
May (closed) 14,000 92.20
June (closed) 14,000 92.20
July (closed) 14,000 92.20
August (closed) 14,000 92.20
September (closed) 14,000 92.20
October 14,000 92.20
November 14,000 92.20
December 4,000 91.96
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IV. Forward-Looking Statements
This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts, including, among others, statements regarding EOG's future financial position, business strategy, budgets, reserve information, projected levels of production, projected costs and plans and objectives of management for future operations, are forward-looking statements. EOG typically uses words such as "expect," "anticipate," "estimate," "strategy," "intend," "plan," "target" and "believe" or the negative of those terms or other variations or comparable terminology to identify its forward-looking statements. In particular, statements, express or implied, concerning future operating results, the ability to replace or increase reserves or to increase production, or the ability to generate income or cash flows are forward-looking statements. Forward-looking statements are not guarantees of performance. Although EOG believes the expectations reflected in its forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations will be achieved. Important factors that could cause actual results to differ materially from the expectations reflected in EOG's forward-looking statements include, among others:
º the timing and extent of changes in commodity prices for crude oil, natural
gas and related products, foreign currency exchange rates, interest rates
and financial market conditions;
º the extent and effect of any hedging activities engaged in by EOG;
º the timing and impact of liquefied natural gas imports;
º changes in demand or prices for ammonia or methanol;
º the extent of EOG's success in discovering, developing, marketing and
producing reserves and in acquiring oil and gas properties;
º the accuracy of reserve estimates, which by their nature involve the
exercise of professional judgment and may therefore be imprecise;
º the ability to achieve production levels from existing and future oil and
gas development projects due to operating hazards, drilling risks and the
inherent uncertainties in predicting oil and gas reservoir performance;
º the availability and cost of drilling rigs, experienced drilling crews,
tubular steel and other materials, equipment and services used in drilling
and well completions;
º the availability, terms and timing of mineral licenses and leases and
governmental and other permits and rights of way;
º access to surface locations for drilling and production facilities;
º the availability and capacity of gathering, processing and pipeline
transportation facilities;
º the availability of compression uplift capacity;
º the extent to which EOG can economically develop its Barnett Shale acreage
outside of Johnson County, Texas;
º whether EOG is successful in its efforts to more densely develop its
acreage in the Barnett Shale and other production areas;
º political developments around the world and the enactment of new government
policies, legislation and regulations, including environmental regulations;
º acts of war and terrorism and responses to these acts; and
º weather, including weather-related delays in the installation of gathering
and production facilities.
In light of these risks, uncertainties and assumptions, the events anticipated by EOG's forward-looking statements may not occur. EOG's forward-looking statements speak only as of the date made and EOG undertakes no obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
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