Drilling & Completions | Quarterly / Earnings Reports | Fourth Quarter (4Q) Update | Financial Results | Capital Markets | Capital Expenditure | Drilling Activity | Environmental, Social, Governance (ESG)

EOG Resources Fourth Quarter, Full Year 2021 Results

Share Print Bookmark    |    Monday,February 28,2022

EOG Resources, Inc. reported fourth quarter and full-year 2021 results.

Key Financial Results

From Ezra Yacob, Chief Executive Officer: "The outstanding fourth quarter results cap off a tremendous year for EOG - record earnings, record free cash flow, and return of cash that places EOG among the leaders in our industry and across the broader market. Reflecting these results, we are continuing to deliver on our long-standing free cash flow priorities with another $1.00 per share special dividend while further strengthening the balance sheet. Strong returns due to our premium investment standard and levered by our high-performance culture drove the results.
Double-premium, the latest increase to our investment standard that we formalized at the start of 2021, is just beginning to flow through to our bottom-line financial performance. The best is yet to come.

"The strong fourth quarter performance was also a hallmark of our consistent operational execution, as we once again delivered on our production and capital targets. Exploration efforts continued to move forward, as we progressed multiple domestic oil prospects that stand to further improve the quality of our large inventory of future drilling locations. We applied technology and innovation towards continuing improvements in our ESG performance during 2021, including methane emissions, water and safety. We are aiming to do even better this year.

"Looking to 2022, our disciplined capital plan reflects an oil market that is in position to rebalance during the year. It is focused on investments in high-return double premium wells along with exploration and infrastructure projects to further improve the business. Combined with our low cost structure and an improved commodity price environment, EOG is positioned to once again generate significant free cash flow. We remain firmly committed to our long-standing free cash flow and cash return priorities. EOG has never been better positioned to generate significant long-term shareholder value."

Fourth Quarter 2021 Financial Performance

Adjusted Earnings per Share 4Q 2021 vs 3Q 2021

Natural gas, crude oil and NGL prices increased in 4Q compared with 3Q. In addition, cash paid for hedge settlements declined by $171 million in 4Q compared with 3Q.

Total company equivalent volumes increased 2% compared with 3Q. Crude oil production of 450,600 Bopd was above the mid-point of the guidance range due to better well productivity. NGL production declined slightly compared with 3Q due to decreased extraction of ethane. Natural gas production increased 8% compared with 3Q, primarily due to EOG's Dorado dry gas play in south Texas.

Increased impairment and dry hole costs primarily related to drilling in Oman were the largest contributors to the per-unit cost increase in 4Q. Lease and well costs also contributed to the overall cost increase. These were partially offset by reductions in DD&A and G&A costs.

A lower effective income tax rate was the primary contributor to the increase in earnings from this category.

Change in Cash 4Q 2021 vs 3Q 2021

Free Cash Flow

EOG generated discretionary cash flow (net cash provided by operating activities before exploration costs and changes in working capital) of $3.1 billion in 4Q. The company incurred $1.1 billion of capital expenditures, resulting in $2.0 billion of free cash flow.

Capital expenditures of $1.1 billion were in-line with the mid-point of the guidance range. EOG has continued to be successful offsetting inflationary price pressures with additional efficiencies and other operating improvements.

EOG paid $0.2 billion of regular dividends and $1.2 billion of special dividends in 4Q

Full-Year 2021 Financial Performance

Adjusted Earnings per Share 2021 vs 2020

Crude oil prices increased by 77% in 2021 compared with 2020, while prices for NGLs and natural gas more than doubled. Higher prices along with increased production volumes generated a wellhead revenue increase of $8.1 billion, or 111%, in 2021 compared with 2020. This was partially offset by an increase in cash paid for hedge settlements of $1.7 billion from 2020 to 2021.

Total company equivalent production increased 10% in 2021 compared with 2020, when EOG shut in certain wells in response to low crude oil prices. Crude oil volumes in 2021 were 445,000 Bopd, 9% higher than 2020 and consistent with EOG's plan to maintain production at 4Q 2020 levels. NGL volumes increased 6% while natural gas volumes increased 15%.

Impairments, transportation and G&P costs increased in 2021 compared with 2020, mostly offset by reductions in DD&A, LOE and G&A costs.

Per-unit taxes other than income increased by $1.73 per Boe in 2021 compared with 2020, due to increased product prices, and was the largest contributor to the reduction in earnings from this category.

Change in Cash 2021 vs 2020

Free Cash Flow

EOG generated discretionary cash flow (net cash provided by operating activities before exploration costs and changes in working capital) of $9.4 billion in 2021. The company incurred $3.9 billion of capital expenditures, resulting in $5.5 billion of free cash flow.

EOG doubled its regular dividend rate during 2021, from $1.50 per share at year-end 2020 to $3.00 per share by year-end 2021. In addition, EOG paid $3.00 per share in special dividends during 2021. Altogether, EOG returned $2.7 billion to shareholders in 2021. Also, EOG repaid with cash on hand the $750 million principal amount of notes that matured in February 2021.

Fourth Quarter 2021 Operating Performance

Lease and Well

Per-unit LOE costs were above the guidance mid- point and prior periods due to higher costs for fuel, lease maintenance and remediation.

Per-unit transportation and G&P costs in 4Q were slightly below the guidance midpoints and in-line with 3Q. Costs increased compared with the prior year period primarily due to higher fuel costs.

The addition of reserves from new wells at lower finding costs, driven by EOG's double-premium drilling program, continues to lower DD&A costs. Per-unit DD&A costs were below the guidance midpoint and declined 4% and 3% compared with 3Q 2021 and 4Q 2020, respectively.

Per-unit G&A costs in 4Q were above the guidance midpoint and the prior year due to higher employee related costs.

2021 Reserves and Premium Location Additions; Special Dividend

Finding and Development Cost

Finding and development cost, excluding price revisions, declined 17% YoY in 2021 to $5.81 per Boe. Proved developed finding cost, excluding price revisions, was $7.98 per Boe in 2021. For the 34th consecutive year, internal reserves estimates were within five percent of estimates independently prepared by DeGolyer and McNaughton.

Extensions and discoveries, net of revisions other than price, added 644 MMBoe of proved reserves in 2021. Revisions other than price reduced proved reserves primarily due to the high-grading of our future drilling plan. Proved undeveloped locations that did not meet EOG's double premium standard were replaced with fewer, more productive double-premium locations. Reserves from these high-graded proved undeveloped locations are included as part of reserve additions from extensions and discoveries. Net proved reserve additions from all sources, excluding price revisions, replaced 208% of 2021 production.

EOG identified 700 new net double-premium locations in 2021, replacing 170% of the approximately 410 net double-premium wells drilled in 2021. The new double-premium locations are spread across EOG's portfolio of high-return plays. The double-premium inventory increased to 6,000 net locations from 5,700 previously and represents more than 11 years of drilling at EOG's current pace. EOG's total premium inventory of 11,500 net undrilled locations remained unchanged in 2021.

The Board of Directors today declared a dividend of $0.75 per share on EOG's common stock. The dividend will be payable April 29, 2022, to stockholders of record as of April 15, 2022. The indicated annual rate is $3.00 per share. The Board of Directors today also declared a special dividend of $1.00 per share on EOG's Common Stock. The special dividend will be payable March 29, 2022, to stockholders of record as of March 15, 2022

2021 ESG Performance

Further Improvements to Strong ESG Track Record

• ~25% Reduction in Methane Emissions Percentage
• 99.8% Wellhead Gas Capture
• 55% of Water Sourced from Reuse
• 10% Reduction in Total Recordable Incident Rate

EOG reduced its methane emissions percentage by approximately 25% during 2021. Reduced emissions associated with pneumatic controllers and lower fugitive emissions contributed to the reduction. Wellhead gas capture increased to 99.8% from 99.6% in 2020. Water sourced from reuse increased to 55% from 46% in 2020. Finally, EOG improved its safety performance in 2021, with a reduction of 10% in the total recordable incident rate compared with 2020. The company's GHG intensity rate increased slightly in 2021 due to increased compression for gas gathering. EOG remains confident in achieving its 2025 emissions goals and its ambition to reach net zero scope 1 and scope 2 emissions by 2040.