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EOG Resources Third Quarter 2022 Results

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EOG Resources, Inc. reported third quarter 2022 results.

Third Quarter 2022 Highlights:

• Announced 395,000 net acre position in the Ohio Utica Shale
• Declared regular quarterly dividend of $0.825 per share, a 10 percent increase and a $3.30 per share indicated annual rate
• Declared special dividend of $1.50 per share
• Earned adjusted net income of $2.2 billion, or $3.71 per share
• Generated $2.3 billion of free cash flow
• Oil, NGLs and natural gas production above guidance midpoints
• Capital expenditures below guidance midpoint

Volumes and Capital Expenditures

From Ezra Yacob, Chairman and Chief Executive Officer: "EOG is now operating seven significant resource basins with the addition of the Utica Combo in Ohio. Our growing multi-basin portfolio of high-return plays positions EOG for long-term sustainable value creation.

"Our multi-basin footprint reinforces several competitive advantages. It provides flexibility to allocate capital to the highest return projects across a diverse and improving inventory of future well locations. Operating in multiple basins also fosters innovation through diverse, high-performing teams creating new ideas at the field level that are then shared across our operations.

"Strong performance by our operating teams propelled third quarter production volumes and capital expenditures ahead of their targets, despite a challenging operating environment. We remain focused on applying new innovations and efficiencies to mitigate future inflationary cost pressures. We expect our multi-basin footprint, now with the addition of the Utica Combo play, will continue to lower EOG's overall cost of supply.

"EOG continues to get better. The decision to increase the regular dividend by 10 percent reflects our confidence in EOG's future. EOG is well positioned to improve returns going forward from an existing asset base of low-cost-of-supply wells, augmented by a growing roster of new emerging plays. We remain committed to returning cash through a sustainable, growing regular dividend, which is supported by our low cost structure and an impeccable balance sheet - now in a net cash positive position. EOG is in a better position than ever to deliver value for our shareholders and play a significant role in the long-term future of energy."

Third Quarter 2022 Financial Performance

Adjusted Earnings per Share 3Q 2022 vs 2Q 2022

Volumes
Total company crude oil production in 3Q of 465,100 Bopd was above the midpoint of the guidance range and up less than 1% compared with 2Q. NGL production increased 4% compared with 2Q and was also above the midpoint of the guidance range. Natural gas production declined 4% compared with 2Q primarily due to plant maintenance in Trinidad, but was above the midpoint of the guidance range.

Prices and Hedges
Crude oil and NGL prices declined in 3Q compared with 2Q while natural gas prices increased. Price declines were more than offset by a $1.3 billion reduction in cash paid for hedge settlements in 3Q compared with 2Q.

Per-Unit Costs and Other
Cash operating costs increased to $10.70 per BOE in 3Q compared with $10.12 per BOE in 2Q, primarily from gathering and processing, transportation, and lease and well costs. A lower DD&A rate partially offset the increase in cash operating costs.

Free Cash Flow
EOG generated cash flow from operations before changes in working capital of $3.43 billion in 3Q. The company incurred $1.17 billion of capital expenditures, resulting in $2.26 billion of free cash flow.

Working Capital and Dividends
Changes in working capital accounted for $1.25 billion of the increase in cash during 3Q, primarily due to a reduction in collateral posted in connection with financial commodity derivative contracts. EOG paid $1.31 billion in dividends in 3Q, including $874 million of special dividends.

Lease and Well
Per-unit LOE costs increased $0.09 in 3Q compared with 2Q, within the guidance range. Higher fuel and water handling costs were the primary drivers of the increase.

Transportation, Gathering and Processing
Per-unit transportation and G&P costs in 3Q were both above the guidance midpoints and above 2Q primarily due to higher fuel prices.

General and Administrative
Per-unit G&A costs in 3Q were below the guidance midpoint because a transaction expected to occur in 3Q was not executed until 4Q. Per-unit costs in 3Q were above 2Q because of seasonally higher employee-related costs.

Depreciation, Depletion and Amortization
Per-unit DD&A costs in 3Q were below the guidance midpoint and decreased $0.16 compared with 2Q. The addition of lower-cost reserves drove the decrease.

Regular Dividend Increased 10% to $3.30 per Share Indicated Annual Rate
The Board of Directors today declared a regular dividend of $0.825 per share on EOG's common stock. The dividend will be payable January 31, 2023, to stockholders of record as of January 17, 2023. The new dividend represents an indicated annual rate of $3.30 per share, a 10% increase from the previous level. The increase reflects improvements across the company during 2022 from sustainable efficiencies and innovations, progressing new and emerging plays, and increased financial strength. EOG has never suspended or reduced its regular dividend.

$1.50 per Share Special Dividend
The Board of Directors also today declared a special dividend of $1.50 per share on EOG's common stock. The special dividend will be payable December 30, 2022, to stockholders of record as of December 15, 2022. EOG has now committed to return $5.1 billion of cash to shareholders in 2022 through regular quarterly and special dividends.

Ohio Utica Combo Play

EOG has established a new position in the Ohio Utica Combo play, accumulating 395,000 net acres. The company has also acquired about 135,000 mineral acres in the southern portion of its acreage footprint. The combined cost of entry is less than $500 million.

The company has completed four wells and operates 18 additional legacy wells across a 140-mile trend. Initial drilling results confirm EOG's reservoir model, which is enhanced by experience across its multi-basin portfolio. It is also supported by extensive geotechnical and production analysis from within the play.

EOG expects the Utica Combo to be its next large-scale premium resource play. A favorable drilling environment and the opportunity to develop the play with three-mile laterals support cost efficiencies. Combined with strong liquids production rates, EOG expects the Utica Combo to be additive to the overall quality of its premium inventory. Development of this high rate-of-return play is underway with about 20 wells projected for 2023.