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EOG Increases Earnings, Production, Reserves and Dividends

February 7, 2005
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On a roll, EOG Resources, Inc. last Wednesday reported increased earnings, record production and added reserves for the fourth quarter and the year 2004 and announced a stock split and a 33% dividend increase.

EOG reported net income of $204.1 million, or $1.69 per share, up from $71.8 million, or $0.61 per share in 4Q2003. For the full year 2004, EOG reported net income of $614 million, or $5.15 per share, compared to $419.1 million, or $3.60 per share for 2003.

And the trend should continue, according to EOG Chairman Mark Papa. "EOG has never been better positioned to achieve its production growth targets and continue the momentum we have steadily built over the years. Based on our company's consistent performance and current commodity prices, we expect to achieve 13.5% organic production growth in 2005, which includes an 11% increase in natural gas production from the U.S. and Canada.

"To achieve this, we expect our capital expenditure budget to be $1.6 billion, compared to the $1.5 billion we spent last year," said Papa. "Although production from the Barnett Shale will contribute to this production goal, the strong ongoing performance from our other assets in the U.S. and Canada remain integral to our future success."

Total company oil and gas production increased 10.4% during 2004 on a daily basis to 1,233 MMcfe/d from 1,117 MMcfe/d in 2003. In the U.S. and Canada, natural gas production increased 5% to an average 843 MMcf/d from 803 MMcf/d and for the fourth quarter production was 900 MMcf/d compared to 827 MMcf/d in 4Q 2003. In the U.S. production declined slightly to an average of 631 MMcf/d in 2004 from 638 MMcf/d in 2003. Production from operations off Trinidad hit an average of 224 MMcf/d in the fourth quarter, up from 151 in 4Q 2003, while the yearly average for 2004 was 186 MMcf/d compared to 152 MMcf/d in 2003.

EOG's composite price from its U.S. and Canadian natural gas averaged $5.60/Mcf in 2004 compared to $4.98/Mcf in 2003. The fourth quarter composite was $6.10/Mcf compared to $4.47/Mcf in 4Q 2003. Gas from Trinidad brought in $1.51/Mcf in 2004 compared to $1.35/Mcf in 2003.

Excluding the impact of production from the North Texas Barnett Shale play, natural gas production in the U.S. and Canada increased 4.2%, with the strongest increases contributed by the Rocky Mountain region and the Canadian shallow natural gas program.

"Our operations in the U.S. and Canada have expanded considerably over the past few years. These areas of our portfolio, excluding the Barnett Shale, continue to deliver steady profitable growth that we expect to continue beyond 2005," said Papa.

"In the Barnett Shale, we worked to prove the geologic concept in the non-core area where our activity centered during 2004. This year, the focal point of operations will be on increasing production and determining the play's ultimate reserve size. We continue to be very enthusiastic about the Barnett Shale and expect to have further definition before year-end regarding its aerial extent and optimum well spacing," said Papa.

Consistent with the previously stated goals for the Barnett Shale, EOG had 400,000 acres under lease in the play at year-end 2004. Net natural gas production reached 30 MMcf/d during December.

On Dec. 31, 2004, total company reserves were 5.6 Tcfe, an increase of 430 Bcfe, or 8% higher than 2003. From drilling alone, EOG added 850 Bcfe of reserves. For the year, total reserve replacement, the ratio of net reserve additions from drilling, acquisitions, revisions and dispositions to total production was 194%.

The board of directors approved a two-for-one stock split in the form of a stock dividend, payable to record holders as of Feb. 15, 2005 and issued March 1, 2005. In addition, the board increased the cash dividend on the common stock by 33%, following a 20% increase in 2004. The latest is the fifth increase in six years.

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