EOG Resources Inc. plans to grow its production 6.5% in 2004, 10% in 2005 and 7% in 2006 — and expects North American natural gas to be a key component of the growth, the CEO said Monday.

CEO Mark Papa, who presided over a sterling third quarter earnings report, noted that the Houston-based independent had quadrupled its quarterly earnings compared with last year. EOG reported net income of $114.7 (99 cents/share), compared with $26.1 million (22 cents/share) for the same period of 2002.

“EOG is one of a few large cap E&P companies that has organically grown year-over-year domestic gas production each of the last four quarters, and we expect to grow North American gas production 6.5% in 2004,” Papa said. “We are well positioned to attain the targets we have set forth for the coming years while maintaining our focus on rate of return.”

Quarterly results included a previously disclosed $23.6 million ($15.2 million after tax, or 13 cents/share) gain on the mark- to-market of commodity price transactions. During the quarter, the net cash outflow from the settlement of third quarter commodity price transactions and premium payments associated with some of its 2004 natural gas financial collar contracts was $10.0 million ($6.5 million after tax, or 6 cents/share).

At the end of the third quarter, EOG’s debt-to-total capitalization ratio was 32.5% with $184 million of cash on the balance sheet. The year-end ratio is expected to be in the range of 34-37%.

EOG expects to grow its North American production based on several factors. In October, EOG closed the largest acquisition in its history, a $330 million deal to increase its Canadian drilling inventory, primarily in shallow natural gas properties in southern Alberta, which complements the company’s existing Canadian assets by providing incremental reserve potential. Also as a result of the transaction, EOG significantly increased its coalbed methane acreage position in the Twining Field. Based on favorable results from initial production testing of this acreage, EOG is planning a pilot development program in 2004.

In South Texas, EOG recently made two significant discoveries in the Frio and Wilcox sands with three successful exploration wells. These wells are expected to add combined new production of 30 MMcf/d and 2,000 bbl of condensate per day, net by mid-December 2003. EOG plans additional drilling in the fourth quarter 2003 to further delineate these discoveries.

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