EOG Resources Inc. reported a net loss of $505.0 million (minus $1.88/share) during 4Q2012, compared with net income of $120.7 million (45 cents/share) for the preceding fourth quarter. The loss included a large write-down of $849.4 million for Canadian properties. It resulted in full-year 2012 net income of $570.3 million ($2.11/share), down considerably from $1.09 billion ($4.10/share) for the full-year 2011.
But the Houston-based company said it now holds 2.2 billion boe of potential recoverable crude oil reserves in the Eagle Ford Shale — reportedly the largest share net to one company in the last 40 years — and plans to continue focusing on oil production in 2013, after posting large increases in oil, condensate and natural gas liquids (NGL) production the year before.
“I’ll note that in the fourth quarter, we incurred a significant financial and natural gas reserve write-down, which is very unusual for EOG,” CEO Mark Papa said during a 4Q2012 earnings call. “Approximately 98% of the total financial write-down occurred in Canada as a result of low gas prices. We have written off the remaining book value of our entire Horn River acreage along with all PDP [proved developed producing] and PUD [proved undeveloped] reserves, because they are on economic at current gas prices. However, the drilling we have done today holds our remaining 127,000 net acres in the Horn River with an estimated seven Tcf reserve potential until 2020, providing optionality for us.
“The other major main issue of the component involved our Canadian shallow gas assets. Even with these write-downs affecting our capital account, we accomplished our goal of keeping our net debt to total cap below 30%.”
EOG announced encouraging results from one of its first two horizontal wells targeting the Wolfcamp Shale in West Texas, and raised its common stock dividend by 10% effective April 30 for shareholders of record to a quarterly dividend of 18.75 cents/share (75 cents/share annually).
EOG said year/year (y/y) production of crude oil and condensate had grown 39% between 2011 and 2012 (from 113.4 million b/d to 157.9 million b/d), while NGL production increased 32% (from 42.4 million b/d to 55.9 million b/d) during the same time frame, and total liquids were up 37%.
Papa said EOG plans to spend between $7.0 billion and $7.2 billion on capital expenditures (capex) in 2013, a $400 million decline from 2012. He said the company would devote $1.2 billion to facilities, gathering systems and other infrastructure, but only about $25 million would be spent on dry gas in North America, and that would be just to hold acreage. He also said that despite it being “a tall order for a company our size,” EOG plans to grow its crude oil and NGL production by 28% and 23%, respectively, in 2013.
EOG’s adjusted non-GAAP net income for the full year 2012 was $1.54 billion, or $5.67 per share, and for the full year 2011 was $1.01 billion, or $3.79 per share. Adjusted non-GAAP net income for the fourth quarter 2012 was $437.0 million, or $1.61 per share.
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