HOUSTON, Aug. 2, 2018 /PRNewswire/ --
EOG Resources, Inc. (NYSE: EOG) (EOG) today reported second quarter 2018 net income of $696.7 million, or $1.20 per share. This compares to second quarter 2017 net income of $23.1 million, or $0.04 per share.
Adjusted non-GAAP net income for the second quarter 2018 was $794.9 million, or $1.37 per share, compared to adjusted non-GAAP net income of $46.7 million, or $0.08 per share, for the same prior year period.
EOG's premium portfolio of high-return plays generated strong financial performance in the second quarter 2018. Higher commodity prices, increased production volumes and overall per-unit cost reductions resulted in a dramatic increase in adjusted non-GAAP net income, compared to the second quarter 2017. Higher commodity prices and production volumes also resulted in significant increases in discretionary cash flow and adjusted EBITDAX. Adjusted non-GAAP net income is calculated by matching hedge realizations to settlement months and making certain other adjustments in order to exclude non-recurring and certain other items. Please refer to the attached tables for the reconciliation of non-GAAP measures to GAAP measures.
EOG grew total crude oil production 15 percent year-over-year to 384,600 barrels of oil per day (Bopd), setting a company record. Total company production increased 16 percent in the second quarter 2018 compared to the same prior year period. Growth in the Delaware Basin, Eagle Ford and Powder River Basin drove EOG's strong performance. The company maintained its target for 18 percent crude oil growth for full year 2018.
Total per-unit operating expenses declined during the second quarter 2018 compared to the same prior year period. A 16 percent reduction in depreciation, depletion and amortization rates and an 18 percent decrease in transportation rates were the largest contributors to the overall per-unit cost reduction.
EOG maintained its forecast for 2018 exploration and development expenditures of $5.4 to $5.8 billion, excluding acquisitions and non-cash transactions. The company also maintained its target to reduce average well costs by five percent in 2018.
"EOG delivered a strong quarter, meeting or exceeding expectations for production volumes, price realizations and operating expenses," said William R. "Bill" Thomas, Chairman and Chief Executive Officer. "The EOG machine is firing on all cylinders. We grew crude oil production in five operating areas while reducing costs. Our disciplined investments across a diverse array of premium plays are generating record rates of return."
EOG's Board of Directors increased the cash dividend on the common stock by 19 percent. Effective with the dividend payable October 31, 2018, to holders of record as of October 17, 2018, the board declared a quarterly dividend of $0.22 per share on the common stock. The indicated annual rate is $0.88 per share.
"EOG's premium drilling strategy has reset the profitability of the company and we are confident our premium investments can sustain a larger dividend. Therefore, we increased the common stock dividend for a second time in 2018, reaffirming our commitment to deliver more value for long-term stockholders," Thomas said.
Powder River Basin
EOG significantly expanded the estimated resource potential of its 400,000 net acre position in the pressure cell of the Powder River Basin in Wyoming. The Mowry and Niobrara shales along with the Turner sand have combined estimated net resource potential of 2.1 billion barrels of oil equivalent (BnBoe). The company has identified over 1,600 net premium drilling locations, representing more than 30 years of drilling inventory at the current pace. The Powder River Basin is now EOG's third largest asset.
EOG is operating a two-rig program in 2018 and expects to complete approximately 45 net wells. Targeted well costs across these plays range from $4.5 to $6.1 million per well. These costs have declined significantly due to faster drilling speeds and more efficient completion operations. The company plans to increase its drilling activity during 2019 and install additional infrastructure in preparation for initiating a long-term development program.
EOG has identified 141,000 net acres prospective for the Mowry. The company has identified an initial 875 net premium locations with estimated net resource potential of 1.2 BnBoe. EOG completed two Mowry wells in the second quarter. The Ballista 204-1102H and the Flatbow 423-1720H were completed with an average treated lateral length of 9,100 feet per well and average 30-day initial production rates per well of 2,190 barrels of oil equivalent per day (Boed), or 760 Bopd, 495 barrels per day (Bpd) of natural gas liquids (NGLs) and 5.6 million cubic feet per day (MMcfd) of natural gas. Well costs are targeted at $6.1 million for a 9,500 foot lateral well. Reserves per well are estimated to be 1,400 thousand barrels of oil equivalent (MBoe), net after royalty, with an oil mix of 28 percent.
In the Niobrara, EOG has identified 89,000 prospective net acres with an initial 555 net premium locations. The Niobrara has estimated net resource potential of 640 million barrels of oil equivalent (MMBoe). Reserves per well are estimated to be 1,150 MBoe, net after royalty, with a 48 percent oil mix. Targeted well cost is $5.9 million for a 9,500 foot lateral well.
EOG has completed five horizontal Niobrara wells in the past two years. The Ballista 213-1301H was brought to sales in June 2016 with a treated lateral length of 9,500 feet and 30-day initial production rate of 2,090 Boed, or 1,180 Bopd, 310 Bpd of NGLs and 3.6 MMcfd of natural gas. Since coming on-line, the well has produced 225,000 barrels of crude oil and over one billion cubic feet of natural gas.
EOG holds 169,000 net acres prospective for the Turner with 200 net premium locations remaining to be drilled. The company has completed 50 wells in the play since the last premium inventory assessment in 2017. Reserves per well are estimated to be 500 MBoe, net after royalty, with a 46 percent oil mix. Targeted well cost is $4.5 million for an 8,000 foot lateral well.
In the second quarter, EOG completed seven Turner wells with an average well cost of $4.1 million per well. These wells were completed with an average treated lateral length of 6,200 feet per well and average 30-day initial production rates per well of 915 Boed, or 760 Bopd, 50 Bpd of NGLs and 0.6 MMcfd of natural gas.
"These two new high-return plays in the Powder River Basin further diversify EOG's premium portfolio, supporting high-return organic growth," Thomas said. "We acquired the acreage at low cost and applied our industry-leading exploration expertise to identify the best targets. We further leveraged this position with our low-cost operating culture. The Powder River Basin, with 2.1 BnBoe of resource potential, is poised to become a major asset in EOG's diverse portfolio of premium plays."
EOG has identified an additional 375 net undrilled premium locations in the Delaware Basin, raising the total to 4,815 locations and more than replacing the 250 locations drilled since the last premium inventory assessment in 2017. Cost reductions from infrastructure investments and the delineation of additional drilling targets supported the identification of the new premium locations.
During the second quarter 2018, EOG continued development of its 416,000 net acre position in the Delaware Basin with ongoing testing of additional targets and spacing. Lateral lengths increased further during the quarter, and the company increased its use of locally sourced sand beginning in June. Operations also commenced at additional locations on EOG's new crude oil gathering system commissioned earlier in 2018.
In the Delaware Basin Wolfcamp, EOG completed the Quanah Parker 8H-11H. This four-well package was drilled on 440-foot spacing staggered across two target intervals. The wells were completed with an average treated lateral length of 9,900 feet per well and average 30-day initial production rates per well of 2,565 Boed, or 1,535 Bopd, 525 Bpd of NGLs and 3.0 MMcfd of natural gas.
In the Delaware Basin Second Bone Spring, EOG completed the Bandit 29 State Com 501H-503H and 504Y, a four-well package with an average treated lateral length of 7,100 feet per well and average 30-day initial production rates per well of 2,410 Boed, or 2,035 Bopd, 170 Bpd of NGLs and 1.3 MMcfd of natural gas.
South Texas Eagle Ford and Austin Chalk
EOG also updated its premium inventory in the Eagle Ford, which now stands at 2,300 net undrilled premium locations. The company completed 270 net wells since the last premium inventory assessment in 2017. Lower well costs and further efficiencies from shifting to longer laterals enabled EOG to convert 145 additional locations to premium.
The South Texas Eagle Ford remained a focal point of EOG's high-rate-of-return drilling program in the second quarter 2018. With approximately two-thirds of the 7,200 total identified drilling locations remaining to be developed, the company is utilizing the flexibility of its contiguous 520,000 net acre position in the oil window of this world-class play to increase the size of drilling units to accommodate longer-lateral wells. Wells completed in the second quarter had average treated lateral lengths of 7,200 feet per well. In the western half of the field, wells completed in the second quarter had average treated lateral lengths in excess of 10,000 feet per well. At the same time, EOG continues to test various spacing patterns and lateral targets. Strong well results speak to the play's status as an important contributor to total company crude oil production growth.
Notable wells in the second quarter included the Sandies Creek A-F 1H-6H, a six-well package in DeWitt County, TX with an average treated lateral length of 6,500 feet per well and average 30-day initial production rates per well of 3,205 Boed, or 2,320 Bopd, 450 Bpd of NGLs and 2.6 MMcfd of natural gas. In Karnes County, TX, EOG completed the Hickok 5H-8H, a four-well package with an average treated lateral length of 5,000 feet per well and average 30-day initial production rates per well of 2,685 Boed, or 2,020 Bopd, 340 Bpd of NGLs and 2.0 MMcfd of natural gas. On the western side of the Eagle Ford in McMullen County, TX, EOG completed the Antrim Cook Unit 15H-18H, a four-well package with an average treated lateral length of 11,200 feet per well and average 30-day initial production rates per well of 2,240 Boed, or 2,210 Bopd, 15 Bpd of NGLs and 0.1 MMcfd of natural gas.
EOG also continued delineation of the South Texas Austin Chalk, completing five wells in the second quarter 2018.
Williston Basin and DJ Basin
During the second quarter 2018, EOG resumed completion activity in the Williston Basin as part of its seasonal development program and continued development of its premium DJ Basin Codell play in Wyoming. The company further lowered well costs by improving drilling and completion times and making other efficiency improvements.
In the North Dakota Williston Basin, EOG drilled nine wells and began production from two wells in the second quarter. The Clarks Creek 108 and 155-0706H targeted the Three Forks formation in McKenzie County, ND and were completed with an average treated lateral length of 9,200 feet per well and average 30-day initial production rates per well of 2,980 Boed, or 2,240 Bopd, 345 Bpd of NGLs and 2.4 MMcfd of natural gas.
EOG began production from eight wells in the DJ Basin during the second quarter 2018. In particular, a four-well package of DJ Basin Codell wells in Laramie County, WY, the Windy 576 and 577-1702H and the Windy 591 and 593-1705H, was completed with an average treated lateral length of 9,300 feet per well and average 30-day initial production rates per well of 870 Boed, or 755 Bopd, 70 Bpd of NGLs and 0.3 MMcfd of natural gas. All four of these wells are premium. They were drilled in an average of 4.4 days per well with an average cost of $3.4 million per well.
At June 30, 2018, EOG's total debt outstanding was $6.4 billion for a debt-to-total capitalization ratio of 27 percent. Considering cash on the balance sheet at the end of the second quarter, EOG's net debt was $5.4 billion for a net debt-to-total capitalization ratio of 24 percent. For a reconciliation of non-GAAP measures to GAAP measures, please refer to the attached tables.
During the second quarter 2018, EOG entered into additional crude oil derivative contracts. A comprehensive summary of crude oil and natural gas derivative contracts is provided in the attached tables.
Conference Call August 3, 2018
EOG's second quarter 2018 results conference call will be available via live audio webcast at 9 a.m. Central time (10 a.m. Eastern time) on Friday, August 3, 2018. To listen, log on to the Investors Overview page on the EOG website at http://investors.eogresources.
EOG Resources, Inc. is one of the largest independent (non-integrated) crude oil and natural gas companies in the United States with proved reserves in the United States, Trinidad, the United Kingdom and China. EOG Resources, Inc. is listed on the New York Stock Exchange and is traded under the ticker symbol "EOG."