OIL - EOG Resources Reports Fourth Quarter and Full-Year 2021 Results; Announces 2022 Capital Program; Declares $1.00 per Share Special Dividend

PR Newswire

HOUSTON , Feb. 24, 2022 /PRNewswire/ -- EOG Resources, Inc. (EOG) today reported fourth quarter and full-year 2021 results. The attached supplemental financial tables and schedules for the reconciliation of non-GAAP measures to GAAP measures and related definitions, along with a related presentation, are also available on EOG's website at http://investors.eogresources.com/investors .

Key Financial Results

Fourth Quarter Highlights

• Record quarterly adjusted net income of $1.8 billion , or $3.09 per share, and $2.0 billion of free cash flow
• Capital expenditures in-line with guidance while oil production above guidance mid-point
• Declared regular dividend of $0.75 per share and special dividend of $1.00 per share

Full Year 2021 Highlights

• Record annual adjusted net income of $5.0 billion , or $8.61 per share
• Generated record $5.5 billion of free cash flow
• Reduced well costs 7%
• Identified 700 new net double premium locations, replacing 170% of double premium wells drilled in 2021
• Replaced more than two times 2021 production at $5.81 per Boe finding and development cost
• Achieved significant improvements in methane emissions, water and safety performance

2022 Capital Plan

• Capital plan of $4.3 to $4.7 billion returns oil production to pre-pandemic levels, maintains flat well costs, lowers per-unit cash costs and funds investments to further improve the business
• Cash from operations before working capital funds capital plan at $32 WTI

Fourth Quarter and Full-Year 2021 Highlights

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Volumes and Capital Expenditures

From Ezra Yacob , Chief Executive Officer

"The outstanding fourth quarter results cap off a tremendous year for EOG – record earnings, record free cash flow, and return of cash that places EOG among the leaders in our industry and across the broader market. Reflecting these results, we are continuing to deliver on our long-standing free cash flow priorities with another $1.00 per share special dividend while further strengthening the balance sheet. Strong returns due to our premium investment standard and levered by our high-performance culture drove the results.
Double-premium, the latest increase to our investment standard that we formalized at the start of 2021, is just beginning to flow through to our bottom-line financial performance. The best is yet to come.

"The strong fourth quarter performance was also a hallmark of our consistent operational execution, as we once again delivered on our production and capital targets. Exploration efforts continued to move forward, as we progressed multiple domestic oil prospects that stand to further improve the quality of our large inventory of future drilling locations. We applied technology and innovation towards continuing improvements in our ESG performance during 2021, including methane emissions, water and safety. We are aiming to do even better this year.

"Looking to 2022, our disciplined capital plan reflects an oil market that is in position to rebalance during the year. It is focused on investments in high-return double premium wells along with exploration and infrastructure projects to further improve the business. Combined with our low cost structure and an improved commodity price environment, EOG is positioned to once again generate significant free cash flow. We remain firmly committed to our long-standing free cash flow and cash return priorities. EOG has never been better positioned to generate significant long-term shareholder value."

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Fourth Quarter 2021 Financial Performance

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Adjusted Earnings per Share 4Q 2021 vs 3Q 2021

Prices and Hedges
Natural gas, crude oil and NGL prices increased in 4Q compared with 3Q. In addition, cash paid for hedge settlements declined by $171 million in 4Q compared with 3Q.

Production Volumes
Total company equivalent volumes increased 2% compared with 3Q. Crude oil production of 450,600 Bopd was above the mid-point of the guidance range due to better well productivity. NGL production declined slightly compared with 3Q due to decreased extraction of ethane. Natural gas production increased 8% compared with 3Q, primarily due to EOG's Dorado dry gas play in south Texas .

Per-Unit Costs
Increased impairment and dry hole costs primarily related to drilling in Oman were the largest contributors to the per-unit cost increase in 4Q. Lease and well costs also contributed to the overall cost increase. These were partially offset by reductions in DD&A and G&A costs.

Other
A lower effective income tax rate was the primary contributor to the increase in earnings from this category.

Change in Cash 4Q 2021 vs 3Q 2021

Free Cash Flow
EOG generated discretionary cash flow (net cash provided by operating activities before exploration costs and changes in working capital) of $3.1 billion in 4Q. The company incurred $1.1 billion of capital expenditures, resulting in $2.0 billion of free cash flow.

Capital Expenditures
Capital expenditures of $1.1 billion were in-line with the mid-point of the guidance range. EOG has continued to be successful offsetting inflationary price pressures with additional efficiencies and other operating improvements.

Dividends
EOG paid $0.2 billion of regular dividends and $1.2 billion of special dividends in 4Q

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Full-Year 2021 Financial Performance

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Adjusted Earnings per Share 2021 vs 2020

Prices and Hedges
Crude oil prices increased by 77% in 2021 compared with 2020, while prices for NGLs and natural gas more than doubled. Higher prices along with increased production volumes generated a wellhead revenue increase of $8.1 billion , or 111%, in 2021 compared with 2020. This was partially offset by an increase in cash paid for hedge settlements of $1.7 billion from 2020 to 2021.

Production Volumes
Total company equivalent production increased 10% in 2021 compared with 2020, when EOG shut in certain wells in response to low crude oil prices. Crude oil volumes in 2021 were 445,000 Bopd, 9% higher than 2020 and consistent with EOG's plan to maintain production at 4Q 2020 levels. NGL volumes increased 6% while natural gas volumes increased 15%.

Per-Unit Costs
Impairments, transportation and G&P costs increased in 2021 compared with 2020, mostly offset by reductions in DD&A, LOE and G&A costs.

Other
Per-unit taxes other than income increased by $1.73 per Boe in 2021 compared with 2020, due to increased product prices, and was the largest contributor to the reduction in earnings from this category.

Change in Cash 2021 vs 2020

Free Cash Flow
EOG generated discretionary cash flow (net cash provided by operating activities before exploration costs and changes in working capital) of $9.4 billion in 2021. The company incurred $3.9 billion of capital expenditures, resulting in $5.5 billion of free cash flow.

Dividend and Debt
EOG doubled its regular dividend rate during 2021, from $1.50 per share at year-end 2020 to $3.00 per share by year-end 2021. In addition, EOG paid $3.00 per share in special dividends during 2021. Altogether, EOG returned $2.7 billion to shareholders in 2021. Also, EOG repaid with cash on hand the $750 million principal amount of notes that matured in February 2021 .

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Fourth Quarter 2021 Operating Performance

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Lease and Well
Per-unit LOE costs were above the guidance mid- point and prior periods due to higher costs for fuel, lease maintenance and remediation.

Transportation, Gathering and Processing
Per-unit transportation and G&P costs in 4Q were slightly below the guidance midpoints and in-line with 3Q. Costs increased compared with the prior year period primarily due to higher fuel costs.

Depreciation, Depletion and Amortization
The addition of reserves from new wells at lower finding costs, driven by EOG's double-premium drilling program, continues to lower DD&A costs. Per-unit DD&A costs were below the guidance midpoint and declined 4% and 3% compared with 3Q 2021 and 4Q 2020, respectively.

General and Administrative
Per-unit G&A costs in 4Q were above the guidance midpoint and the prior year due to higher employee related costs.

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2021 Reserves and Premium Location Additions; Special Dividend

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Finding and Development Cost
Finding and development cost, excluding price revisions, declined 17% YoY in 2021 to $5.81 per Boe. Proved developed finding cost, excluding price revisions, was $7.98 per Boe in 2021. For the 34th consecutive year, internal reserves estimates were within five percent of estimates independently prepared by DeGolyer and McNaughton.

Reserve Replacement
Extensions and discoveries, net of revisions other than price, added 644 MMBoe of proved reserves in 2021. Revisions other than price reduced proved reserves primarily due to the high-grading of our future drilling plan. Proved undeveloped locations that did not meet EOG's double premium standard were replaced with fewer, more productive double-premium locations. Reserves from these high-graded proved undeveloped locations are included as part of reserve additions from extensions and discoveries. Net proved reserve additions from all sources, excluding price revisions, replaced 208% of 2021 production.

2021 Premium Location Additions
EOG identified 700 new net double-premium locations in 2021, replacing 170% of the approximately 410 net double-premium wells drilled in 2021. The new double-premium locations are spread across EOG's portfolio of high-return plays. The double-premium inventory increased to 6,000 net locations from 5,700 previously and represents more than 11 years of drilling at EOG's current pace. EOG's total premium inventory of 11,500 net undrilled locations remained unchanged in 2021.

Regular Dividend and Special Dividend
The Board of Directors today declared a dividend of $0.75 per share on EOG's common stock. The dividend will be payable April 29, 2022 , to stockholders of record as of April 15, 2022 . The indicated annual rate is $3.00 per share. The Board of Directors today also declared a special dividend of $1.00 per share on EOG's Common Stock. The special dividend will be payable March 29, 2022 , to stockholders of record as of March 15, 2022

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2021 ESG Performance and 2022 Capital Program

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Further Improvements to Strong ESG Track Record

• ~25% Reduction in Methane Emissions Percentage
• 99.8% Wellhead Gas Capture
• 55% of Water Sourced from Reuse
• 10% Reduction in Total Recordable Incident Rate

2021 ESG Performance – Preliminary Results
EOG reduced its methane emissions percentage by approximately 25% during 2021. Reduced emissions associated with pneumatic controllers and lower fugitive emissions contributed to the reduction. Wellhead gas capture increased to 99.8% from 99.6% in 2020. Water sourced from reuse increased to 55% from 46% in 2020. Finally, EOG improved its safety performance in 2021, with a reduction of 10% in the total recordable incident rate compared with 2020. The company's GHG intensity rate increased slightly in 2021 due to increased compression for gas gathering. EOG remains confident in achieving its 2025 emissions goals and its ambition to reach net zero scope 1 and scope 2 emissions by 2040.

2022 Capital Program ²
Total expenditures for 2022 are expected to range from $4.3 to $4.7 billion , including exploration and development drilling, facilities, leasehold acquisitions, capitalized interest, other property, plant and equipment, and excluding property acquisitions, asset retirement costs and non-cash exchanges. The capital program also excludes certain exploration costs incurred as operating expenses. The disciplined capital program is focused on high-return investment in EOG's double-premium drilling inventory and returns oil production back to pre-pandemic levels of 455,000 to 467,000 Bopd.

Approximately $3 billion of the capital program is allocated to investment in EOG's existing premium areas. The capital program also funds investment in international plays, high-potential exploration drilling across multiple prospects and investment in various cost-reduction, infrastructure and environmental projects. The total capital program can be funded from cash flow provided by operating activities before changes in working capital at a $32 WTI oil price. EOG plans to complete 570 net wells in 2022 compared with 519 net wells in 2021, including an additional 20 net wells in the Dorado natural gas play and 10 additional net wells in new high potential exploration prospects.

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Fourth Quarter 2021 Results vs Guidance

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First Quarter and Full-Year 2022 Guidance ²

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Fourth Quarter and Full-Year 2021 Results Webcast
Friday, February 25, 2022 , 9:00 a.m. Central time ( 10:00 a.m. Eastern time ) Webcast will be available on EOG's website for one year. http://investors.eogresources.com/Investors

About EOG
EOG Resources, Inc. (NYSE: EOG) is one of the largest crude oil and natural gas exploration and production companies in the United States with proved reserves in the United States and Trinidad . To learn more visit www.eogresources.com.

Investor Contacts
David Streit 713–571–4902
Neel Panchal 713–571–4884

Media and Investor Contact
Kimberly Ehmer 713–571–4676

This press release may include forward–looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, including, among others, statements and projections regarding EOG's future financial position, operations, performance, business strategy, goals, returns and rates of return, budgets, reserves, levels of production, capital expenditures, costs and asset sales, statements regarding future commodity prices and statements regarding the plans and objectives of EOG's management for future operations, are forward looking statements. EOG typically uses words such as "expect," "anticipate," "estimate," "project," "strategy," "intend," "plan," "target," "aims," "ambition," "initiative," "goal," "may," "will," "focused on," "should" and "believe" or the negative of those terms or other variations or comparable terminology to identify its forward-looking statements. In particular, statements, express or implied, concerning EOG's future operating results and returns or EOG's ability to replace or increase reserves, increase production, generate returns and rates of return, replace or increase drilling locations, reduce or otherwise control operating costs and capital expenditures, generate cash flows, pay down or refinance indebtedness, achieve, reach or otherwise meet initiatives, plans, goals, ambitions or targets with respect to emissions, other environmental matters, safety matters or other ESG (environmental/social/governance) matters, or pay and/or increase dividends are forward looking statements.
Forward–looking statements are not guarantees of performance. Although EOG believes the expectations reflected in its forward–looking statements are reasonable and are based on reasonable assumptions, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all) or will prove to have been correct. Moreover, EOG's forward–looking statements may be affected by known, unknown or currently unforeseen risks, events or circumstances that may be outside EOG's control. Furthermore, this press release and any accompanying disclosures may include or reference certain forward–looking, non–GAAP financial measures, such as free cash flow or discretionary cash flow, and certain related estimates regarding future performance, results and financial position. Because we provide these measures on a forward–looking basis, we cannot reliably or reasonably predict certain of the necessary components of the most directly comparable forward–looking GAAP measures, such as future impairments and future changes in working capital. Accordingly, we are unable to present a quantitative reconciliation of such forward–looking, non–GAAP financial measures to the respective most directly comparable forward–looking GAAP financial measures. Management believes these forward–looking, non–GAAP measures may be a useful tool for the investment community in comparing EOG's forecasted financial performance to the forecasted financial performance of other companies in the industry. Any such forward–looking measures and estimates are intended to be illustrative only and are not intended to reflect the results that EOG will necessarily achieve for the period(s) presented; EOG's actual results may differ materially from such measures and estimates. Important factors that could cause EOG's actual results to differ materially from the expectations reflected in EOG's forward–looking statements include, among others:

• the timing, extent and duration of changes in prices for, supplies of, and demand for, crude oil and condensate, natural gas liquids (NGLs), natural gas and related commodities;
• the extent to which EOG is successful in its efforts to acquire or discover additional reserves;
• the extent to which EOG is successful in its efforts to (i) economically develop its acreage in, (ii) produce reserves and achieve anticipated production levels and rates of return from, (iii) decrease or otherwise control its drilling, completion, operating and capital costs related to, and (iv) maximize reserve recovery from, its existing and future crude oil and natural gas exploration and development projects and associated potential and existing drilling locations;
• the extent to which EOG is successful in its efforts to market its production of crude oil and condensate, NGLs and natural gas;
• security threats, including cybersecurity threats and disruptions to our business and operations from breaches of our information technology systems, physical breaches of our facilities and other infrastructure or breaches of the information technology systems, facilities and infrastructure of third parties with which we transact business;
• the availability, proximity and capacity of, and costs associated with, appropriate gathering, processing, compression, storage, transportation, refining, and export facilities;
• the availability, cost, terms and timing of issuance or execution of mineral licenses and leases and governmental and other permits and rights-of-way, and EOG's ability to retain mineral licenses and leases;
• the impact of, and changes in, government policies, laws and regulations, including climate change-related regulations, policies and initiatives (for example, with respect to air emissions); tax laws and regulations (including, but not limited to, carbon tax legislation); environmental, health and safety laws and regulations relating to disposal of produced water, drilling fluids and other wastes, hydraulic fracturing and access to and use of water; laws and regulations affecting the leasing of acreage and permitting for oil and gas drilling and the calculation of royalty payments in respect of oil and gas production; laws and regulations imposing additional permitting and disclosure requirements, additional operating restrictions and conditions or restrictions on drilling and completion operations and on the transportation of crude oil and natural gas; laws and regulations with respect to derivatives and hedging activities; and laws and regulations with respect to the import and export of crude oil, natural gas and related commodities;
• the impact of climate change-related policies and initiatives at the corporate and/or investor community levels and other potential developments related to climate change, such as (but not limited to) changes in consumer and industrial/commercial behavior, preferences and attitudes with respect to the generation and consumption of energy; increased availability of, and increased consumer and industrial/commercial demand for, competing energy sources (including alternative energy sources); technological advances with respect to the generation, transmission, storage and consumption of energy; alternative fuel requirements; energy conservation measures; decreased demand for, and availability of, services and facilities related to the exploration for, and production of, crude oil, NGLs and natural gas; and negative perceptions of the oil and gas industry and, in turn, reputational risks associated with the exploration for, and production of, crude oil, NGLs and natural gas;
• EOG's ability to effectively integrate acquired crude oil and natural gas properties into its operations, fully identify existing and potential problems with respect to such properties and accurately estimate reserves, production and drilling, completing and operating costs with respect to such properties;
• the extent to which EOG's third-party-operated crude oil and natural gas properties are operated successfully, economically and in compliance with
• applicable laws and regulations;
• competition in the oil and gas exploration and production industry for the acquisition of licenses, leases and properties;
• the availability and cost of, and competition in the oil and gas exploration and production industry for, employees and other personnel, facilities, equipment, materials (such as water and tubulars) and services;
• the accuracy of reserve estimates, which by their nature involve the exercise of professional judgment and may therefore be imprecise;
• weather, including its impact on crude oil and natural gas demand, and weather-related delays in drilling and in the installation and operation (by EOG or third parties) of production, gathering, processing, refining, compression, storage, transportation, and export facilities;
• the ability of EOG's customers and other contractual counterparties to satisfy their obligations to EOG and, related thereto, to access the credit and capital markets to obtain financing needed to satisfy their obligations to EOG;
• EOG's ability to access the commercial paper market and other credit and capital markets to obtain financing on terms it deems acceptable, if at all, and to otherwise satisfy its capital expenditure requirements;
• the extent to which EOG is successful in its completion of planned asset dispositions;
• the extent and effect of any hedging activities engaged in by EOG;
• the timing and extent of changes in foreign currency exchange rates, interest rates, inflation rates, global and domestic financial market conditions and global and domestic general economic conditions;
• the duration and economic and financial impact of epidemics, pandemics or other public health issues, including the COVID-19 pandemic;
• geopolitical factors and political conditions and developments around the world (such as the imposition of tariffs or trade or other economic sanctions, political instability and armed conflict), including in the areas in which EOG operates;
• the extent to which EOG incurs uninsured losses and liabilities or losses and liabilities in excess of its insurance coverage;
• acts of war and terrorism and responses to these acts; and
• the other factors described under ITEM 1A, Risk Factors of this Annual Report on Form 10-K and any updates to those factors set forth in EOG's subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

In light of these risks, uncertainties and assumptions, the events anticipated by EOG's forward-looking statements may not occur, and, if any of such events do, we may not have anticipated the timing of their occurrence or the duration or extent of their impact on our actual results. Accordingly, you should not place any undue reliance on any of EOG's forward-looking statements. EOG's forward-looking statements speak only as of the date made, and EOG undertakes no obligation, other than as required by applicable law, to update or revise its forward-looking statements, whether as a result of new information, subsequent events, anticipated or unanticipated circumstances or otherwise.

The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose not only "proved" reserves (i.e., quantities of oil and gas that are estimated to be recoverable with a high degree of confidence), but also "probable" reserves (i.e., quantities of oil and gas that are as likely as not to be recovered) as well as "possible" reserves (i.e., additional quantities of oil and gas that might be recovered, but with a lower probability than probable reserves). Statements of reserves are only estimates and may not correspond to the ultimate quantities of oil and gas recovered. Any reserve or resource estimates provided in this press release that are not specifically designated as being estimates of proved reserves may include "potential" reserves, "resource potential" and/or other estimated reserves or estimated resources not necessarily calculated in accordance with, or contemplated by, the SEC's latest reserve reporting guidelines. Investors are urged to consider closely the disclosure in EOG's Annual Report on  Form 10–K for the fiscal year ended December 31, 2021 , available from EOG at P.O. Box 4362, Houston, Texas 77210–4362 (Attn: Investor Relations). You can also obtain this report from the SEC by calling 1–800–SEC–0330 or from the SEC's website at www.sec.gov. In addition, reconciliation and calculation schedules for non–GAAP financial measures can be found on the EOG website at www.eogresources.com.

Income Statements

Wellhead Volumes and Prices

Balance Sheets

Cash Flow Statements

Non-GAAP Financial Measures

Adjusted Net Income (Loss)

Discretionary Cash Flow and Free Cash Flow

Total Expenditures

EBITDAX and Adjusted EBITDAX

Net Debt-to-Total Capitalization Ratio

Proved Reserves and Reserve Replacement Data

Reserve Replacement Cost Data

Reserve Replacement Cost Data

Reserve Replacement Cost Data

Financial Commodity Derivative Contracts

Direct After-Tax Rate of Return

ROCE & ROE

ROCE & ROE

Revenues, Costs and Margins Per Barrel of Oil Equivalent

SOURCE EOG Resources, Inc.