EOG Resources, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report; the supplied filing text does not provide clear Q4-only financial results.
Business context
EOG explores for, develops, produces and markets crude oil, natural gas liquids (NGLs) and natural gas, primarily in the United States and Trinidad. Approximately 99% of year-end proved reserves were in the United States. Management emphasizes capital discipline, returns, cost control and a strong balance sheet.
Financial and operating performance
| Metric | 2023 | 2022 |
|---|---|---|
| Operating revenues and other | $24.186 billion | $25.702 billion |
| Operating income | $9.603 billion | $9.966 billion |
| Net income | $7.594 billion | $7.759 billion |
| Diluted EPS | $13.00 | $13.22 |
| Net cash from operating activities | $11.340 billion | $11.093 billion |
| Net cash used in investing activities | $6.340 billion | $5.056 billion |
| Capital expenditures and other reported expenditures | $6.818 billion | $5.610 billion |
Revenue declined 6% and net income declined 2%. Operating and net margins were approximately 39.7% and 31.4%, respectively, compared with 38.8% and 30.2% in 2022. Operating cash flow rose modestly despite lower wellhead revenue, partly because cash settlements on derivatives and income-tax payments were lower.
Total production increased 8% to 984.8 thousand barrels of oil equivalent per day. Crude oil and condensate production rose 3%, NGL production 13%, and natural gas production 14%. Lower realized prices offset volume growth: composite crude oil price fell 19% to $79.17 per barrel, NGL price fell 37% to $23.07 per barrel, and natural gas price fell 60% to $2.79 per Mcf.
Reported revenue included an $818 million net mark-to-market gain on commodity derivatives, versus a $3.982 billion loss in 2022. Cash settlements were net payments of $112 million in 2023 versus $3.501 billion in 2022; the mark-to-market result should therefore be distinguished from realized cash flows.
Balance sheet, liquidity and shareholder returns
At year-end, cash and cash equivalents were $5.278 billion. Senior-note principal was $3.640 billion, down from $4.890 billion after repayment of $1.250 billion of notes due in 2023; finance lease obligations were $183 million. Debt-to-total capitalization was 12%, versus 17% a year earlier. EOG had no revolver or commercial-paper borrowings outstanding and reported $1.9 billion of revolving-credit availability.
EOG paid $3.386 billion in dividends and repurchased approximately $1.0 billion of stock during 2023. Effective in 2024, its stated cash-return commitment increased from at least 60% to at least 70% of annual operating cash flow before certain balance-sheet changes, less capital expenditures. The Board retains discretion over dividends and repurchases.
Material changes, outlook and risks
- Proved reserves increased 260 MMBoe to 4,498 MMBoe. Additions from extensions, discoveries and other additions were 607 MMBoe; reserve revisions were net positive 29 MMBoe. Lower year-end commodity-price assumptions reduced reserve estimates, partly offset by lower expected operating costs and other revisions.
- The standardized measure of discounted future net cash flows for proved reserves fell to $42.992 billion from $74.572 billion, principally reflecting lower prices used in the calculation. The filing cautions that this standardized measure is not a representation of current company value.
- For 2024, EOG forecasts capital expenditures of approximately $6.0–$6.4 billion, expects crude oil and total equivalent production to increase from 2023, and plans about 600 net U.S. well completions. Planned activity is concentrated in the Delaware Basin, South Texas, the Rockies and other areas, including the Utica.
- Management cited ongoing commodity-price volatility and uncertainty around inflation, service costs and availability. EOG said 2023 well costs rose less than 10% year over year and that efficiency initiatives largely offset cost pressures, while cautioning that future results are uncertain.
- Key exposures include oil, NGL and gas prices; drilling and reserve-estimation uncertainty; access to water, labor, services and transport infrastructure; weather and operational incidents; customer and counterparty concentration; and changing environmental, methane, hydraulic-fracturing and climate rules. EOG has an ambition to reach net-zero Scope 1 and Scope 2 emissions by 2040 and notes that achieving its ESG targets is not assured.
- 2024 contractual cash requirements were estimated at $2.206 billion, including transportation and storage commitments, purchase and service obligations, and lease-related amounts. Total minimum purchase, service, transportation and storage commitments not qualifying as leases were $6.684 billion. Management did not expect ordinary-course legal claims to materially affect results; no environmental proceedings meeting the filing’s stated disclosure threshold were reported.
The independent auditor issued an unqualified opinion on the financial statements and internal control over financial reporting. Proved reserves and depletion were identified as a critical audit matter because of the significant judgments involved in reserve estimates and development timing.
Important facts for investors to verify
- Whether 2024 production growth and the $6.0–$6.4 billion capital plan are achieved within the company’s return and cash-generation objectives.
- How much of reported earnings and future cash flow depends on commodity prices and derivative mark-to-market movements, versus realized prices and cash settlements.
- Reserve additions, revisions and conversion of proved undeveloped reserves into producing reserves, including the assumptions behind the sharp year-over-year change in standardized reserve value.
- Execution of the 70% cash-return commitment, alongside capital needs, contractual commitments and the Board’s discretion over dividends and repurchases.
- Potential effects of methane and other environmental regulation, infrastructure constraints, and operating-cost or service-availability changes.