EOG Resources, Inc. — Q1 2021 Form 10-Q
Business context and period: Unaudited results for the three months ended March 31, 2021, compared with Q1 2020. EOG is an independent oil and gas producer operating primarily in the United States, with operations in Trinidad and other international markets. Amounts below are in millions of dollars unless noted.
Financial and operating performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Total operating revenues and other | $3,694 | $4,718 |
| Wellhead revenues | $3,190 | $2,436 |
| Operating income | $932 | $58 |
| Net income | $677 | $10 |
| Diluted earnings per share | $1.16 | $0.02 |
| Net cash provided by operating activities | $1,870 | $2,585 |
| Net cash used in investing activities | $821 | $1,531 |
| Net cash used in financing activities | $988 | $175 |
- Operating margin was approximately 25% of reported revenues, versus approximately 1% in Q1 2020; reported revenue and margins were materially affected by non-cash mark-to-market derivative changes.
- Q1 2021 revenues included a $367 million mark-to-market derivative loss, compared with a $1.206 billion gain in Q1 2020. Wellhead revenues rose 31%, reflecting higher realized prices, partly offset by lower production.
- Average production was 778.9 thousand barrels of oil equivalent per day, down about 11% from 874.1 thousand. Crude oil and condensate volumes fell 11%; NGL volumes fell 23%; natural gas volumes fell 3%.
- Composite wellhead prices rose year over year: crude oil and condensate to $58.02/bbl from $46.96; NGLs to $28.03/bbl from $10.94; natural gas to $5.17/Mcf from $1.67. Natural gas prices benefited on certain days from Winter Storm Uri disruptions.
- Operating expenses were $2.762 billion versus $4.660 billion. Q1 2020 included $1.573 billion of impairments, compared with $44 million in Q1 2021. Taxes other than income increased to $215 million from $157 million.
Balance sheet, liquidity and capital allocation
- At March 31, 2021, cash and cash equivalents were $3.388 billion, total assets were $36.171 billion, and stockholders’ equity was $20.762 billion.
- Balance-sheet debt totaled approximately $5.133 billion, including $39 million current and $5.094 billion long term, down from $5.816 billion at December 31, 2020. EOG repaid $750 million of notes at maturity in February. Debt-to-total capitalization was 20%, versus 22% at year-end.
- EOG reported $2.0 billion of availability under its revolving credit facility and no revolver borrowings or outstanding letters of credit. It was in compliance with the facility’s debt-to-capitalization covenant.
- Operating cash flow fell $715 million year over year, primarily due to an unfavorable working-capital change and higher cash paid for derivative settlements. Cash increased $59 million during the quarter.
- Exploration and development expenditures were $934 million; total expenditures, including asset retirement costs and other property and equipment, were $1.067 billion. The company repaid debt, paid $219 million in dividends, and declared quarterly dividends of $0.4125 per share for payment beginning in April.
Material changes, outlook and risks
- Management attributed improving oil demand and prices to economic recovery and easing pandemic impacts, while noting continuing uncertainty in commodity markets and OPEC+ production policy.
- 2021 capital expenditures were expected to be approximately $3.7–$4.1 billion, excluding acquisitions and non-cash transactions. EOG expected full-year crude oil production to remain around Q4 2020 levels and planned to focus investment on its Delaware Basin, Eagle Ford and Rocky Mountain areas.
- After quarter-end, EOG announced a $1.00-per-share special dividend, payable July 30, 2021. It also entered an agreement to sell its China subsidiary for approximately $140 million, with closing expected in Q2 2021, subject to customary conditions.
- Winter Storm Uri disrupted sales in some markets and adversely affected certain operating costs. Commodity prices, production and demand, operational costs, weather, regulation, permitting, transportation capacity, pandemic effects and geopolitical conditions are among the disclosed risks.
- Derivative positions produced a net liability of $195 million at March 31, 2021; EOG had posted $19 million of collateral. Derivative fair-value changes can cause substantial volatility in reported earnings.
- Management said pending ordinary-course lawsuits and claims were not expected to have a material adverse effect. No environmental proceedings meeting the filing’s stated disclosure threshold were reported for the quarter.
Important facts for investors to verify
- How much of reported earnings and revenue reflects realized operating performance versus mark-to-market derivative movements.
- Whether production volumes, realized prices and operating costs track management’s 2021 assumptions, including the effects of weather and market disruptions.
- Execution of the $3.7–$4.1 billion capital plan and the company’s ability to sustain cash generation, dividends and debt levels.
- Completion and proceeds of the announced China asset sale, and the cash-flow and operational implications.
- Commodity-price, counterparty, collateral and liquidity exposures, together with the risks and contingencies described in the filing.