EOG Resources, Inc. — Q1 2024 Form 10-Q
Business context and reporting period. Unaudited results cover the three months ended March 31, 2024, compared with Q1 2023. EOG is an independent oil and gas producer, with operations primarily in the United States and Trinidad. Its strategy emphasizes returns on capital, cost control, operational efficiency, and maintaining a strong balance sheet.
Key financial and operating metrics
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total operating revenues and other | $6.123 billion | $6.044 billion |
| Operating income | $2.271 billion | $2.572 billion |
| Net income | $1.789 billion | $2.023 billion |
| Diluted EPS | $3.10 | $3.45 |
| Cash from operating activities | $2.903 billion | $3.255 billion |
| Cash used in investing activities | $1.597 billion | $1.567 billion |
| Cash and cash equivalents, quarter-end | $5.292 billion | $5.018 billion |
- Revenue increased 1% year over year, while operating income fell 12% and net income fell 12%. Calculated operating margin was approximately 37.1%, versus 42.6%; net margin was approximately 29.2%, versus 33.5%.
- Operating cash flow less investing cash flow was approximately $1.306 billion, compared with $1.688 billion in Q1 2023. Cash increased $14 million during the quarter.
- At March 31, total debt was approximately $3.791 billion, including current debt of $34 million; cash exceeded debt by approximately $1.501 billion. Debt-to-total capitalization was 12%. EOG reported $1.9 billion available under its revolving credit facility, with no borrowings or letters of credit outstanding.
- Total production was 1.029 million barrels of oil equivalent per day, up from 943,000. U.S. crude oil and condensate production rose 6%; natural gas production rose 13%. Composite wellhead gas price fell 36% to $2.26 per Mcf.
- Capital expenditures and other property, plant and equipment expenditures totaled $1.952 billion for the quarter. The filing reports DD&A of $1.074 billion, up $276 million year over year; this included a $117 million adjustment primarily related to domestic natural gas used by EOG’s gathering systems.
Material changes versus Q1 2023
- Higher crude oil and condensate and NGL volumes supported wellhead revenues, but lower natural gas prices reduced natural gas revenue by $135 million. Total wellhead revenue increased 4% to $4.375 billion.
- Mark-to-market derivative gains declined to $237 million from $376 million; Q1 2024 included $144 million of gains tied to the Brent-linked gas sales contract. Asset disposition gains also declined, to $26 million from $69 million.
- Operating expenses increased $380 million to $3.852 billion, mainly reflecting higher DD&A, including the noted adjustment, and higher lease-and-well and general and administrative expenses.
- Operating cash flow was down $352 million, principally due to working-capital and other balance-sheet movements and the prior-year period’s receipt of $324 million of cash collateral. Q1 2024 had no collateral posted or held.
- Financing cash use was $1.292 billion, including $759 million of treasury stock purchases and $525 million of dividends paid. In Q1 2023, financing cash use included repayment of $1.250 billion of debt and $1.067 billion of dividends.
Outlook, management commentary, and risks
- EOG estimates 2024 capital expenditures of approximately $6.0–$6.4 billion, excluding acquisitions, non-cash transactions, and exploration costs. It expects full-year production to increase modestly versus 2023.
- Beginning in 2024, EOG committed to return at least 70% of annual operating cash flow before certain balance-sheet-related changes, less total capital expenditures, to stockholders through dividends and share repurchases. The board declared a quarterly dividend of $0.91 per share for payment in July 2024.
- EOG repurchased 6.4 million shares for approximately $750 million in Q1; approximately $3.3 billion remained under the $5 billion authorization at quarter-end. Repurchases remain discretionary and may be modified or stopped.
- In February, EOG entered a 10-year agreement beginning in 2027 to sell 180,000 MMBtud of domestic natural gas, with pricing linked to Brent and/or a U.S. Gulf Coast gas index. The contract is accounted for as a derivative, creating mark-to-market earnings volatility before deliveries begin.
- Management said inflationary pressure on operating and capital costs had eased from prior periods, but service, labor, and materials markets remain variable. Risks include commodity-price volatility, production and reserve performance, cost inflation, infrastructure access, regulation and climate-related developments, geopolitical conditions, and counterparty and cybersecurity risks.
- Ordinary-course lawsuits and claims are pending; management does not expect their resolution, individually or collectively, to materially adversely affect EOG. No environmental proceedings meeting the filing’s stated disclosure threshold were reported for the quarter.
Important facts for investors to verify
- Whether production growth and the expected modest full-year increase are achieved, especially as commodity prices and realized gas prices fluctuate.
- How much reported earnings and future results depend on derivative mark-to-market gains, including the Brent-linked contract, versus realized operating cash flows.
- Whether the $6.0–$6.4 billion capital budget and cash-return commitment remain supported by operating cash flow after commodity prices, working capital, and investment needs.
- The drivers and persistence of higher DD&A, including the $117 million adjustment and increased per-unit rates.
- Progress on share repurchases and dividends, and the effect of discretionary shareholder returns on liquidity and capital allocation.
- Developments in regulatory and climate-related requirements; the filing notes the SEC climate-disclosure rules were stayed pending judicial review and EOG was evaluating their impact.