SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ------------------------- Form 10-Q ------------------------- [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 1-9743 EOG RESOURCES, INC. (Exact name of registrant as specified in its charter) Delaware 47-0684736 (State or other (I.R.S. Employer jurisdiction Identification No.) of incorporation or organization) 1200 Smith Street, Suite 300, Houston, Texas 77002-7361 (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: 713-651-7000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of April 25, 2001. Title of each class Number of shares ------------------- ---------------- Common Stock, $.01 par value 115,951,347
2 EOG RESOURCES, INC. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Page No. -------- ITEM 1. Financial Statements Consolidated Statements of Income - Three Months Ended March 31, 2001 and 2000................................................... 3 Consolidated Balance Sheets - March 31, 2001 and December 31, 2000............................................................ 4 Consolidated Statements of Cash Flows - Three Months Ended March 31, 2001 and 2000............................................... 5 Notes to Consolidated Financial Statements........................ 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................. 8 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings.......................................... 12 ITEM 6. Exhibits and Reports on Form 8-K........................... 12
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS EOG RESOURCES, INC. CONSOLIDATED STATEMENTS OF INCOME (In Thousands Except Per Share Amounts) (Unaudited) <TABLE> Three Months Ended March 31, --------------------- 2001 2000 ---------- ---------- <S> <C> <C> NET OPERATING REVENUES Natural Gas $ 521,477 $ 186,200 Crude Oil, Condensate and Natural Gas Liquids 75,194 73,067 Gains on Sales of Reserves and Related Assets and Other, Net 582 629 --------- --------- TOTAL 597,253 259,896 OPERATING EXPENSES Lease and Well 42,574 33,739 Exploration Costs 20,265 12,945 Dry Hole Costs 15,684 5,761 Impairments 15,764 8,402 Depreciation, Depletion and Amortization 93,961 84,137 General and Administrative 17,949 16,287 Taxes Other Than Income 37,032 18,415 --------- --------- TOTAL 243,229 179,686 --------- --------- OPERATING INCOME 354,024 80,210 OTHER INCOME (EXPENSE), NET (639) 17 --------- --------- INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES 353,385 80,227 INTEREST EXPENSE, NET 13,289 14,568 --------- --------- INCOME BEFORE INCOME TAXES 340,096 65,659 INCOME TAX PROVISION 124,849 24,169 --------- --------- NET INCOME 215,247 41,490 PREFERRED STOCK DIVIDENDS (2,721) (2,654) --------- --------- NET INCOME AVAILABLE TO COMMON $ 212,526 $ 38,836 ========= ========= NET INCOME PER SHARE AVAILABLE TO COMMON Basic $ 1.83 $ 0.33 ========= ========= Diluted $ 1.79 $ 0.33 ========= ========= AVERAGE NUMBER OF COMMON SHARES Basic 116,384 117,827 ========= ========= Diluted 118,952 118,273 ========= ========= The accompanying notes are an integral part of these consolidated financial statements. </TABLE>
4 PART I. FINANCIAL INFORMATION - (Continued) ITEM 1. FINANCIAL STATEMENTS - (Continued) EOG RESOURCES, INC. CONSOLIDATED BALANCE SHEETS (In Thousands) <TABLE> March 31, December 31, 2001 2000 - --------------------------------------------------------------------------------------------- (Unaudited) ASSETS <S> <C> <C> CURRENT ASSETS Cash and Cash Equivalents $ 30,849 $ 20,152 Accounts Receivable 286,778 342,579 Inventories 20,307 16,623 Other 20,981 15,073 ----------- ----------- TOTAL 358,915 394,427 OIL AND GAS PROPERTIES (SUCCESSFUL EFFORTS METHOD) 5,251,407 5,122,728 Less: Accumulated Depreciation, Depletion and Amortization (2,681,866) (2,597,721) ----------- ----------- Net Oil and Gas Properties 2,569,541 2,525,007 OTHER ASSETS 83,824 81,381 ----------- ----------- TOTAL ASSETS $ 3,012,280 $ 3,000,815 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 241,402 $ 246,030 Accrued Taxes Payable 128,371 78,838 Dividends Payable 5,081 4,525 Other 31,227 40,285 ----------- ----------- TOTAL 406,081 369,678 LONG-TERM DEBT 644,871 859,000 OTHER LIABILITIES 56,546 51,133 DEFERRED INCOME TAXES 372,508 340,079 SHAREHOLDERS' EQUITY Preferred Stock, $.01 Par, 10,000,000 Shares Authorized: Series B, 100,000 Shares Issued, Cumulative, $100,000,000 Liquidation Preference 97,939 97,879 Series D, 500 Shares Issued, Cumulative, $50,000,000 Liquidation Preference 49,330 49,285 Common Stock, $.01 Par, 320,000,000 Shares Authorized; 124,730,000 Shares Issued 201,247 201,247 Additional Paid In Capital 9,687 4,221 Unearned Compensation (10,051) (3,756) Accumulated Other Comprehensive Income (48,377) (31,756) Retained Earnings 1,508,953 1,301,067 Common Stock Held in Treasury, 8,491,430 shares at March 31, 2001 and 7,825,708 shares at December 31, 2000 (276,454) (237,262) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 1,532,274 1,380,925 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,012,280 $ 3,000,815 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. </TABLE>
5 PART I. FINANCIAL INFORMATION - (Continued) ITEM 1. FINANCIAL STATEMENTS - (Continued) EOG RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) <TABLE> Three Months Ended March 31, - ------------------------------------------------------------------------------------------------------- 2001 2000 - ------------------------------------------------------------------------------------------------------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES Reconciliation of Net Income to Net Operating Cash Inflows: Net Income $ 215,247 $ 41,490 Items Not Requiring Cash Depreciation, Depletion and Amortization 93,961 84,137 Impairments 15,764 8,402 Deferred Income Taxes 34,452 17,045 Other, Net 5,393 826 Exploration Costs 20,265 12,945 Dry Hole Costs 15,684 5,761 Gains on Sales of Reserves and Related Assets and Other, Net 316 1,571 Tax Benefits From Stock Options Exercised 5,246 239 Other, Net (3,233) (2,129) Changes in Components of Working Capital and Other Liabilities Accounts Receivable 55,824 (30,410) Inventories (3,684) 1,862 Accounts Payable (4,897) 20,289 Accrued Taxes Payable 49,533 (529) Other Liabilities 2,135 3,924 Other, Net (14,966) 4,600 Changes in Components of Working Capital Associated with Investing and Financing Activities (7,833) 5,059 --------- --------- NET OPERATING CASH INFLOWS 479,207 175,082 INVESTING CASH FLOWS Additions to Oil and Gas Properties (169,443) (75,944) Exploration Costs (20,265) (12,945) Dry Hole Costs (15,684) (5,761) Proceeds from Sales of Reserves and Related Assets 1,419 20,621 Changes in Components of Working Capital Associated with Investing Activities 7,813 (5,266) Other, Net (5,873) (2,864) --------- --------- NET INVESTING CASH OUTFLOWS (202,033) (82,159) FINANCING CASH FLOWS Long-Term Debt (214,129) (49,386) Dividends Paid (6,701) (6,330) Treasury Stock Purchased (55,590) (30,253) Proceeds from Sales of Treasury Stock 9,987 854 Other, Net (44) 714 --------- --------- NET FINANCING CASH OUTFLOWS (266,477) (84,401) --------- --------- INCREASE IN CASH AND CASH EQUIVALENTS 10,697 8,522 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 20,152 24,836 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 30,849 $ 33,358 ========= ========= The accompanying notes are an integral part of these consolidated financial statements. </TABLE>
6 PART I. FINANCIAL INFORMATION (Continued) ITEM 1. FINANCIAL STATEMENTS (Continued) EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.The consolidated financial statements of EOG Resources, Inc. and subsidiaries ("EOG") included herein have been prepared by management without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial results for the interim periods. Certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. However, management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in EOG's 2000 Annual Report to Shareholders. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications have been made to prior period financial statements to conform with the current presentation. Beginning first quarter of 2001, the "Impairment of Unproved Oil and Gas Properties" caption on the Consolidated Statements of Income was renamed "Impairments" to include the impairment loss of long-lived assets as described in Statement of Financial Accounting Standards No. 121 -- "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed of" ("SFAS 121 Impairments"). As a result, EOG reclassified all prior periods to reflect such SFAS 121 Impairments in Impairments, instead of Depreciation, Depletion and Amortization ("DD&A") as previously reported. SFAS 121 Impairments reclassified from DD&A to Impairments were $0.4 million for the first quarter of 2000. As more fully discussed in Notes 1 and 12 to the consolidated financial statements included in EOG's 2000 Annual Report to Shareholders, EOG engages in price risk management activities from time to time. Derivative financial instruments (primarily price swaps and costless collars) are utilized selectively to hedge the impact of market fluctuations on natural gas and crude oil market prices. EOG adopted on January 1, 2001 Statement of Financial Accounting Standards ("SFAS") No. 133 -- "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and 138 ("SFAS 133"). SFAS 133 requires that changes in the derivative's fair value be recognized currently in earnings using the mark-to-market accounting method unless specific hedge accounting criteria are met. The adoption of SFAS 133 did not have a material impact on EOG's financial statements. During the first quarter of 2001, EOG elected not to designate any of its price risk management activities as hedges, and accordingly, accounted for them using the mark-to-market accounting method. The application of the mark-to-market accounting method during the first quarter of 2001 did not have a material impact on EOG's financial statements. 2.The following table sets forth the computation of basic and diluted earnings from net income available to common (in thousands, except per share amounts): <TABLE> Quarter Ended March 31, ---------------------- 2001 2000 ---------- ---------- <S> <C> <C> Numerator for basic and diluted earnings per share - Net income available to common $212,526 $ 38,836 ======== ======== Denominator for basic earnings per share - Weighted average shares 116,384 117,827 Potential dilutive common shares - Stock options 2,342 394 Restricted stock and units 226 52 -------- -------- Denominator for diluted earnings per share - Adjusted weighted average shares 118,952 118,273 ======== ======== Net income per share of common stock Basic $ 1.83 $ 0.33 ======== ======== Diluted $ 1.79 $ 0.33 ======== ======== </TABLE>
7 PART I. FINANCIAL INFORMATION (Continued) ITEM 1. FINANCIAL STATEMENTS (Continued) EOG RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3.The following table presents the components of EOG's comprehensive income: <TABLE> Three Months Ended March 31, --------------------- 2001 2000 ---------- --------- (In Thousands) <S> <C> <C> Net Income $215,247 $ 41,490 Other Comprehensive Income Unrealized Gain on Available-for-Sale Security, net of tax of $180 in 2001 334 - Foreign Currency Translation Adjustment (16,955) (2,099) -------- -------- Comprehensive Income $198,626 $ 39,391 ======== ======== - --------------------------------------------------------------------------------- </TABLE> 4.Selected financial information about operating segments is reported below for the three-month periods ended March 31, 2001 and 2000: <TABLE> Three Months Ended March 31, -------------------- 2001 2000 -------- --------- (In Thousands) <S> <C> <C> NET OPERATING REVENUES United States $503,989 $206,249 Canada 74,530 32,755 Trinidad 18,708 20,883 Other 26 9 -------- -------- TOTAL $597,253 $259,896 ======== ======== OPERATING INCOME (LOSS) United States $300,847 $ 59,792 Canada 52,905 14,126 Trinidad 5,985 7,031 Other (5,713) (739) -------- -------- TOTAL 354,024 80,210 RECONCILING ITEMS Other Income (Expense), Net (639) 17 Interest Expense, Net 13,289 14,568 -------- -------- INCOME BEFORE INCOME TAXES $340,096 $ 65,659 ======== ======== - ------------------------------------------------------------------------- </TABLE> 5.As reported in EOG's 2000 Annual Report to Shareholders, two stockholders of EOG filed separate lawsuits purportedly on behalf of EOG against Enron Corp. and directors of EOG, alleging that Enron Corp. and directors of EOG breached their fiduciary duties of good faith and loyalty in approving the Share Exchange transaction in the third quarter of 1999. The lawsuits have been consolidated and seek to temporarily and permanently enjoin the Share Exchange transaction and seek to rescind the transaction or to receive monetary damages and costs and expenses, including reasonable attorneys' and experts' fees. EOG, Enron Corp. and directors of EOG believe the lawsuits are without merit and intend to vigorously contest them. During the first quarter of 2001, EOG favorably resolved a disagreement over the timing of the conversion of a 5% overriding royalty interest held by a third party in EOG's Trinidad SECC block to a 15% working interest. There are various other suits and claims against EOG that have arisen in the ordinary course of business. However, management does not believe these suits and claims will individually or in the aggregate have a material adverse effect on the financial condition or results of operations of EOG. EOG has been named as a potentially responsible party in certain Comprehensive Environmental Response Compensation and Liability Act proceedings. However, management does not believe that any potential assessments resulting from such proceedings will individually or in the aggregate have a materially adverse effect on the financial condition or results of operations of EOG.
8 PART I. FINANCIAL INFORMATION (Continued) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS EOG RESOURCES, INC. The following review of operations for the three-month periods ended March 31, 2001 and 2000 should be read in conjunction with the consolidated financial statements of EOG Resources, Inc. and subsidiaries ("EOG") and Notes thereto. Results of Operations Three Months Ended March 31, 2001 vs. Three Months Ended March 31, 2000 EOG generated first quarter net income available to common of $213 million compared to net income of $39 million for the first quarter of 2000. Net operating revenues were $597 million compared to $260 million for the first quarter of 2000. Following is an explanation of the variances causing this increase. <TABLE> Wellhead volume and price statistics are summarized below: - ------------------------------------------------------------------------ 2001 2000 - ------------------------------------------------------------------------ <S> <C> <C> Natural Gas Volumes (MMcf per day)(1) United States 704 656 Canada 117 132 ------ ------ North America 821 788 Trinidad 120 128 ------ ------ TOTAL 941 916 ====== ====== Average Natural Gas Prices ($/Mcf)(2) United States $ 6.97 $ 2.53 Canada 6.60 2.17 North America Composite 6.91 2.47 Trinidad 1.22 1.17 COMPOSITE 6.19 2.29 Crude Oil/Condensate Volumes (MBbl per day)(1) United States 23.0 20.7 Canada 1.7 2.3 ------ ------ North America 24.7 23.0 Trinidad 2.2 2.9 ------ ------ TOTAL 26.9 25.9 ====== ====== Average Crude Oil/Condensate Prices ($/Bbl)(2) United States $28.09 $28.14 Canada 25.25 26.83 North America Composite 27.89 28.01 Trinidad 28.84 27.85 COMPOSITE 27.97 27.99 Natural Gas Liquids Volumes (MBbl per day)(1) United States 3.0 4.3 Canada 0.5 0.8 ------ ------ TOTAL 3.5 5.1 ====== ====== Average Natural Gas Liquids Prices ($/Bbl) (2) United States $23.95 $20.64 Canada 23.46 13.64 COMPOSITE 23.88 19.58 Natural Gas Equivalent Volumes (MMcfe per day)(3) United States 860 805 Canada 131 151 ------ ------ North America 991 956 Trinidad 132 145 ------ ------ TOTAL 1,123 1,101 ====== ====== Total Bcfe(3)Deliveries 101 100 - ---------------------------------------------------------------------------- (1) Million cubic feet per day or thousand barrels per day, as applicable. (2) Dollars per thousand cubic feet or per barrel, as applicable. (3) Million cubic feet equivalent per day or billion cubic feet equivalent, as applicable. </TABLE>
9 PART I. FINANCIAL INFORMATION (Continued) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued) EOG RESOURCES, INC. Wellhead revenues increased 125% to $599 million in the first quarter of 2001 compared to $266 million in the first quarter of 2000, primarily due to higher average wellhead prices worldwide for natural gas and natural gas liquids. Average wellhead natural gas prices were up by 170%, increasing net operating revenues by $330 million. Average wellhead crude oil and condensate prices were basically flat with those a year ago. First quarter 2001, U.S. wellhead natural gas deliveries were approximately 7% higher than the comparable period in 2000. The increase in volumes is primarily due to increased production in the Midland, Offshore and Tyler divisions. Combined with reduced production in Trinidad, due to takes above the take or pay contracted volume by the Trinidadian government in the first quarter of 2000, and decreased production in the Canada division, due to plant curtailment in the first quarter of 2001, the overall natural gas production growth was approximately 3% higher than the comparable period in 2000, increasing net operating revenues by $3 million. Wellhead crude oil and condensate deliveries were approximately 4% higher than the prior year period, increasing net operating revenues by $2 million. The increase is primarily due to increased U.S. crude oil production from the Denver, Midland and Oklahoma City divisions, partially offset by decreased crude oil production from the Canada and International divisions. Natural gas liquids decreased net operating revenues by $2 million primarily due to a decrease in deliveries of 31%, partially offset by an increase in prices of 22% compared to a year ago. Operating expenses of $243 million for the first quarter of 2001 were approximately $64 million higher than the first quarter of 2000. Taxes other than income were $19 million higher due to increased wellhead revenues in North America. Depreciation, depletion and amortization ("DD&A") increased $10 million primarily due to increased production volumes and increased per unit DD&A rates in certain North America locations. Lease and well expenses were $9 million higher than the comparable period in 2000 primarily due to an industry-wide increase in costs and increased North America production activities to maximize the volumes delivered at higher product prices. Exploration expenses of $20 million and dry hole expenses of $16 million increased $7 million and $10 million, respectively, primarily due to increased North America and international exploratory drilling activities. Impairments, which includes writedowns of unproved leases and losses from reduction of carrying values of certain long-lived assets as a result of future cash flow analysis,increased $7 million compared to the comparable period in 2000. The per unit operating costs of EOG for lease and well, DD&A, general and administrative ("G&A") expenses, interest expense, and taxes other than income averaged $2.03 per Mcfe during the first quarter of 2001 compared to $1.67 per Mcfe during the first quarter of 2000. The increase is primarily due to a higher per unit rate of DD&A, lease and well, G&A expense and taxes other than income partially offset by a lower per unit rate of interest expense. Income tax provision for the first quarter of 2001 was $125 million (effective tax rate of 36.7%) compared to $24 million (effective tax rate of 36.8%) for the comparable period of 2000, primarily due to higher pre-tax income.
10 PART I. FINANCIAL INFORMATION (Continued) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Continued) EOG RESOURCES, INC. Capital Resources and Liquidity EOG's primary sources of cash during the three months ended March 31, 2001 included funds generated from operations, proceeds from sales of reserves and related assets and proceeds from sales of treasury stock. Primary cash outflows included funds used in operations, exploration and development expenditures, repayments of debt, dividends and common stock repurchases. Net operating cash flows of $479 million for the first three months of 2001 increased approximately $304 million as compared to the first three months of 2000 primarily reflecting higher operating revenues, partially offset by higher cash operating expenses. Net investing cash outflows of approximately $202 million for the first three months of 2001 increased by $120 million versus the comparable prior year period due primarily to higher exploration and development expenditures and lower proceeds from sales of reserves and related assets. Changes in Components of Working Capital Associated with Investing Activities included changes in accounts payable associated with the accrual of exploration and development expenditures and changes in inventories which represent materials and equipment used in drilling and related activities. Exploration and development expenditures for the first three months of 2001 and 2000 are as follows (in millions): ----------------------------------------------------------- 2001 2000 ----------------------------------------------------------- United States $173 $ 74 Canada 12 11 ---- ---- North America 185 85 Trinidad 14 9 Other 6 1 ---- ---- TOTAL $205 $ 95 ==== ==== ----------------------------------------------------------- Exploration and development expenditures of $205 million for the first three months of 2001 were $110 million higher than the prior year period due primarily to increased development and exploratory activities. The level of exploration and development expenditures will vary in future periods depending on energy market conditions and other related economic factors. EOG has significant flexibility with respect to financing alternatives and the ability to adjust its exploration and development expenditure budget as circumstances warrant. There are no material continuing commitments associated with expenditure plans. Cash used by financing activities was $266 million for the first three months of 2001 compared to $84 million for the comparable prior year period. Financing activities for 2001 included repayment of debt of $214 million, repurchases of EOG's common stock of $56 million, proceeds from sales of treasury stock of $10 million and cash dividend payment of $7 million. On February 13, 2001, EOG announced a 14% increase in the annual dividend rate from $.14 per share to $.16 per share beginning with dividends payable after April 19, 2001. Based upon existing economic and market conditions, management believes net operating cash flow and available financing alternatives will be sufficient to fund net investing and other cash requirements of EOG for the foreseeable future. At March 31, 2001, EOG had outstanding swap contracts covering notional volumes of approximately 1.0 million barrels of crude oil and condensate for the period April 2001 to December 2001 at an average price of $26.89 per barrel. EOG elected not to designate these crude oil swap contracts as a hedge of its crude oil production, and accordingly, is accounting for these swap contracts under mark-to-market accounting. At March 31, 2001, the fair value of these oil price swap contracts was $0.5 million.
11 PART I. FINANCIAL INFORMATION - (Concluded) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (Concluded) EOG RESOURCES, INC. At March 31, 2001, EOG also had outstanding swap contracts covering notional volumes of 100,000 million British thermal units of natural gas per day ("MMBtu/d") for the months of April and May 2001 at an average price of $5.16 per MMBtu. EOG is accounting for these swap contracts under mark-to-market accounting. At March 31, 2001, the fair value of these natural gas price swap contracts was negative $0.4 million. During the period of April 30, 2001 to May 2, 2001, EOG entered into price swap agreements covering notional volumes of 200,000 MMBtu/d for the month of June 2001 at an average price of $4.61 per MMBtu. EOG will account for these swap contracts under mark-to-market accounting. During the period of April 30, 2001 to May 2, 2001, EOG also entered into price collars that set a floor price of $4.40 per MMBtu and ceiling prices that average $6.15 per MMBtu covering notional volumes of 200,000 MMBtu/d for the period July 2001 to November 2001 at an average premium of $0.15 per MMBtu. EOG will account for these swap contracts under mark-to-market accounting. Information Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts, including, among others, statements regarding EOG's future financial position, business strategy, budgets, reserve information, projected levels of production, projected costs and plans and objectives of management for future operations, are forward-looking statements. EOG typically uses words such as "expect," "anticipate," "estimate," "strategy," "intend," "plan," "target" and "believe" or the negative of those terms or other variations of them or by comparable terminology to identify its forward-looking statements. In particular, statements, express or implied, concerning future operating results or the ability to increase reserves or to generate income or cash flows are forward- looking statements. Forward-looking statements are not guarantees of performance. Although EOG believes its expectations reflected in forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations will be achieved. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include, among others: timing and extent of changes in commodity prices for crude oil, natural gas and related products and interest rates; extent of EOG's success in discovering, developing, marketing and producing reserves and in acquiring oil and gas properties; political developments around the world; and financial market conditions. In light of these risks, uncertainties and assumptions, the events anticipated by EOG's forward-looking statements might not occur. EOG undertakes no obligations to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
12 PART II. OTHER INFORMATION EOG RESOURCES, INC. ITEM 1. Legal Proceedings See Part 1, Item 1, Note 5 to Consolidated Financial Statements, which is incorporated herein by reference. ITEM 5. Other Information On May 8, 2001, the Board of Directors further amended the By-laws of EOG to (i) delete the requirement that the annual meeting of shareholders occur within 13 months of the prior annual meeting, (ii) provide that directors be elected by a majority of the votes of the shares of EOG present in person or represented by proxy at a shareholders meeting and entitled to vote on the election of directors, (iii) require that at least three-fifths of the members of the Board of Directors be independent directors, as that term is defined in the amendments to the By-laws, (iv) provide that a majority of the total number of directors, at least half of whom are independent directors, shall constitute a quorum for the transaction of business of the Board of Directors, and (v) increase the mandatory retirement age for incumbent directors serving EOG as of September 7, 1999, to 76 years of age. The foregoing description of the amendments to the By-laws does not purport to be complete and is qualified in its entirety by reference to the By-laws, as amended and restated effective as of May 8, 2001, which is attached as an exhibit hereto and incorporated herein by reference. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 3.1 - By-Laws of EOG Resources, Inc., as amended and restated effective as of May 8, 2001. Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends (b) Reports on Form 8-K Current Report on Form 8-K filed on February 7, 2001, to provide estimate for the first quarter and full year 2001 in Item 9 - Regulation FD Disclosure. Current Report on Form 8-K filed on February 23, 2001, to report certain crude oil and natural gas price swap contracts and natural gas physical contracts in Item 5 - Other Events. Current Report on Form 8-K filed on February 27, 2001, to present management's discussion and analysis of financial condition and results of operations for 2000, financial statements for 2000, and related exhibits in Item 7 - Financial Statements and Exhibits.
13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EOG RESOURCES, INC. (Registrant) Date: May 8, 2001 By /S/ T. K. DRIGGERS ----------------------------- T. K. Driggers Vice President, Accounting and Land Administration (Principal Accounting Officer)
14 <TABLE> Exhibit 12 EOG RESOURCES, INC. Computation of Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Dividends (In Thousands) (Unaudited) Year Ended December 31, Three Months Ended -------------------------------------------------- March 31, 2001 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> <C> EARNINGS AVAILABLE FOR FIXED CHARGES: Net Income $215,247 $396,931 $569,094 $ 56,171 $121,970 $140,008 Less: Capitalized Interest Expense (2,047) (6,708) (10,594) (12,711) (13,706) (9,136) Add: Fixed Charges 15,336 67,714 72,413 61,290 41,423 21,997 Income Tax Provision 124,849 236,626 (1,382) 4,111 41,500 50,954 -------- -------- -------- -------- -------- -------- EARNINGS AVAILABLE $353,385 $694,563 $629,531 $108,861 $191,187 $203,823 ======== ======== ======== ======== ======== ======== FIXED CHARGES: Interest Expense $ 13,289 $ 61,006 $ 61,819 $ 48,463 $ 27,369 $ 12,370 Capitalized Interest 2,047 6,708 10,594 12,711 13,706 9,136 Rental Expense Representative of Interest Factor - - - 116 348 491 -------- -------- -------- -------- -------- -------- TOTAL FIXED CHARGES 15,336 67,714 72,413 61,290 41,423 21,997 Preferred Dividends on a Pre-tax Basis 4,299 17,602 660 - - - -------- -------- -------- -------- -------- -------- TOTAL FIXED CHARGES AND PREFERRED DIVIDENDS $ 19,635 $ 85,316 $ 73,073 $ 61,290 $ 41,423 $ 21,997 ======== ======== ======== ======== ======== ======== RATIO OF EARNINGS TO FIXED CHARGES 23.04 10.26 8.69 1.78 4.62 9.27 RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS 18.00 8.14 8.62 1.78 4.62 9.27 </TABLE>