EOG Resources, Inc. (EOG) today reported first quarter 2022 results. OG 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.
Key Financial Results
In millions of USD, except per-share and ratio data
| 1Q 2022 | 4Q 2021 | 1Q 2021 | |||||
| GAAP | Total Revenue | 3,983 | 6,044 | 3,694 | |||
| Net Income | 390 | 1,985 | 677 | ||||
| Net Income Per Share | 0.67 | 3.39 | 1.16 | ||||
| Net Cash Provided by Operating Activities | 828 | 3,166 | 1,870 | ||||
| Total Expenditures | 1,144 | 1,137 | 1,067 | ||||
| Current and Long-Term Debt | 5,099 | 5,109 | 5,133 | ||||
| Cash and Cash Equivalents | 4,009 | 5,209 | 3,388 | ||||
| Debt-to-Total Capitalization | 19.1% | 18.7% | 19.8% | ||||
| Non- GAAP | Adjusted Net Income | 2,346 | 1,806 | 946 | |||
| Adjusted Net Income Per Share | 4.00 | 3.09 | 1.62 | ||||
| CFO before Changes in Working Capital | 3,372 | 3,069 | 1,982 | ||||
| Capital Expenditures | 1,009 | 1,015 | 912 | ||||
| Free Cash Flow | 2,363 | 2,054 | 1,070 | ||||
| Net Debt | 1,090 | (100) | 1,745 | ||||
| Net Debt-to-Total Capitalization | 4.8% | (0.5)% | 7.8% |
First Quarter 2022 Highlights
- Announced guidance to return minimum 60% of free cash flow to shareholders each year
- Declared special dividend of $1.80 per share and regular dividend of $0.75 per share
- Earned adjusted net income of $2.3 billion, or $4.00 per share
- Generated $2.4 billion of free cash flow
- Oil, NGL and natural gas production above guidance midpoints
- Capital expenditures near low end of guidance range
- Total per-unit cash operating costs below guidance midpoint
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First Quarter 2022 Highlights
From Ezra Yacob, Chief Executive Officer
“EOG is off to a great start in 2022. We extended our track record of reliable execution with strong first quarter results. Production volumes, capital expenditures and overall operating costs were each better than expected. Despite challenges from rising inflation and supply chain constraints since we announced our 2022 plan at the start of the year, we remain well positioned to deliver within our production and capital expenditure targets. Consistent with the EOG culture, our employees continue to find new innovations and efficiencies to meet our goals for the year.
“Along with strong operating execution, EOG continues to deliver on our long-term free cash flow priorities. In addition to the $0.75 per share regular dividend, we declared a $1.80 per share special dividend. We also initiated new cash return guidance to provide greater transparency to capital allocation, committing to return at least 60 percent of free cash flow to shareholders each year. Our financial strategy aims to create long-term shareholder value and our free cash flow priorities and cash return guidance remain consistent with this goal.
“Our 2022 game plan is on track, guided by our long-term strategy focused on returns. EOG’s competitive advantage includes a diverse portfolio of plays across multiple basins, powered by our high-performing people and unique culture. Our pristine balance sheet and commitment to low-cost exploration continue to serve us well. We are well positioned to be among the lowest cost, highest return, lowest emissions producers, playing a significant role in the long-term future of energy.”
First Quarter 2022 Financial Performance
Adjusted Earnings per Share 1Q 2022 vs 4Q 2021
Prices and Hedges
Crude oil prices increased significantly in 1Q compared with 4Q, partially offset by declines in natural gas and NGL prices. In addition, cash paid for hedge settlements in 1Q increased by $174 million compared with 4Q.
Volumes
Total company crude oil production in 1Q of 450,100 Bopd was above the midpoint of the guidance range and in-line with 4Q. NGL production was above the midpoint of the guidance range and increased 21% compared with 4Q due to increased extraction of ethane. Natural gas production declined 5% compared with 4Q, also related to extraction of ethane. Total company equivalent daily volumes increased 2% compared with 4Q.
Per-Unit Costs
Lower impairment and DD&A costs were the largest contributors to the overall reduction in per-unit costs in 1Q compared with 4Q. Compared with 4Q, per-unit cash operating costs decreased $0.32 per BOE due to lower G&A, G&P and LOE costs.
Change in Cash 1Q 2022 vs 4Q 2021
Free Cash Flow
EOG generated cash flow from operations before changes in working capital of $3.4 billion in 1Q. The company incurred $1.0 billion of cash capital expenditures, resulting in $2.4 billion of free cash flow.
Working Capital
Changes in working capital in 1Q represented a use of cash of $2.6 billion. Most of the change is due to an increase in collateral EOG has posted with counterparties to financial commodity derivative contracts that are in a net liability position.
First Quarter 2022 Operating Performance
Lease and Well
Per-unit LOE costs declined $0.09 in 1Q compared with 4Q but were $0.10 above the 1Q guidance midpoint. Fuel and power costs increased more than forecast during 1Q. Workover and labor costs declined in 1Q compared with 4Q, but the reduction was less than forecast.
Depreciation, Depletion and Amortization
Per-unit DD&A costs in 1Q were lower than the guidance midpoint and declined 7% compared with 4Q due to positive price-related reserve revisions and the addition of new reserves at lower finding costs.
Transportation, Gathering and Processing
Per-unit transportation and G&P costs in 1Q were in-line with 4Q and the guidance midpoints.
General and Administrative
Per-unit G&A costs declined 11% compared with 4Q and were below the guidance midpoint due to lower employee-related costs.
Free Cash Flow Allocation Actions
Regular Dividend and Special Dividend
The Board of Directors today declared a regular dividend of $0.75 per share on EOG’s common stock. The regular dividend will be payable July 29, 2022, to stockholders of record as of July 15, 2022. The indicated annual rate is $3.00 per share. The Board of Directors today also declared a special dividend of $1.80 per share on EOG’s common stock. The special dividend will be payable June 30, 2022, to stockholders of record as of June 15, 2022.
Cash Return Guidance
EOG announced its commitment to return a minimum of 60% of free cash flow to shareholders each year. This additional transparency complements the company’s long-standing free cash flow priorities. It also reflects EOG’s determination to continue to deliver on all its priorities, including returning additional cash to shareholders through special dividends or opportunistic share repurchases. The highest priority remains paying a sustainable and growing regular dividend. The $0.75 per share regular dividend declared today represents a $3.00 per share indicated annual rate. This is an 86% increase from the $1.61 per share regular dividends paid in 2021. EOG today also declared a special dividend of $1.80 per share. Combined with the $1.00 per share special dividend declared in February, EOG has committed to return $1.6 billion to shareholders through special dividends to-date in 2022.
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