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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
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 jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
333 Clay Street, Suite 4200, Houston, Texas 77002-7361
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: 713-651-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.01 par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None.
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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K .
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Act). Yes x No
Aggregate market value of the voting stock held by nonaffiliates
of the registrant, based on the closing sale price in the daily
composite list for transactions on the New York Stock Exchange on June
28, 2002 was $4,611,553,826. As of March 10, 2003, there were
114,940,924 shares of the registrant's Common Stock, $.01 par value,
outstanding.
Documents incorporated by reference. Portions of the following
documents are incorporated by reference into the indicated parts of
this report: Current Report on Form 8-K filed February 20, 2003 -
Part I, II and IV; and Proxy Statement for the May 6, 2003 Annual
Meeting of Shareholders to be filed within 120 days after December 31,
2002 ("Proxy Statement") - Part III.
TABLE OF CONTENTS
Page
PART I
Item 1. Business 1
General 1
Business Segments 1
Exploration and Production 1
Marketing 4
Wellhead Volumes and Prices, and Lease and
Well Expenses 5
Competition 6
Regulation 6
Enron Corp. Bankruptcy 8
Other Matters 9
Current Executive Officers of the Registrant 11
Item 2. Properties
Oil and Gas Exploration and Production
Properties and Reserves 12
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 15
Item 6. Selected Financial Data 16
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 17
Item 8. Financial Statements and Supplementary Data 17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 17
PART III
Item 10. Directors and Executive Officers of the Registrant 18
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters 18
Item 13. Certain Relationships and Related Transactions 19
Item 14. Controls and Procedures 19
PART IV
Item 15. Financial Statements and Financial Statement Schedule,
Exhibits and Reports on Form 8-K 19
SIGNATURES
CERTIFICATIONS
PART I
ITEM 1. Business
General
EOG Resources, Inc., a Delaware corporation organized in
1985 ("EOG"), together with its subsidiaries, explores for,
develops, produces and markets natural gas and crude oil
primarily in major producing basins in the United States, as well
as in Canada and Trinidad and, to a lesser extent, selected other
international areas. EOG's principal producing areas are further
described under "Exploration and Production" below. EOG's
website address is http://www.eogresources.com. EOG's Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and all amendments to those reports are made
available, free of charge, through its website as soon as
reasonably practicable after such reports have been filed with or
furnished to the Securities and Exchange Commission.
At December 31, 2002, EOG's estimated net proved natural gas
reserves were 4,091 billion cubic feet ("Bcf") and estimated net
proved crude oil, condensate and natural gas liquids reserves
were 85 million barrels ("MMBbl") (see "Supplemental Information
to Consolidated Financial Statements" on page 37 of EOG's Current
Report on Form 8-K filed with the Securities and Exchange
Commission on February 20, 2003, which included financial
statements of EOG for the fiscal year ended December 31, 2002
(the "Form 8-K filed on February 20, 2003")). At such date,
approximately 49% of EOG's reserves (on a natural gas equivalent
basis) was located in the United States, 19% in Canada and 32%
in Trinidad. As of December 31, 2002, EOG employed approximately
1,000 persons, including foreign national employees.
EOG's business strategy is to maximize the rate of return on
investment of capital by controlling all operating and capital
costs. This strategy is intended to enhance the generation of
cash flow and earnings from each unit of production on a cost-
effective basis. EOG focuses its drilling activity toward
natural gas deliverability in addition to natural gas reserve
replacement and to a lesser extent crude oil exploitation and
exploration. EOG focuses on the cost-effective utilization of
advances in technology associated with the gathering, processing
and interpretation of three-dimensional seismic data, the
development of reservoir simulation models, the use of new and/or
improved drill bits, mud motors and mud additives, and formation
logging techniques and reservoir fracturing methods. These
advanced technologies are used, as appropriate, throughout EOG to
reduce the risks associated with all aspects of oil and gas
reserve exploration, exploitation and development. EOG
implements its strategy by emphasizing the drilling of internally
generated prospects in order to find and develop low cost
reserves. EOG also makes selected tactical acquisitions that
result in additional economies of scale or land positions with
significant additional prospects. Achieving and maintaining the
lowest possible operating cost structure that is consistent with
prudent and safe operations are also important goals in the
implementation of EOG's strategy.
With respect to information on EOG's working interest in
wells or acreage, "net" oil and gas wells or acreage are
determined by multiplying "gross" oil and gas wells or acreage by
EOG's working interest in the wells or acreage. Unless otherwise
defined, all references to wells are gross.
Business Segments
EOG's operations are all natural gas and crude oil
exploration and production related.
Exploration and Production
North American Operations
EOG's North American operations are organized into eight
operating divisions, each focusing on several basins, utilizing
personnel who have developed experience and expertise unique to
the geology of the region, thereby leveraging EOG's knowledge and
cost structure into enhanced returns on invested capital.
At December 31, 2002, 84% of EOG's proved United States
reserves (on a natural gas equivalent basis) was natural gas and
16% was crude oil, condensate and natural gas liquids. A
substantial portion of EOG's United States natural gas reserves
are in long-lived fields with well-established production
histories. EOG believes that opportunities exist to increase
production in many of these fields through continued development
and application of new technology. EOG will also continue an
active exploration program, designed to extend existing fields
and add new trends to our broad portfolio of North American
plays. The following is a summary of significant developments
during 2002 and certain drilling plans for 2003 for EOG's North
American operating divisions.
Midland, Texas Division. The Division operations are
primarily focused in the Delaware, Val Verde and Midland Basin
areas of West Texas, and Southeast New Mexico. During 2002, the
Division continued to focus on improving drilling and exploration
techniques in the Devonian Horizontal Trend with the successful
implementation of dual lateral completion technology, which has
lowered finding costs and improved rates of return for the play.
The Division also introduced water-fracturing technology to the
Devonian play with encouraging results. During 2002, the
Division drilled 65 wells and net average daily production was 94
million cubic feet ("MMcf") per day of natural gas and 6.5
thousand barrels ("MBbl") per day of crude oil, condensate and
natural gas liquids. The Midland Division plans an aggressive
drilling program focused in the Devonian and Permo-Penn Carbonate
Trends of West Texas, the Atoka/Morrow Trends in Southeast New
Mexico, and in the Barnett Shale Trend of the Ft. Worth Basin.
The Division will also continue to develop secondary recovery
projects to increase production from existing fields. EOG has
developed a wide range of new growth opportunities in the Permian
Basin to ensure continued growth.
Denver, Colorado Division. Key producing and exploration
areas continue to be in the traditional core areas of Big Piney -
LaBarge Platform; Vernal - Uintah Basin / Chapita / Natural
Buttes; and Southwest Wyoming - Washakie Basin. During 2002, the
Division continued development of these core areas and further
expanded the 2001 Uintah Basin exploration successes, drilling
seven delineation wells. The Division drilled or participated in
76 development wells and eight wildcats during 2002. The
activity level of 2002 was moderated from 2001, primarily due to
fiscal restraint brought on by lower natural gas prices
throughout the Rockies. Net production for the Division in 2002
averaged 121 MMcf per day of natural gas and 6.6 MBbl per day of
crude oil, condensate and natural gas liquids. EOG expects that
drilling will increase in Big Piney, Wyoming and Vernal, Utah
during 2003.
Oklahoma City/Mid-Continent Division. The Mid-Continent
Division had average net production during 2002 of approximately
71 MMcf per day of natural gas and 2.1 MBbl of crude oil and
condensate. In the fourth quarter 2002, net average production
of natural gas increased 19% to 81 MMcf per day in 2002 from 68
MMcf per day in 2001, in addition to an increase of crude oil and
condensate production to 1.9 MBbl in the fourth quarter 2002
compared to 1.1 MBbl in the same period for 2001. The Division's
production activities span 48 counties in four states with the
volume increase resulting largely from the continued success in
the Hugoton-Deep Trend drilling in Texas County, Oklahoma. The
2002 division drilling program included 128 wells in three states
which resulted in 189% reserve replacement. Most notable for
2002, were seven wells drilled in the Hugoton-Deep, Marmaton play
that produced 3 billion cubic feet equivalent ("Bcfe") in the
last six months of 2002. In addition, the Division's Texas
County War Party Waterflood produced 670 MBbl of crude oil from
the Cherokee formation and the project paid out in less than ten
months. The Division had numerous stratigraphic discoveries in
other plays throughout the basin and expects to drill a slightly
expanded program in 2003.
Tyler, Texas Division. Key areas of production for the
Division are the Sabine Uplift Region, Upper Texas Coast and
Mississippi Salt Basin. During 2002, the Division drilled or
participated in 55 wells. Net production for the Division
averaged approximately 106 MMcf per day of natural gas and 3.9
MBbl per day of crude oil, condensate and natural gas liquids in
2002. The Division had continued success in the Mississippi
Salt Basin, drilling for the shallow Eutaw and Selma Chalk and
the deep Hosston and Sligo Formations. EOG expects drilling in
these areas to continue through 2003 and expects to have an
active program in the East Texas Sabine Uplift Region.
Corpus Christi, Texas Division. The Corpus Christi Division
had an active 2002, drilling 56 wells. During 2002, net
production for the Division averaged 160 MMcf per day of natural
gas, an increase of approximately 7% over 2001. The Division had
reserve replacement through drilling of 135% and for the fifth
year in a row the reserves per well drilled have increased. The
principal areas of activity are in the Frio Trend in Matagorda,
Nueces and San Patricio Counties, the Wilcox Trend in Duval
County, and the Lobo/Roleta Trend in Webb and Zapata Counties.
EOG expects that drilling will continue to be strong through 2003
in Nueces, San Patricio, Duval, Webb and Zapata Counties.
Pittsburgh, Pennsylvania Division. In 2002, the Division
drilled 200 shallow wells. Net average production increased from
13 MMcf per day of natural gas in 2001 to 20 MMcf per day of
natural gas in 2002. The Division expanded its acreage position
by over 60,000 net acres in key exploratory and development
plays, and plans to drill in excess of 200 wells in 2003. While
most of the division drilling will concentrate on development
wells, several higher impact exploratory and unconventional
reservoir wells will be drilled in 2003.
Houston, Texas/Offshore Division. The Offshore Division
focuses on the Gulf of Mexico in Texas and Louisiana. Two
fields, Eugene Island 135 and Matagorda Island 623, account for
over half of the Division's production. During 2002, total net
production averaged approximately 63 MMcf per day of natural gas.
Throughout 2002, the Division drilled or participated in eight
wells, including a significant exploration discovery at South
Timbalier 156. EOG operates and has a 50% working interest in
this estimated 50 Bcfe discovery which is expected to commence
sales in the third quarter of 2003. Another discovery on High
Island 206 came on line in February 2003. Two successful
development wells were drilled on the Matagorda Island 623 block.
Deep water activity included the assignment, with regulatory
permitting contingencies, of one half the working interest held
in the Tuscany prospect, acquired in the 2001 Eastern Gulf Lease
Sale, to an industry partner in consideration for their agreement
to bear 100% of EOG's cost for drilling the initial exploratory
well expected to be drilled in 2003. EOG retains a 37.5% working
interest in the prospect.
Calgary, Canada Division. The Division conducts operations
through EOG's Canadian subsidiary, EOG Resources Canada Inc.,
from offices in Calgary, Alberta. During 2002, the Division was
again successful with its strategy of drilling a large number of
shallow gas wells in Western Canada, which contributed to a
record 1,089 wells drilled in 2002, and increased its reserve
base and production potential. Strategic property and small
corporate acquisitions were also utilized to expand the shallow
gas platform area in Southwest Saskatchewan and Southeast
Alberta. Division net production during 2002 averaged
approximately 154 MMcf per day of natural gas, as compared to 126
MMcf per day of natural gas during 2001. New wells coming on
stream late in the year increased December 2002 net average
deliverability to 185 MMcfe per day. Key producing areas in the
Western Canadian Sedimentary Basin were Sandhills, Blackfoot, SE
Alberta Shallow and Grande Prairie - Wapiti.
Outside North America Operations
EOG has producing operations offshore Trinidad and is
evaluating exploration, exploitation and development
opportunities in selected other international areas. The
Trinidad operations are conducted through its Trinidadian
subsidiary, EOG Resources Trinidad Limited ("EOGRT"), from
its Port of Spain, Trinidad, office.
Trinidad. In November 1992, EOG, through its
subsidiary, EOGRT, was awarded a 95% working interest
concession in the South East Coast Consortium ("SECC") Block
offshore Trinidad, encompassing three undeveloped fields -
the Kiskadee, Ibis and Oilbird fields, previously held by
three government-owned energy companies. The Kiskadee and
Ibis fields have since been developed. The Oilbird field
was successfully appraised by the drilling of two wells in
the fourth quarter of 2001 and will be developed over the
next few years. The Oilbird 2 well encountered 380 feet of
net pay and the Oilbird 3 well encountered 290 feet of net
pay. A discovery was made with the Parula #1 wildcat well
in 2002 which encountered 370 feet of net pay. This field
is scheduled to be developed and brought on stream during
2004. Existing surplus processing and transportation
capacity at the Pelican field facilities owned and operated
by Trinidad and Tobago government-owned companies is being
used to process and transport existing production. Natural
gas is being sold into the local market under a take-or-pay
agreement with the National Gas Company of Trinidad and
Tobago. In 2002, deliveries net to EOG averaged 135 MMcf
per day of natural gas and 2.4 MBbl per day of crude oil and
condensate. In August 2002, EOG and its co-owners were
granted a 25-year extension of the SECC Block through
December 2029.
In July 1996, EOG, through its subsidiary, EOG Resources
Trinidad-U(a) Block Ltd., signed a production sharing
contract with the Government of Trinidad and Tobago for the
Modified U(a) Block where EOG holds a 100% working interest.
EOG drilled its first commitment well, OA-1, on this block
in 1998. This well encountered over 500 feet of net pay. In
the first quarter of 2001, EOG drilled the OA-2 well which
encountered 305 feet of net pay and increased gross proved
reserves to a field total of 870 Bcfe. In September 2001,
EOG set a platform and jacket and first production began in
the third quarter of 2002. This field supplies
approximately 50 MMcf per day, net to EOG, under a 15-year
natural gas supply contract to a 1,850 metric ton per day
anhydrous ammonia plant which is owned by Caribbean Nitrogen
Company Limited ("CNCL"), a Trinidadian company in which EOG
has an approximate 16% equity interest. The construction of the
plant was completed during the second quarter of 2002.
In April 2002, EOG, through its subsidiary, EOG
Resources Trinidad LRL Unlimited, signed a production
sharing contract with the Government of Trinidad and Tobago
for the Lower Reverse "L" Block which is adjacent to the
SECC Block. EOG holds a 100% working interest in the Lower
Reverse "L" Block.
In October 2002, EOG, through its subsidiary, EOG
Resources Trinidad-U(b) Block Unlimited, signed a production
sharing contract with the Government of Trinidad and Tobago
for the Modified U(b) Block which is also adjacent to the
SECC Block. EOG holds a 55% working interest in and operates
the Modified U(b) Block and Primera Oil & Gas Ltd, a Trinidadian
company, holds the remaining 45% interest.
EOGRT owns an approximate 16% equity interest in a
Trinidadian company named CNCL which has constructed an
ammonia plant in Pt. Lisas, Trinidad. The other
shareholders in CNCL are Ferrostaal AG and subsidiaries of
Duke Energy, Halliburton and CL Financial Ltd. At December
31, 2002, investment in CNCL was approximately $14 million.
CNCL commenced production in June 2002 and currently
produces approximately 1,850 metric tons of ammonia daily.
At December 31, 2002, CNCL had a long-term debt balance of
approximately $219 million, which is non-recourse to CNCL's
shareholders. As part of the financing for CNCL, the
shareholders agreed to enter into a post-completion
deficiency loan agreement with CNCL to fund the costs of
operation, payment of principal and interest to the
principal creditor and other cash deficiencies of CNCL up to
$30 million, up to approximately $5 million of which is to be
provided by EOGRT. The Shareholders' Agreement requires the
consent of the holders of 90% or more of the shares to take
certain material actions. Accordingly, given its current
level of equity ownership, EOGRT is able to exercise
significant influence over the operating and financial
policies of CNCL and therefore, it accounts for the
investment using the equity method. During 2002, EOG
recognized equity income of $0.3 million.
Secondly, EOG, through its subsidiary, EOG Resources
Nitro2000 Limited ("EOGNitro2000"), owns an approximate 31%
equity interest in a Trinidadian company named Nitrogen
(2000) Unlimited ("N2000"). The other shareholders in N2000
are subsidiaries of Ferrostaal AG, Halliburton and CL
Financial Ltd. At December 31, 2002, EOG's investment in
N2000 was approximately $18 million. N2000 is constructing
an ammonia plant in Trinidad, at an expected cost of
approximately $320 million and is expected to commence
production in 2005. At December 31, 2002, N2000 had a long-
term debt balance of approximately $7 million, the repayment
of which has been guaranteed by Ferrostaal AG. EOG has
agreed to reimburse Ferrostaal AG for approximately $400,000
in the event that Ferrostaal AG is required to pay the debt
balance. Upon receipt of an amendment to N2000's
certificate of environmental clearance and confirmation from
the lender that it is satisfied with the amendment, this
long-term debt will become non-recourse to all of N2000's
shareholders. N2000 has received the amendment and is
awaiting confirmation from the lender that it is satisfied
with the amendment. As part of the loan agreement for the
N2000 financing, affiliates of the shareholders have entered
into a pre-completion deficiency loan agreement with N2000
to fund plant cost overruns up to $15 million, up to
approximately $5 million of which is to be provided by the
immediate parent company of EOGNitro2000. Affiliates of the
shareholders have also entered into a post-completion deficiency
loan agreement with N2000 to fund the costs of operation,
payment of principal and interest to the principal creditor
and other cash deficiencies of N2000 up to $30 million, up to
approximately $9 million of which is to be provided by the immediate
parent company of EOGNitro2000. The Shareholders' Agreement
requires the consent of the holders of 90% or more of the
shares to take certain material actions. Accordingly, given
its current level of equity ownership, EOG, through
EOGNitro2000, is able to exercise significant influence over
the operating and financial policies of N2000 and therefore,
it accounts for the investment using the equity method.
In November 2002, the EOG subsidiaries along with the
Ferrostaal AG affiliates entered into share purchase agreements
for the sale of a portion of their shareholdings in CNCL and
N2000 with a third party energy company. EOG expects the
EOG subsidiaries to close these transactions during the
first quarter of 2003 once certain conditions precedent have
occurred. The sale will leave the EOG subsidiaries with
more than a 10% equity interest in each of CNCL and N2000.
EOG does not expect these transactions to result in any
gains or losses.
At December 31, 2002, EOG held approximately 194,500
net undeveloped acres in Trinidad.
Other International. EOG continues to evaluate other
selected conventional natural gas and crude oil
opportunities outside North America primarily by pursuing
exploitation opportunities in countries where indigenous
natural gas and crude oil reserves have been identified,
including the United Kingdom.
Marketing
Wellhead Marketing. EOG's North America wellhead natural
gas production is currently being sold on the spot market and
under long-term natural gas contracts at market-responsive
prices. In many instances, the long-term contract prices closely
approximate the prices received for natural gas being sold on the
spot market. Wellhead natural gas volumes from Trinidad are sold
under either a contract with a fixed price schedule with annual
escalations, or a contract that is price dependent on Caribbean
ammonia index prices.
Substantially all of EOG's wellhead crude oil and condensate
is sold under various terms and arrangements at market-responsive
prices.
During 2002, sales to three subsidiaries of a major utility
company accounted for 14% of EOG's oil and gas revenues. No
other individual purchaser accounted for 10% or more of EOG's oil
and gas revenues for the same period. EOG does not believe that
the loss of any single purchaser will have a material adverse
effect on the financial condition or results of operations of
EOG.
Other Marketing. EOG Resources Marketing, Inc. ("EOGM"), a
wholly owned subsidiary of EOG, is a marketing company engaging
in various marketing activities. EOGM enters into natural gas
sales transactions with various purchasers under a variety of
terms and conditions and supplies these sales by purchasing
natural gas from various sources, including third-party
producers, marketing companies and EOG's own production. In
addition, EOGM has purchased and constructed several small gas
gathering systems in order to facilitate its entry into the gas
gathering business on a limited basis.
Wellhead Volumes and Prices, and Lease and Well Expenses
The following table sets forth certain information regarding
EOG's wellhead volumes of and average prices for natural gas per
thousand cubic feet ("Mcf"), crude oil and condensate, and
natural gas liquids per barrel ("Bbl"), and average lease and
well expenses per thousand cubic feet equivalent ("Mcfe"- natural
gas equivalents are determined using the ratio of 6.0 Mcf of
natural gas to 1.0 Bbl of crude oil, condensate or natural gas
liquids) delivered during each of the three years in the period
ended December 31, 2002.
Year Ended December 31,
2002 2001 2000
Natural Gas Volumes (MMcf per day)
United States 635 680 654
Canada 154 126 129
Trinidad 135 115 125
Total 924 921 908
Crude Oil and Condensate Volumes (MBbl per day)
United States 18.8 22.0 22.8
Canada 2.1 1.7 2.1
Trinidad 2.4 2.1 2.6
Total 23.3 25.8 27.5
Natural Gas Liquids Volumes (MBbl per day)
United States 2.9 3.5 4.0
Canada 0.8 0.5 0.7
Total 3.7 4.0 4.7
Average Natural Gas Prices ($/Mcf)
United States $ 2.89 $ 4.26 $ 3.96
Canada 2.67 3.78 3.33
Trinidad 1.20 1.22 1.17
Composite 2.60 3.81 3.49
Average Crude Oil and Condensate Prices ($/Bbl)
United States $24.79 $25.06 $29.68
Canada 23.62 22.70 27.76
Trinidad 23.58 24.14 30.14
Composite 24.56 24.83 29.57
Average Natural Gas Liquids Prices ($/Bbl)
United States $14.76 $17.17 $20.45
Canada 11.17 15.05 16.75
Composite 14.05 16.89 19.87
Lease and Well Expenses ($/Mcfe)
United States $ 0.45 $ 0.45 $ 0.35
Canada 0.72 0.62 0.52
Trinidad 0.17 0.15 0.16
Composite 0.45 0.44 0.35
Competition
EOG actively competes for reserve acquisitions and
exploration/exploitation leases, licenses and concessions,
frequently against companies with substantially larger financial
and other resources. To the extent EOG's exploration budget is
lower than that of certain of its competitors, EOG may be
disadvantaged in effectively competing for certain reserves,
leases, licenses and concessions. Competitive factors include
price, contract terms and quality of service, including pipeline
connection times and distribution efficiencies. In addition, EOG
faces competition from other worldwide energy supplies, such as
natural gas from Canada.
Regulation
United States Regulation of Natural Gas and Crude Oil
Production. Natural gas and crude oil production operations are
subject to various types of regulation, including regulation in
the United States by state and federal agencies.
United States legislation affecting the oil and gas industry
is under constant review for amendment or expansion. Also,
numerous departments and agencies, both federal and state, are
authorized by statute to issue and have issued rules and
regulations which, among other things, require permits for the
drilling of wells, regulate the spacing of wells, prevent the
waste of natural gas and liquid hydrocarbon resources through
proration and restrictions on flaring, require drilling bonds and
regulate environmental and safety matters. The regulatory burden
on the oil and gas industry increases its cost of doing business
and, consequently, affects its profitability.
A substantial portion of EOG's oil and gas leases in the Big
Piney area and in the Gulf of Mexico, as well as some in other
areas, are granted by the federal government and administered by
the Bureau of Land Management (the "BLM") and the Minerals
Management Service (the "MMS"), both federal agencies.
Operations conducted by EOG on federal oil and gas leases must
comply with numerous statutory and regulatory restrictions
concerning the above and other matters. Certain operations must
be conducted pursuant to appropriate permits issued by the BLM
and the MMS.
BLM and MMS leases contain relatively standardized terms
requiring compliance with detailed regulations and, in the case
of offshore leases, orders pursuant to the Outer Continental
Shelf Lands Act (which are subject to change by the MMS). Such
offshore operations are subject to numerous regulatory
requirements, including the need for prior MMS approval for
exploration, development, and production plans, stringent
engineering and construction specifications applicable to
offshore production facilities, regulations restricting the
flaring or venting of production, and regulations governing the
plugging and abandonment of offshore wells and the removal of all
production facilities. Under certain circumstances, the MMS may
require operations on federal leases to be suspended or
terminated. Any such suspension or termination could adversely
affect EOG's interests.
The MMS amended the regulations governing the calculation of
royalties and the valuation of crude oil produced from federal
leases, effective June 1, 2000. The new rules modified the
valuation procedures for both arm's-length and non-arm's-length
crude oil transactions to decrease reliance on oil posted prices
and assign a value to crude oil that, in the opinion of MMS,
better reflects its market value. Two industry trade
associations have sought judicial review of the new rules in
federal district court. EOG cannot predict what effect the
outcome of the litigation will be or what effect, if any, it will
have on EOG's operations.
In March 2000, a federal district court vacated MMS
regulations which sought to clarify the types of costs that are
deductible transportation costs for purposes of royalty valuation
of production sold off the lease. In particular, MMS disallowed
deduction of costs associated with marketer fees, cash out and
other pipeline imbalance penalties, or long-term storage fees.
The United States has appealed the district court ruling. EOG
cannot predict what the outcome of the appeal will be or what
effect, if any, it will have on EOG's operations.
Sales of crude oil, condensate and natural gas liquids by
EOG are made at unregulated market prices.
The transportation and sale for resale of natural gas in
interstate commerce are regulated pursuant to the Natural Gas Act
of 1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the
"NGPA"). These statutes are administered by the Federal Energy
Regulatory Commission (the "FERC"). Effective January 1, 1993,
the Natural Gas Wellhead Decontrol Act of 1989 deregulated
natural gas prices for all "first sales" of natural gas, which
includes all sales by EOG of its own production. All other sales
of natural gas by EOG, such as those of natural gas purchased
from third parties, remain jurisdictional sales subject to a
blanket sales certificate under the NGA, which has flexible terms
and conditions. Consequently, all of EOG's sales of natural gas
currently may be made at market prices, subject to applicable
contract provisions. EOG's jurisdictional sales, however, are
subject to the future possibility of greater federal oversight,
including the possibility that the FERC might prospectively
impose more restrictive conditions on such sales.
Since 1985, the FERC has endeavored to enhance competition
in natural gas markets by making natural gas transportation more
accessible to natural gas buyers and sellers on an open and
nondiscriminatory basis. These efforts culminated in Order No.
636 and various rehearing orders ("Order No. 636"), which
mandated a fundamental restructuring of interstate natural gas
pipeline sales and transportation services, including the
"unbundling" by interstate natural gas pipelines of the sales,
transportation, storage, and other components of their service,
and to separately state the rates for each unbundled service.
Order No. 636 does not directly regulate EOG's activities, but
has an indirect effect because of its broad scope. Order No. 636
has ended interstate pipelines' traditional role as wholesalers
of natural gas, and substantially increased competition in
natural gas markets. In spite of this uncertainty, Order No. 636
may enhance EOG's ability to market and transport its natural gas
production, although it may also subject EOG to more restrictive
pipeline imbalance tolerances and greater penalties for violation
of such tolerances.
EOG owns, directly or indirectly, certain natural gas
pipelines that it believes meet the traditional tests the FERC
has used to establish a pipeline's status as a gatherer not
subject to FERC jurisdiction under the NGA. State regulation of
gathering facilities generally includes various safety,
environmental, and in some circumstances, nondiscriminatory take
requirements, but does not generally entail rate regulation.
Natural gas gathering may receive greater regulatory scrutiny at
both the state and federal levels as a result of pipeline
restructuring under Order No. 636. For example, the Texas
Railroad Commission has approved changes to its regulations
governing transportation and gathering services performed by
intrastate pipelines and gatherers, which prohibit such entities
from unduly discriminating in favor of their affiliates. EOG's
gathering operations could be adversely affected should they be
subject in the future to the application of state or federal
regulation of rates and services.
EOG's natural gas gathering operations also may be or become
subject to safety and operational regulations relating to the
design, installation, testing, construction, operation,
replacement, and management of facilities. Additional rules and
legislation pertaining to these matters are considered or adopted
from time to time. EOG cannot predict what effect, if any, such
legislation might have on its operations, but the industry could
be required to incur additional capital expenditures and
increased costs depending on future legislative and regulatory
changes.
The FERC recently began a broad review of its transportation
regulations, including how they operate in conjunction with state
proposals for retail natural gas marketing restructuring, whether
to eliminate cost-of-service rates for short-term transportation,
whether to allocate all short-term capacity on the basis of
competitive auctions, and whether changes to its long-term
transportation policies may also be appropriate to alleviate a
market bias toward short-term contracts. This review culminated
in part with the FERC's issuance of Order No. 637 on February 9,
2000.
Order No. 637 revises the FERC's current regulatory
framework for purposes of improving the efficiency of the market
and providing captive pipeline customers with the opportunity to
reduce their cost of holding long-term pipeline capacity while
continuing to protect against the exercise of market power.
Order No. 637 revises FERC pricing policy by waiving price
ceilings for short-term released capacity for a two-year period
and permitting pipelines to file for peak/off-peak and term
differentiated rate structures. Order No. 637 does not, however,
require the allocation of all short-term capacity on the basis of
competitive auctions--as had been proposed by the FERC. Order No.
637 adopts changes in regulations relating to scheduling
procedures, capacity segmentation and pipeline penalties to
improve the competitiveness and efficiency of the interstate
pipeline grid. It also narrows pipeline customers' right of
first refusal to remove economic biases in the current rule,
while still protecting captive customers' ability to resubscribe
to long-term capacity. Finally, it improves the FERC's reporting
requirements to provide more transparent pricing information and
permit more effective monitoring of the market. Appeals of Order
No. 637 are pending court review. EOG cannot predict what the
outcome of that review will be or what effect it will have on
EOG's operations.
While Order No. 637, and any subsequent FERC action will
affect EOG only indirectly, the Order and related inquiries are
intended to further enhance competition in natural gas markets,
while maintaining adequate consumer protections.
EOG cannot predict the effect that any of the aforementioned
orders or the challenges to such orders will ultimately have on
EOG's operations. Additional proposals and proceedings that
might affect the natural gas industry are considered from time to
time by Congress, the FERC and the courts. EOG cannot predict
when or whether any such proposals or proceedings may become
effective. It should also be noted that the natural gas industry
historically has been very heavily regulated; therefore, there is
no assurance that the less regulated approach currently being
pursued by the FERC will continue indefinitely.
Environmental Regulation. Various federal, state and local
laws and regulations covering the discharge of materials into the
environment, or otherwise relating to the protection of the
environment, affect EOG's operations and costs as a result of
their effect on natural gas and crude oil exploration,
development and production operations and could cause EOG to
incur remediation or other corrective action costs in connection
with a release of regulated substances, including crude oil, into
the environment. In addition, EOG has acquired certain oil and
gas properties from third parties whose actions with respect to
the management and disposal or release of hydrocarbons or other
wastes were not under EOG's control. Under environmental laws
and regulations, EOG could be required to remove or remediate
wastes disposed of or released by prior owners or operators.
Compliance with such laws and regulations increases EOG's overall
cost of business, but has not had a material adverse effect on
EOG's operations or financial condition. It is not anticipated,
based on current laws and regulations, that EOG will be required
in the near future to expend amounts that are material in
relation to its total exploration and development expenditure
program in order to comply with each environmental law and
regulation, but inasmuch as such laws and regulations are
frequently changed, EOG is unable to predict the ultimate cost of
compliance. EOG also could incur costs related to the clean up
of sites to which it sent regulated substances for disposal and
for damages to natural resources or other claims related to
releases of regulated substances at such sites. In this regard,
EOG has been named as a potentially responsible party in certain
proceedings initiated pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act and may be named as a
potentially responsible party in other similar proceedings in the
future. It is not anticipated that the costs incurred by EOG in
connection with the presently pending proceedings will,
individually or in the aggregate, have a materially adverse
effect on the financial condition or results of operations of
EOG.
Canadian Regulation. In Canada, the petroleum industry is
subject to extensive controls and operates under various
provincial and federal legislation and regulations governing land
tenure, royalties, taxes, production rates, operational
standards, environmental protection, health and safety, exports
and other matters. EOG operates within this regulatory framework
and continues to monitor and evaluate the impact of the
regulatory regime when determining parameters for engaging in oil
and gas activities and investments in Canada. The price of
natural gas and crude oil in Canada has been deregulated and is
determined by market conditions and negotiations between buyers
and sellers in a North American market place. The North American
Free Trade Agreement supports the on-going cross-border
commercial transactions of the natural gas and crude oil
business.
Various matters relating to the transportation and export of
natural gas continue to be subject to regulation by provincial
agencies and federally, by the National Energy Board; however,
the North American Free Trade Agreement may have reduced the risk
of altering existing cross-border commercial transactions through
the assurance of fair implementation of regulatory changes,
minimal disruption of contractual arrangements and the
prohibition of discriminatory order restrictions and export
taxes.
Canadian governmental regulations may have a material effect
on the economic parameters for engaging in oil and gas activities
in Canada and may have a material effect on the advisability of
investments in Canadian oil and gas drilling activities. EOG is
monitoring political, regulatory and economic developments in
Canada.
Other International Regulation. EOG's exploration and
production operations outside North America are subject to
various types of regulations imposed by the respective
governments of the countries in which EOG's operations are
conducted, and may affect EOG's operations and costs within that
country. EOG currently has operations offshore Trinidad.
Enron Corp. Bankruptcy
In December 2001, Enron Corp. and certain of its affiliates,
including Enron North America Corp., filed voluntary petitions
for reorganization under Chapter 11 of the United States
Bankruptcy Code. EOG recorded $19.2 million in charges
associated with the Enron bankruptcies in the fourth quarter of
2001 related to certain contracts with Enron affiliates,
including 2001 and 2002 natural gas and crude oil derivative
contracts. Based on EOG's review of all matters related to Enron
Corp. and its affiliates, EOG believes that Enron Corp.'s Chapter
11 proceedings will not have a material adverse effect on EOG's
financial position.
By an order entered on June 21, 2002, the bankruptcy judge
in the Enron bankruptcy case authorized the sale of 11.5 million
shares of EOG common stock held by an affiliate of Enron. On
November 22, 2002, the entire 11.5 million shares were sold by
the Enron affiliate to an unaffiliated broker. EOG purchased one
million shares of EOG common stock from the broker, and the
remaining 10.5 million shares were sold by the broker to third
parties.
Other Matters
Energy Prices. Since EOG is primarily a natural gas
company, it is more significantly impacted by changes in natural
gas prices than in the prices for crude oil, condensate or
natural gas liquids. Average North America wellhead natural gas
prices have fluctuated, at times rather dramatically, during the
last three years. These fluctuations resulted in an 80% increase
in the average wellhead natural gas price for North America
received by EOG from 1999 to 2000, an increase of 9% from 2000 to
2001, and a decrease of 32% from 2001 to 2002. Wellhead natural
gas volumes from Trinidad are sold under either a contract with a
fixed price schedule with annual escalations, or a contract that
is price dependent on Caribbean ammonia index prices.
Substantially all of EOG's wellhead crude oil and condensate is
sold under various terms and arrangements at market responsive
prices. Crude oil and condensate prices also have fluctuated
during the last three years. Due to the many uncertainties
associated with the world political environment, the
availabilities of other world wide energy supplies and the
relative competitive relationships of the various energy sources
in the view of consumers, EOG is unable to predict what changes
may occur in natural gas, crude oil and condensate, and ammonia
prices in the future.
Risk Management. EOG engages in price risk management
activities from time to time. These activities are intended to
manage EOG's exposure to fluctuations in commodity prices for
natural gas and crude oil. EOG utilizes derivative financial
instruments, primarily price swaps and collars, and fixed price
physical contracts as a means to manage this price risk.
Presented below is a summary of EOG's 2003 natural gas
financial collar contracts and natural gas and crude oil
financial price swap contracts as of March 13, 2003 with prices
expressed in dollars per million British thermal units ($/MMBtu)
and in dollars per barrel ($/Bbl), as applicable, and notional
volumes in million British thermal units per day (MMBtud) and in
barrels per day (Bbld), as applicable. EOG accounts for these
collar and swap contracts using mark-to-market accounting.
Natural Gas Financial Collar Contracts Financial Price Swap Contracts
Floor Price Ceiling Price Natural Gas Crude Oil
Weighted Weighted
Floor Weighted Ceiling Weighted Average Average
Volume Range Average Range Average Volume Price Volume Price
Month (MMBtud) ($/MMBtu) ($/MMBtu) ($/MMBtu) ($/MMBtu) (MMBtud) ($/MMBtu) (Bbld) ($/Bbl)
Jan* 50,000 $3.87 $3.87 $6.09 $6.09 -- -- 2,000 $27.34
Feb* 125,000 3.76 - 4.30 4.04 5.05 - 6.30 5.87 -- -- 2,000 26.91
Mar* 125,000 3.61 - 4.20 3.93 5.00 - 6.20 5.77 100,000 $5.19 4,000 27.96
Apr 125,000 3.59 - 4.02 3.82 4.80 - 6.03 5.33 100,000 4.96 5,000 27.77
May 125,000 3.54 - 3.92 3.74 4.70 - 5.92 5.24 100,000 4.82 5,000 27.04
Jun 125,000 3.56 - 3.89 3.74 4.70 - 5.90 5.25 100,000 4.77 5,000 26.43
Jul 125,000 3.59 - 3.91 3.76 4.73 - 5.91 5.27 100,000 4.77 5,000 25.90
Aug 125,000 3.60 - 3.91 3.76 4.73 - 5.91 5.27 100,000 4.77 5,000 25.49
Sep 125,000 3.60 - 3.89 3.75 4.73 - 5.89 5.26 100,000 4.74 5,000 25.19
Oct 125,000 3.60 - 3.90 3.75 4.73 - 5.90 5.27 100,000 4.74 5,000 24.90
Nov 125,000 3.77 - 4.04 3.90 4.90 - 6.04 5.43 -- -- 5,000 24.70
Dec 125,000 3.92 - 4.18 4.04 5.05 - 6.18 5.57 -- -- 5,000 24.47
*The January and February 2003 portions of these contracts are
closed. March 2003 natural gas financial collar and natural
gas financial price swap contracts are closed.
Tight Gas Sand Tax Credits (Section 29) and Severance Tax
Exemption. United States federal tax law provided a tax credit
of approximately $0.52 per MMBtu of natural gas for production of
certain fuels produced from nonconventional sources (including
natural gas produced from tight formations), subject to a number
of limitations. Fuels qualifying for the credit must be produced
from a well drilled before January 1, 1993, and must have been
sold before January 1, 2003.
In 1999 and 2000, EOG entered into arrangements with a third
party whereby certain Section 29 credits were sold by EOG to the
third party, and payments for such credits have been received on
an as-generated basis. In January 2003, these arrangements were
terminated.
Natural gas production from wells spudded or completed after
May 24, 1989 and before September 1, 1996 in tight formations in
Texas qualifies for a ten-year exemption from severance taxes,
subject to certain limitations, during the period beginning
September 1, 1991 and ending August 31, 2001. In addition,
natural gas production from qualifying wells spudded or completed
after August 31, 1996 and before September 1, 2002 is entitled to
use a reduced severance tax rate for the first 120 consecutive
months. However, the cumulative value of the tax reduction
cannot exceed 50 percent of the drilling and completion costs
incurred on a well by well basis.
Other. All of EOG's natural gas and crude oil activities
are subject to the risks normally incident to the exploration for
and development and production of natural gas and crude oil,
including blowouts, cratering and fires, each of which could
result in damage to life and property. Offshore operations are
subject to usual marine perils, including hurricanes and other
adverse weather conditions. EOG's activities are also subject to
governmental regulations as well as interruption or termination
by governmental authorities based on environmental and other
considerations. In accordance with customary industry practices,
insurance is maintained by EOG against some, but not all, of the
risks. Losses and liabilities arising from such events could
reduce revenues and increase costs to EOG to the extent not
covered by insurance.
EOG's operations outside of North America are subject to
certain risks, including expropriation of assets, risks of
increases in taxes and government royalties, renegotiation of
contracts with foreign governments, political instability,
payment delays, limits on allowable levels of production and
currency exchange and repatriation losses, as well as changes in
laws, regulations and policies governing operations of foreign
companies generally.
Current Executive Officers of the Registrant
The current executive officers of EOG and their names and
ages are as follows:
Name Age Position
Mark G. Papa 56 Chairman of the Board and Chief
Executive Officer; Director
Edmund P. Segner, III 49 President and Chief of Staff; Director
Loren M. Leiker 49 Executive Vice President, Exploration
and Development
Gary L. Thomas 53 Executive Vice President, Operations
Barry Hunsaker, Jr. 52 Senior Vice President and General
Counsel
Timothy K. Driggers 41 Vice President, Accounting and Land
Administration
Mark G. Papa was elected Chairman of the Board and Chief
Executive Officer of EOG in August 1999, President and Chief Executive
Officer and Director in September 1998, President and Chief Operating
Officer in September 1997, President in December 1996 and was
President-North America Operations from February 1994 to September 1998.
Mr. Papa joined Belco Petroleum Corporation, a predecessor of EOG, in 1981.
Edmund P. Segner, III became President and Chief of Staff
and Director of EOG in August 1999. He became Vice Chairman and
Chief of Staff of EOG in September 1997. He was a director of
EOG from January 1997 to October 1997. Mr. Segner is EOG's
principal financial officer.
Loren M. Leiker was elected Executive Vice President,
Exploration in May 1998 and was subsequently named Executive Vice
President, Exploration and Development. He was previously Senior
Vice President, Exploration. Mr. Leiker joined the international
division of EOG in April 1989 as Exploration Manager.
Gary L. Thomas was elected Executive Vice President, North
America Operations in May 1998 and was subsequently named
Executive Vice President, Operations. He was previously Senior
Vice President and General Manager of EOG's Midland Division.
Mr. Thomas joined a predecessor of EOG in July 1978.
Barry Hunsaker, Jr. has been Senior Vice President and
General Counsel since he joined EOG in May 1996.
Timothy K. Driggers was elected Vice President and
Controller of EOG in October 1999 and was subsequently named Vice
President, Accounting and Land Administration. He held
management positions in the Financial Planning and Reporting
Department of EOG from August 1995 to September 1998 and its
former majority shareholder, Enron Corp., from October 1998 through
September 1999. Mr. Driggers is EOG's principal accounting officer.
There are no family relationships among the officers listed,
and there are no arrangements or understandings pursuant to which
any of them were elected as officers. Officers are appointed or
elected annually by the Board of Directors at its first meeting
prior to the Annual Meeting of Shareholders, each to hold office
until the corresponding meeting of the Board in the next year or
until a successor shall have been elected, appointed or shall
have qualified.
ITEM 2. Properties
Oil and Gas Exploration and Production Properties and Reserves
Reserve Information. For estimates of EOG's net proved and
proved developed reserves of natural gas and liquids, including
crude oil, condensate and natural gas liquids, see "Supplemental
Information to Consolidated Financial Statements" in the Form 8-K
filed on February 20, 2003.
There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting future rates of
production and timing of development expenditures, including many
factors beyond the control of the producer. The reserve data set
forth in Supplemental Information to Consolidated Financial
Statements represent only estimates. Reserve engineering is a
subjective process of estimating underground accumulations of
natural gas and liquids, including crude oil, condensate and
natural gas liquids, that cannot be measured in an exact manner.
The accuracy of any reserve estimate is a function of the amount
and quality of available data and of engineering and geological
interpretation and judgment. As a result, estimates of different
engineers normally vary. In addition, results of drilling,
testing and production subsequent to the date of an estimate may
justify revision of such estimate. Accordingly, reserve
estimates are often different from the quantities ultimately
recovered. The meaningfulness of such estimates is highly
dependent upon the accuracy of the assumptions upon which they
were based.
In general, the volume of production from oil and gas
properties owned by EOG declines as reserves are depleted. Except
to the extent EOG acquires additional properties containing
proved reserves or conducts successful exploration, exploitation
and development activities, the proved reserves of EOG will
decline as reserves are produced. Volumes generated from future
activities of EOG are therefore highly dependent upon the level
of success in finding or acquiring additional reserves and the
costs incurred in so doing. EOG's estimates of reserves filed
with other federal agencies agree with the information set forth
in Supplemental Information to Consolidated Financial Statements.
Acreage. The following table summarizes EOG's developed and
undeveloped acreage at December 31, 2002. Excluded is acreage in
which EOG's interest is limited to owned royalty, overriding
royalty and other similar interests.
Developed Undeveloped Total
Gross Net Gross Net Gross Net
United States
Texas 436,193 266,141 801,028 716,586 1,237,221 982,727
Wyoming 167,433 126,583 475,598 336,777 643,031 463,360
Oklahoma 202,357 137,330 187,207 145,580 389,564 282,910
Offshore Gulf of Mexico 222,873 73,677 154,440 78,107 377,313 151,784
New Mexico 106,017 67,300 184,766 121,859 290,783 189,159
Pennsylvania 78,344 66,985 109,570 100,887 187,914 167,872
Utah 74,514 50,449 185,470 116,843 259,984 167,292
West Virginia 96,302 96,062 82,479 56,446 178,781 152,508
Montana 119,326 630 177,259 141,983 296,585 142,613
Ohio 69,932 66,911 30,080 30,467 100,012 97,378
California 2,577 1,647 94,895 93,185 97,472 94,832
New York - - 101,502 84,008 101,502 84,008
Colorado 21,335 1,294 113,922 72,452 135,257 73,746
South Dakota - - 50,958 50,958 50,958 50,958
Mississippi 11,763 10,770 31,400 30,208 43,163 40,978
Louisiana 10,763 9,387 26,278 21,890 37,041 31,277
Michigan - - 42,050 22,819 42,050 22,819
Kansas 10,886 8,705 5,864 3,526 16,750 12,231
Nevada - - 11,744 11,744 11,744 11,744
North Dakota 3,251 1,851 6,814 6,439 10,065 8,290
Arkansas 3,042 1,143 628 228 3,670 1,371
Alabama - - 212 193 212 193
Total United States 1,636,908 986,865 2,874,164 2,243,185 4,511,072 3,230,050
Canada
Saskatchewan 372,861 339,822 144,318 132,197 517,179 472,019
Alberta 796,792 560,934 489,055 420,857 1,285,847 981,791
Manitoba 13,363 11,981 57,515 57,515 70,878 69,496
British Columbia 1,298 806 29,223 21,103 30,521 21,909
New Brunswick 219 33 - - 219 33
Northwest Territories - - 1,139,140 266,249 1,139,140 266,249
Total Canada 1,184,533 913,576 1,859,251 897,921 3,043,784 1,811,497
Trinidad 41,546 40,379 240,540 194,532 282,086 234,911
Total 2,862,987 1,940,820 4,973,955 3,335,638 7,836,942 5,276,458
Producing Well Summary. The following table reflects EOG's
ownership in gas and oil wells located in Texas, the Gulf of
Mexico, Oklahoma, New Mexico, Utah, Pennsylvania, Wyoming, and
various other states, Canada and Trinidad at December 31, 2002.
Gross gas and oil wells include 545 with multiple completions.
Productive Wells
Gross Net
Gas 12,561 9,269
Oil 1,569 1,311
Total 14,130 10,580
Drilling and Acquisition Activities. During the years ended
December 31, 2002, 2001 and 2000 EOG spent approximately $836
million, $1,163 million and $710 million, respectively, for
exploratory and development drilling and acquisition of leases
and producing properties. EOG drilled, participated in the
drilling of or acquired wells as set out in the table below for
the periods indicated:
Year Ended December 31,
2002 2001 2000
Gross Net Gross Net Gross Net
Development Wells Completed
North America
Gas 1,465 1,204.93 1,550 1,311.86 743 611.93
Oil 88 64.27 124 107.06 93 83.46
Dry 84 74.88 95 81.68 51 44.03
Total 1,637 1,344.08 1,769 1,500.60 887 739.42
Outside North America
Gas - - 3 2.90 - -
Oil - - - - - -
Dry - - - - - -
Total - - 3 2.90 - -
Total Development 1,637 1,344.08 1,772 1,503.50 887 739.42
Exploratory Wells Completed
North America
Gas 22 17.97 24 18.38 19 11.85
Oil 4 3.00 10 7.10 4 4.00
Dry 22 17.87 29 23.05 26 20.00
Total 48 38.84 63 48.53 49 35.85
Outside North America
Gas 1 0.95 - - - -
Oil - - - - - -
Dry - - 1 0.25 1 1.00
Total 1 0.95 1 0.25 1 1.00
Total Exploratory 49 39.79 64 48.78 50 36.85
Total 1,686 1,383.87 1,836 1,552.28 937 776.27
Wells in Progress at end
of period 50 42.93 71 59.04 46 40.19
Total 1,736 1,426.80 1,907 1,611.32 983 816.46
Wells Acquired*
Gas 664 374.06 1,089 981.53 1,315 985.37
Oil 7 4.21 53 51.04 168 120.70
Total 671 378.27 1,142 1,032.57 1,483 1,106.07
*Includes the acquisition of additional interests in certain
wells in which EOG previously owned an interest.
All of EOG's drilling activities are conducted on a contract
basis with independent drilling contractors. EOG owns no drilling
equipment.
ITEM 3. Legal Proceedings
The information required by this Item is incorporated by
reference from the Contingencies section in Note 7 of Notes to
Consolidated Financial Statements included in the Form 8-K filed
on February 20, 2003 and attached hereto as Exhibit 99.1.
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security
holders during the fourth quarter of 2002.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Shareholder Matters
The following table sets forth, for the periods indicated,
the high and low sales prices per share for the common stock of
EOG, as reported on the New York Stock Exchange Composite Tape,
and the amount of cash dividends declared per share.
Price Range Cash
High Low Dividend
2002
First Quarter $41.32 $30.50 $0.040
Second Quarter 44.15 37.11 0.040
Third Quarter 39.68 30.02 0.040
Fourth Quarter 42.00 32.40 0.040
2001
First Quarter $55.50 $39.30 $0.035
Second Quarter 49.86 34.91 0.040
Third Quarter 36.99 25.80 0.040
Fourth Quarter 39.66 27.65 0.040
As of March 10, 2003 there were approximately 400 record
holders of EOG's common stock, including individual participants
in security position listings. There are an estimated 62,500
beneficial owners of EOG's common stock, including shares held in
street name.
EOG currently intends to continue to pay quarterly cash
dividends on its outstanding shares of common stock. However,
the determination of the amount of future cash dividends, if any,
to be declared and paid will depend upon, among other things, the
financial condition, funds from operations, level of exploration,
exploitation and development expenditure opportunities and future
business prospects of EOG.
ITEM 6. Selected Financial Data
Year Ended December 31,
(In Thousands, Except Per Share Amounts) 2002 2001 2000 1999 1998
Statement of Income Data:
Net Operating Revenues $1,095,036 $1,654,887 $1,489,895 $ 842,099 $ 808,252
Operating Expenses
Lease and Well 179,429 175,446 140,915 132,233 137,932
Exploration Costs 60,228 67,467 67,196 52,773 65,940
Dry Hole Costs 46,749 71,360 17,337 11,893 22,751
Impairments 68,430 79,156 46,478 161,817(1) 32,904
Depreciation, Depletion and Amortization 398,036 392,399 359,265 329,668 314,278
General and Administrative 88,952 79,963 66,932 82,857 69,010
Taxes Other Than Income 71,881 95,333 94,909 52,670 51,776
Charges Associated with Enron Bankruptcy - 19,211 - - -
Total 913,705 980,335 793,032 823,911 694,591
Operating Income 181,331 674,552 696,863 18,188 113,661
Other Income (Expense), Net (2,005) 2,003 (2,300) 611,343(2) (4,800)
Interest Expense (Net Of Interest Capitalized) 59,654 45,110 61,006 61,819 48,579
Income Before Income Taxes 119,672 631,445 633,557 567,712 60,282
Income Tax Provision (Benefit) 32,499 232,829 236,626 (1,382)(3) 4,111(4)
Net Income 87,173 398,616 396,931 569,094 56,171
Preferred Stock Dividends 11,032 10,994 11,028 535 -
Net Income Available to Common $ 76,141 $ 387,622 $ 385,903 $ 568,559 $ 56,171
Net Income Per Share Available to Common
Basic $ 0.66 $ 3.35 $ 3.30 $ 4.04 $ 0.36
Diluted $ 0.65 $ 3.30 $ 3.24 $ 4.01 $ 0.36
Average Number of Common Shares
Basic 115,335 115,765 116,934 140,648 154,002
Diluted 117,245 117,488 119,102 141,627 154,573
At December 31,
(In Thousands) 2002 2001 2000 1999 1998
Balance Sheet Data:
Net Oil and Gas Properties $3,321,548 $3,055,910 $2,525,007 $2,334,928 $2,676,363
Total Assets 3,814,006 3,414,044 3,001,253 2,610,793 3,018,095
Long-Term Debt
Third Party 1,145,132 855,969 859,000 990,306 942,779
Affiliate - - - - 200,000
Deferred Revenue - - - - 4,198
Shareholders' Equity 1,672,395 1,642,686 1,380,925 1,129,611 1,280,304
(1) Includes $133 million non-cash charges in connection with
impairments and/or EOG's decision to dispose of projects no
longer deemed central to its business.
(2) Includes a $575 million tax-free gain on the share
exchange transactions with a former majority shareholder.
(3) Includes benefits of $8 million relating to tight gas
sands federal income tax credits.
(4) Includes a benefit of $2 million related to the final
audit assessments of India taxes for certain prior years, a
benefit of $3.8 million related to reduced deferred franchise
taxes, $3.5 million related to cumulative Venezuela deferred
tax benefits and $12 million relating to tight gas sands
federal income tax credits.
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Information required by this Item is incorporated by
reference from pages 4 through 13 of the Form 8-K filed on
February 20, 2003 and attached hereto as Exhibit 99.1.
Information Regarding Forward-Looking Statements
This Annual Report on Form 10-K 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, the ability to
replace or increase reserves or to increase production, or the
ability 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: the timing and extent
of changes in commodity prices for crude oil, natural gas and
related products and interest rates; the extent and effect of any
hedging activities engaged in by EOG; the extent of EOG's success
in discovering, developing, marketing and producing reserves and
in acquiring oil and gas properties; the accuracy of reserve
estimates, which by their nature involve the exercise of
professional judgment and may therefore be imprecise; political
developments around the world, including terrorist activities and
responses to such activities; acts of war; 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.
ITEM 7A. Quantitative and Qualitative Disclosures About Market
Risk
EOG's exposure to interest rate risk and commodity price
risk is discussed respectively in the Financing and Outlook
sections of the "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Capital
Resources and Liquidity," which is incorporated by reference from
pages 7 through 10 of the Form 8-K filed on February 20, 2003.
EOG's exposure to foreign currency exchange rate risks and other
market risks is insignificant.
ITEM 8. Financial Statements and Supplementary Data
Information required by this Item is incorporated by reference
from portions of the Form 8-K filed on February 20, 2003 and
attached hereto as Exhibit 99.1 as indicated:
Cross Reference to Applicable Sections Beginning
of Form 8-K filed on February 20, 2003 on Page
Reports of Independent Public Accountants 15
Consolidated Financial Statements 17
Notes to Consolidated Financial Statements 21
Supplemental Information to Consolidated
Financial Statements 37
Unaudited Quarterly Financial Information 45
ITEM 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
The required information has been previously reported in
Item 4 of EOG's Current Report on Form 8-K filed with the
Securities and Exchange Commission on March 1, 2002.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information required by this Item regarding directors is
incorporated by reference from the Proxy Statement to be filed
within 120 days after December 31, 2002, under the caption
entitled "Election of Directors."
See list of "Current Executive Officers of the Registrant"
in Part I located elsewhere herein.
ITEM 11. Executive Compensation
The information required by this Item is incorporated by
reference from the Proxy Statement to be filed within 120 days
after December 31, 2002, under the caption "Compensation of
Directors and Executive Officers."
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
EOG has various stock plans under which employees and non-
employee members of the Board of Directors of EOG and its
subsidiaries have been or may be granted certain equity
compensation consisting of stock options and restricted stock and
units. The following table sets forth data for EOG's stock plans
aggregated by the various plans approved by security holders and
those plans not approved by security holders for the year ended
2002. (In thousands, except per share data.)
2002
Outstanding Average Available
At Grant For Future
December 31 Price Grant
Plan Category
Equity Compensation Plans
Approved by Security Holders 2,374 $29.05 1,796
Equity Compensation Plans
Not Approved by Security Holders 6,243 $27.13 1,136
Total 8,617 $27.66 2,932
Stock Plans Not Approved by Security Holders. EOG maintains
the 1994 Stock Plan, which provides equity compensation to
employees who are not officers within the meaning of Rule 16a-1
of the Securities Exchange Act of 1934, as amended. Under the
plan, employees have been or may be granted stock options (rights
to purchase shares of common stock of EOG at a price not less
than the market price of the stock at the date of grant). Stock
options vest either immediately at the date of grant or up to
four years from the date of grant based on the nature of the
grants and as defined in individual grant agreements. Terms for
stock options granted under the plan have not exceeded a maximum
term of 10 years. Employees have also been or may be granted
restricted shares and/or units without cost to the employee. The
shares and units granted vest to the employee at various times
ranging from one to five years as defined in individual grant
agreements. Upon vesting, restricted shares are released to the
employee. Upon vesting, restricted units are converted into one
share of common stock and released to the employee.
The Board of Directors of EOG also approved a one-time grant
to non-employee directors of EOG in 1998 and a one-time grant to
non-employee directors of EOG Resources Trinidad Ltd. in 1999.
The grants have a 10-year term and vested 50% on the first
anniversary and 50% on the second anniversary of the date of
grant.
Deferral Plan Phantom Stock Account. EOG maintains the 1996
Deferral Plan under which payment of base salary, annual bonus
and director fees may be deferred to a later specified date.
Participants may choose to have their deferrals of compensation
placed into a Phantom Stock Account, in which deferrals are
treated as if they had purchased shares of EOG common stock at
the closing stock price on the date of deferral. Dividends are
credited quarterly and treated as if reinvested in EOG common
stock. Payment of the Phantom Stock Account is made in actual
shares of EOG common stock. A total of 60,000 shares have been
registered for issuance under the plan. As of December 31, 2002,
29,125 phantom stock units had been issued and 30,875 remained
available for issuance under the plan.
Other information required by this Item is incorporated by
reference from the Proxy Statement to be filed within 120 days
after December 31, 2002, under the captions "Election of
Directors" and "Compensation of Directors and Executive
Officers."
ITEM 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by
reference from the Proxy Statement to be filed within 120 days
after December 31, 2002, under the caption "Certain
Transactions."
ITEM 14. Controls and Procedures
Based on an evaluation of the disclosure controls and
procedures conducted within 90 days prior to the filing date of
this report on Form 10-K, the Chairman of the Board and Chief
Executive Officer, Mark G. Papa, and the President and Chief of
Staff, and Principal Financial Officer, Edmund P. Segner, III,
have concluded that the disclosure controls and procedures (as
defined in Rules 13a-14(c) and 15d-14(c) promulgated under the
Securities Exchange Act of 1934) are effective. There were no
significant changes in the internal controls or in other factors
that could significantly affect those controls subsequent to the
date of the evaluation thereof.
PART IV
ITEM 15. Financial Statements and Financial Statement Schedule,
Exhibits and Reports on Form 8-K
Information required by this Item is incorporated by
reference from portions of the Form 8-K filed on February 20,
2003 and attached hereto as Exhibit 99.1 as indicated:
(a)(1) Financial Statements and Supplemental Data
Cross Reference to Applicable Sections Beginning
of Form 8-K filed on February 20, 2003 on Page
Consolidated Financial Statements 17
Notes to Consolidated Financial Statements 21
Supplemental Information to Consolidated
Financial Statements 37
Unaudited Quarterly Financial Information 45
REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
EOG Resources, Inc.
Houston, Texas
We have audited the financial statements of EOG Resources, Inc.
as of December 31, 2002, and for the year in the period ended
December 31, 2002, and have issued our report thereon dated
February 19, 2003; such financial statements and report are
included in your Current Report on Form 8-K dated February 20,
2003, and are incorporated herein by reference. Our audits also
included the financial statement schedule of EOG Resources, Inc,
listed in Item 15. This financial statement schedule is the
responsibility of the Corporation's management. Our
responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedule, when considered
in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
DELOITTE & TOUCHE LLP
February 19, 2003
REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS (Continued)
EOG dismissed Arthur Andersen LLP on February 27, 2002 and
subsequently engaged Deloitte & Touche LLP as its independent
auditors. The predecessor auditor's report appearing below is a
copy of Arthur Andersen's previously issued report dated February
21, 2002. Since EOG is unable to obtain a current manually
signed audit report, a copy of Arthur Andersen's most recent
signed and dated report has been included to satisfy filing
requirements, as permitted under Rule 2-02(e) of Regulation S-X.
To EOG Resources, Inc.:
We have audited in accordance with auditing standards
generally accepted in the United States the financial statements
included in EOG Resources, Inc.'s Current Report on Form 8-K
dated February 27, 2002, incorporated by reference in this Form
10-K, and have issued our report thereon dated February 21, 2002.
Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedule included in this item
is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas
February 21, 2002
(a)(2) Financial Statement Schedule
Schedule II
EOG RESOURCES, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Years Ended December 31, 2002, 2001 and 2000
(In Thousands)
Column A Column B Column C Column D Column E
Additions Deductions for
Balance at Charged to Purpose for Balance at
Beginning of Costs and Which Reserves End of
Description Year Expenses Were Created Year
2002
Reserves deducted from assets
to which they apply--
Allowance for Doubtful Accounts $20,114 $ 182 $ 9 $20,287
2001
Reserves deducted from assets
to which they apply--
Allowance for Doubtful Accounts $ 1,558 $19,211 $ 655 $20,114
2000
Reserves deducted from assets
to which they apply--
Allowance for Doubtful Accounts $ 1,060 $ 500 $ 2 $ 1,558
Other financial statement schedules have been omitted because
they are inapplicable or the information required therein is
included elsewhere in the consolidated financial statements or
notes thereto.
(a)(3) Exhibits
See pages 23 through 28 for a listing of the exhibits.
(b) Reports on Form 8-K
Current Report on Form 8-K filed on October 22, 2002 to
provide estimate for the fourth quarter and full year 2002 in
Item 9 - Regulation FD Disclosure.
Current Report on Form 8-K filed on December 11, 2002 to
report an amendment to EOG's Rights Agreement dated as of
February 14, 2000 between EOG and EquiServe Trust Company, N.A.
in Item 5 - Other Events and to present as an exhibit the said
amendment in Item 7 - Financial Statements and Exhibits.
EXHIBITS
Exhibits not incorporated herein by reference to a prior filing are
designated by an asterisk (*) and are filed herewith; all exhibits not so
designated are incorporated herein by reference to EOG's Form S-1
Registration Statement, Registration No. 33-30678, filed on August 24,
1989 ("Form S-1"), or as otherwise indicated.
Exhibit
Number Description
3.1(a) -- Restated Certificate of Incorporation (Exhibit 3.1 to
Form S-1).
3.1(b) -- Certificate of Amendment of Restated Certificate of
Incorporation (Exhibit 4.1(b) to Form S-8 Registration
Statement No. 33-52201, filed February 8, 1994).
3.1(c) -- Certificate of Amendment of Restated Certificate of
Incorporation (Exhibit 4.1(c) to Form S-8 Registration
Statement No. 33-58103, filed March 15, 1995).
3.1(d) -- Certificate of Amendment of Restated Certificate of
Incorporation, dated June 11, 1996 (Exhibit 3(d) to Form S-3
Registration Statement No. 333-09919, filed August 9, 1996).
3.1(e) -- Certificate of Amendment of Restated Certificate of
Incorporation, dated May 7, 1997 (Exhibit 3(e) to Form S-3
Registration Statement No. 333-44785, filed January 23,
1998).
3.1(f) -- Certificate of Ownership and Merger, dated August 26,
1999 (Exhibit 3.1(f) to EOG's Annual Report on Form 10-K for
the year ended December 31, 1999).
3.1(g) -- Certificate of Designations of Series E Junior
Participating Preferred Stock, dated February 14, 2000
(Exhibit 2 to Form 8-A Registration Statement, filed
February 18, 2000).
3.1(h) -- Certificate of Designation, Preferences and Rights of
Fixed Rate Cumulative Perpetual Senior Preferred Stock,
Series B, dated July 19, 2000 (Exhibit 3.1(h) to EOG's
Registration Statement on Form S-3 Registration Statement No.
333-46858, filed September 28, 2000).
3.1(i) -- Certificate of Designation, Preferences and Rights of
the Flexible Money Market Cumulative Preferred Stock, Series
D, dated July 25, 2000 (Exhibit 3.1(i) to EOG's Registration
Statement on Form S-3 Registration Statement No. 333-46858,
filed September 28, 2000).
3.1(j) -- Certificate of Elimination of the Fixed Rate Cumulative
Perpetual Senior Preferred Stock, Series A, dated September
15, 2000 (Exhibit 3.1(j) to EOG's Registration Statement on
Form S-3 Registration Statement No. 333-46858, filed
September 28, 2000).
3.1(k) -- Certificate of Elimination of the Flexible Money Market
Cumulative Preferred Stock, Series C, dated September 15,
2000 (Exhibit 3.1(k) to EOG's Registration Statement on Form
S-3 Registration Statement No. 333-46858, filed September 28,
2000).
*3.2 -- By-laws, dated August 23, 1989, as amended and restated
effective as of February 20, 2003.
4.1(a) -- Specimen of Certificate evidencing the Common Stock
(Exhibit 3.3 to EOG's Annual Report on Form 10-K for the year
ended December 31, 1999).
4.1(b) -- Specimen of Certificate Evidencing Fixed Rate Cumulative
Perpetual Senior Preferred Stock, Series B (Exhibit 4.3(g) to
EOG's Registration Statement on Form S-4 Registration
Statement No. 333-36056, filed June 7, 2000).
Exhibit
Number Description
4.1(c) -- Specimen of Certificate Evidencing Flexible Money Market
Cumulative Preferred Stock, Series D (Exhibit 4.3(g) to EOG's
Registration Statement on Form S-4 Registration Statement No.
333-36416, filed June 12, 2000).
4.2 -- Rights Agreement, dated as of February 14, 2000, between
EOG and First Chicago Trust Company of New York, which
includes the form of Rights Certificate as Exhibit B and the
Summary of Rights to Purchase Preferred Shares as Exhibit C
(Exhibit 1 to EOG's Registration Statement on Form 8-A, filed
February 18, 2000).
4.3 -- Form of Rights Certificate (Exhibit 3 to EOG's
Registration Statement on Form 8-A, filed February 18, 2000).
4.4 -- Indenture dated as of September 1, 1991, between EOG and
Chase Bank of Texas National Association (formerly, Texas
Commerce Bank National Association) (Exhibit 4(a) to EOG's
Registration Statement on Form S-3 Registration Statement No.
33-42640, filed September 6, 1991).
4.5 -- Indenture dated as of _________, 2000, between EOG and
The Bank of New York (Exhibit 4.6 to EOG's Registration
Statement on Form S-3 Registration Statement No. 333-46858,
filed September 28, 2000).
4.6 -- Amendment, dated as of December 13, 2001, to the Rights
Agreement, dated as of February 14, 2000, between EOG and
First Chicago Trust Company of New York, as rights agent
(Exhibit 2 to Amendment No. 1 to EOG's Registration Statement
on Form 8-A/A filed December 14, 2001).
4.7 -- Letter dated December 13, 2001, from First Chicago Trust
Company of New York to EOG resigning as rights agent
effective January 12, 2002 (Exhibit 3 to Amendment No. 2 to
EOG's Registration Statement on Form 8-A/A filed February 7,
2002).
4.8 -- Amendment, dated as of December 20, 2001, to the Rights
Agreement, dated as of February 14, 2000, as amended, between
EOG and First Chicago Trust Company of New York, as rights
agent (Exhibit 4 to Amendment No. 2 to EOG's Registration
Statement on Form 8-A/A filed February 7, 2002).
4.9 -- Letter dated December 20, 2001, from EOG Resources, Inc.
to EquiServe Trust Company, N.A. appointing EquiServe Trust
Company, N.A. as successor rights agent (Exhibit 5 to
Amendment No. 2 to EOG's Registration Statement on Form 8-A/A
filed February 7, 2002).
4.10 -- Amendment, dated as of April 11, 2002, to the Rights
Agreement, dated as of February 14, 2000, as amended, between
EOG and Equiserve Trust Company, N.A., as rights agent
(Exhibit 4.1 to EOG's Current Report on Form 8-K, filed April
12, 2002).
4.11 -- Amendment, dated as of December 10, 2002, to the Rights
Agreement, dated as of February 14, 2000, as amended, between
EOG and Equiserve Trust Company, N.A., as rights agent
(Exhibit 4.1 to EOG's Current Report on Form 8-K, filed
December 11, 2002).
10.1(a) -- Amended and Restated 1994 Stock Plan (Exhibit 4.3 to
Form S-8 Registration Statement No. 33-58103, filed March 15,
1995).
10.1(b) -- Amendment to Amended and Restated 1994 Stock Plan, dated
effective as of December 12, 1995 (Exhibit 4.3(a) to EOG's
Annual Report on Form 10-K for the year ended December 31,
1995).
10.1(c) -- Amendment to Amended and Restated 1994 Stock Plan, dated
effective as of December 10, 1996 (Exhibit 4.3(a) to Form S-8
Registration Statement No. 333-20841, filed January 31,
1997).
Exhibit
Number Description
10.1(d) -- Third Amendment to Amended and Restated 1994 Stock Plan,
dated effective as of December 9, 1997 (Exhibit 4.3(d) to
EOG's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.1(e) -- Fourth Amendment to Amended and Restated 1994 Stock
Plan, dated effective as of May 5, 1998 (Exhibit 4.3(e) to
EOG's Annual Report on Form 10-K for the year ended
December 31, 1998).
10.1(f) -- Fifth Amendment to Amended and Restated 1994 Stock Plan,
dated effective as of December 8, 1998 (Exhibit 4.3(f) to
EOG's Annual Report on Form 10-K for the year ended
December 31, 1998).
10.1(g) -- Sixth Amendment to Amended and Restated 1994 Stock Plan,
dated effective as of May 8, 2001 (Exhibit 10.1(g) to EOG's
Annual Report on Form 10-K for the year ended December 31,
2001).
10.2(a) -- Stock Restriction and Registration Agreement dated as of
August 23, 1989 (Exhibit 10.2 to Form S-1).
10.2(b) -- Amendment to Stock Restriction and Registration
Agreement, dated December 9, 1997, between EOG and Enron
Corp. (Exhibit 10.2(b) to EOG's Annual Report on Form 10-K
for the year ended December 31, 1997).
10.3 -- Tax Allocation Agreement, entered into effective as of
the Deconsolidation Date, between Enron Corp., EOG, and the
subsidiaries of EOG listed therein as additional parties
(Exhibit 10.3 to EOG's Annual Report on Form 10-K for the
year ended December 31, 1998).
10.4(a) -- Share Exchange Agreement, dated as of July 19, 1999,
between Enron Corp. and EOG (Exhibit 2 to Form S-3
Registration Statement No. 333-83533, filed July 23, 1999).
10.4(b) -- Letter Amendment, dated July 30, 1999, to Share Exchange
Agreement, between Enron Corp. and EOG (Exhibit 2.2 to EOG's
Current Report on Form 8-K, filed August 31, 1999).
10.4(c) -- Letter Amendment, dated August 10, 1999, to Share
Exchange Agreement, between Enron Corp. and EOG (Exhibit 2.3
to EOG's Current Report on Form 8-K, filed August 31, 1999).
10.4(d) -- Consent Agreement between EOG, Enron Corp., Enron
Finance Partners, LLC, Enron Intermediate Holdings, LLC,
Enron Asset Holdings, LLC and Aeneas, LLC, dated November 28,
2000.
10.5 -- Amended and Restated 1993 Nonemployee Directors Stock
Option Plan (Exhibit A to EOG's Proxy Statement, dated March
28, 2002, with respect to EOG's Annual Meeting of
Shareholders).
10.7(a) -- 1992 Stock Plan (As Amended and Restated Effective
June 28, 1999) (Exhibit A to EOG's Proxy Statement, dated
June 4, 1999, with respect to EOG's Annual Meeting of
Shareholders).
10.7(b) -- First Amendment to 1992 Stock Plan (As Amended and
Restated Effective June 28, 1999) dated effective as of May
8, 2001 (Exhibit 10.7(b) to EOG's Annual Report on Form 10-K
for the year ended December 31, 2001).
10.8 -- Equity Participation and Business Opportunity Agreement,
dated December 9, 1997, between EOG and Enron Corp.
(Exhibit 10 to Form S-3 Registration Statement No. 333-44785,
filed January 23, 1998).
10.9(a) -- 1996 Deferral Plan (Exhibit 10.63(a) to EOG's Annual
Report on Form 10-K for the year ended December 31, 1997).
10.9(b) -- First Amendment to 1996 Deferral Plan, dated effective
as of December 9, 1997 (Exhibit 10.63(b) to EOG's Annual
Report on Form 10-K for the year ended December 31, 1997).
Exhibit
Number Description
10.9(c) -- Second Amendment to 1996 Deferral Plan, dated effective
as of December 8, 1998 (Exhibit 10.63(c) to EOG's Annual
Report on Form 10-K for the year ended December 31, 1998).
10.9(d) -- 1996 Deferral Plan, as amended and restated effective
May 8, 2001 (Exhibit 4.4 to Form S-8 Registration Statement
No. 333-84014, filed March 8, 2002).
*10.9(e) -- First Amendment to 1996 Deferral Plan, as amended and
restated effective May 8, 2001, effective as of September 10,
2002.
10.10(a) -- Executive Employment Agreement between EOG and Mark G.
Papa, effective as of November 1, 1997 (Exhibit 10.64 to
EOG's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.10(b) -- First Amendment to Executive Employment Agreement
between EOG and Mark G. Papa, effective as of February 1,
1999 (Exhibit 10.64(b) to EOG's Annual Report on Form 10-K
for the year ended December 31, 1998).
10.10(c) -- Second Amendment to Executive Agreement between EOG and
Mark G. Papa, effective as of June 28, 1999 (Exhibit 10.64(c)
to EOG's Annual Report on Form 10-K for the year ended
December 31, 1999).
10.10(d) -- Third Amendment to Executive Employment Agreement between
EOG and Mark G. Papa, entered into on June 20, 2001, and made
effective as of June 1, 2001 (Exhibit 10.10(d) to EOG's
Annual Report on Form 10-K for the year ended December 31,
2001).
10.10(e) -- Change of Control Agreement between EOG and Mark G. Papa,
effective as of June 20, 2001 (Exhibit 10.10(e) to EOG's
Annual Report on Form 10-K for the year ended December 31,
2001).
10.11(a) -- Executive Employment Agreement between EOG and Edmund P.
Segner, III, effective as of September 1, 1998
(Exhibit 10.65(a) to EOG's Annual Report on Form 10-K for the
year ended December 31, 1998).
10.11(b) -- First Amendment to Executive Employment Agreement
between EOG and Edmund P. Segner, III, effective as of
February 1, 1999 (Exhibit 10.65(b) to EOG's Annual Report on
Form 10-K for the year ended December 31, 1998).
10.11(c) -- Second Amendment to Executive Employment Agreement
between EOG and Edmund P. Segner, III, effective as of
June 28, 1999 (Exhibit 10.65(c) to EOG's Annual Report on
Form 10-K for the year ended December 31, 1999).
10.11(d) -- Third Amendment to Executive Employment Agreement
between EOG and Edmund P. Segner, III, entered into on June
22, 2001, and made effective as of June 1, 2001 (Exhibit
10.11(d) to EOG's Annual Report on Form 10-K for the year
ended December 31, 2001).
10.11(e) -- Change of Control Agreement between EOG and Edmund P.
Segner, III, effective as of June 22, 2001 (Exhibit 10.11(e)
to EOG's Annual Report on Form 10-K for the year ended
December 31, 2001).
10.12(a) -- Executive Employment Agreement between EOG and Barry
Hunsaker, Jr., effective as of September 1, 1998 (Exhibit
10.66(a) to EOG's Annual Report on Form 10-K for the year
ended December 31, 1999).
Exhibit
Number Description
10.12(b) -- First Amendment to Executive Employment Agreement
between EOG and Barry Hunsaker, Jr., effective as of
December 21, 1998 (Exhibit 10.66(b) to EOG's Annual Report on
Form 10-K for the year ended December 31, 1999).
10.12(c) -- Second Amendment to Executive Employment Agreement
between EOG and Barry Hunsaker, Jr., effective as of
February 1, 1999 (Exhibit 10.66(c) to EOG's Annual Report on
Form 10-K for the year ended December 31, 1999).
10.12(d) -- Third Amendment to Executive Employment Agreement
between EOG and Barry Hunsaker, Jr., entered into on June 29,
2001, and made effective as of June 1, 2001 (Exhibit 10.12(d)
to EOG's Annual Report on Form 10-K for the year ended
December 31, 2001).
10.12(e) -- Change of Control Agreement between EOG and Barry
Hunsaker, Jr., effective as of June 29, 2001 (Exhibit
10.12(e) to EOG's Annual Report on Form 10-K for the year
ended December 31, 2001).
10.13(a) -- Executive Employment Agreement between EOG and Loren M
Leiker, effective as of March 1, 1998 (Exhibit 10.67(a) to
EOG's Annual Report on Form 10-K for the year ended December
31, 1999).
10.13(b) -- First Amendment to Executive Employment Agreement
between EOG and Loren M. Leiker, effective as of February 1,
1999 (Exhibit 10.67(b) to EOG's Annual Report on Form 10-K
for the year ended December 31, 1999).
10.13(c) -- Second Amendment to Executive Employment Agreement
between EOG and Loren M. Leiker, entered into on July 1,
2001, and made effective as of June 1, 2001 (Exhibit 10.13(c)
to EOG's Annual Report on Form 10-K for the year ended
December 31, 2001).
10.13(d) -- Change of Control Agreement between EOG and Loren M.
Leiker, effective as of July 1, 2001 (Exhibit 10.13(d) to
EOG's Annual Report on Form 10-K for the year ended December
31, 2001).
10.14(a) -- Executive Employment Agreement between EOG and Gary L.
Thomas, effective as of September 1, 1998 (Exhibit 10.68(a)
to EOG's Annual Report on Form 10-K for the year ended
December 31, 1999).
10.14(b) -- First Amendment to Executive Employment Agreement
between EOG and Gary L. Thomas, effective as of February 1,
1999 (Exhibit 10.68(b) to EOG's Annual Report on Form 10-K
for the year ended December 31, 1999).
10.14(c) -- Second Amendment to Executive Employment Agreement
between EOG and Gary L. Thomas, entered into on July 1, 2001,
and made effective as of June 1, 2001 (Exhibit 10.14(c) to
EOG's Annual Report on Form 10-K for the year ended December
31, 2001).
10.14(d) -- Change of Control Agreement between EOG and Gary L.
Thomas, effective as of July 1, 2001 (Exhibit 10.14(d) to
EOG's Annual Report on Form 10-K for the year ended December
31, 2001).
10.15(a) -- Change of Control Severance Plan (As Amended and
Restated Effective May 8, 2001) (Exhibit 10.15 to EOG's
Annual Report on Form 10-K for the year ended December 31,
2001).
*10.15(b) -- First Amendment to Change of Control Severance Plan (As
Amended and Restated Effective May 8, 2001), effective as of
September 10, 2002.
10.16 -- Employee Stock Purchase Plan (Exhibit 4.4 to Form S-8
Registration Statement No. 333-62256, filed June 4, 2001).
Exhibit
Number Description
*10.17 -- Amended and Restated Savings Plan.
10.18 -- Executive Officer Annual Bonus Plan (Exhibit C to EOG's
Proxy Statement, dated March 30, 2001, with respect to EOG's
Annual Meeting of Shareholders).
10.19 -- EOG Share Agreement, dated as of April 4, 2002, by and
among EOG, Cooperatieve Centrale Raiffeisen-Boerenleenbank
B.A. and Royal Bank of Canada, a corporation organized under
the laws of Canada (Exhibit 10.3 to EOG's Current Report on
Form 8-K, filed April 12, 2002).
*10.20 -- Form of Grant Agreement to Non-Employee Directors of
Enron Gas & Oil Trinidad Limited.
*10.21 -- Form of Grant Agreement to Non-Employee Directors of
EOG.
*12 -- Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Dividends.
16.1 -- Letter regarding change in certifying accountant
(Exhibit 16.1 to EOG's Current Report on Form 8-K, filed
March 1, 2002).
*21 -- List of subsidiaries.
*23.1 -- Consent of DeGolyer and MacNaughton.
23.2 -- Opinion of DeGolyer and MacNaughton dated January 31,
2003 (Exhibit 23.2 to EOG's Current Report on Form 8-K, filed
on February 20, 2003).
*23.3 -- Consent of Deloitte & Touche LLP.
*24 -- Powers of Attorney.
*99.1 -- Current Report on Form 8-K, filed on February 20, 2003.
*99.2 -- Certification of Annual Report of Chief Executive Officer.
*99.3 -- Certification of Annual Report of Principal Financial Officer.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 13th day of March, 2003.
EOG RESOURCES, INC.
(Registrant)
By /s/TIMOTHY K. DRIGGERS
Timothy K. Driggers
Vice President Accounting
and Land Administration
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf
of registrant and in the capacities with EOG Resources, Inc. indicated
and on the 13th day of March, 2003.
Signature Title
/s/ MARK G. PAPA Chairman and Chief Executive Officer and
(Mark G. Papa) Director (Principal Executive Officer)
/s/ EDMUND P. SEGNER, III President and Chief of Staff and Director
(Edmund P. Segner, III) (Principal Financial Officer)
/s/ TIMOTHY K. DRIGGERS Vice President, Accounting
(Timothy K. Driggers) and Land Administration
(Principal Accounting Officer)
*GEORGE A. ALCORN Director
(George A. Alcorn)
*CHARLES R. CRISP Director
(Charles R. Crisp)
*EDWARD RANDALL, III Director
(Edward Randall, III)
*DONALD F. TEXTOR Director
(Donald F. Textor)
*FRANK G. WISNER Director
(Frank G. Wisner)
*By /s/ PATRICIA L. EDWARDS
(Patricia L. Edwards)
(Attorney-in-fact for persons indicated)
CERTIFICATIONS
I, Mark G. Papa, the Principal Executive Officer of EOG Resources, Inc.,
a Delaware corporation, certify that:
1. I have reviewed this annual report on Form 10-K of EOG Resources, Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this annual report (the
"Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 13, 2003
/s/ MARK G. PAPA
Mark G. Papa
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
CERTIFICATIONS (Concluded)
I, Edmund P. Segner, III, the Principal Financial Officer of EOG
Resources, Inc., a Delaware corporation, certify that:
1. I have reviewed this annual report on Form 10-K of EOG Resources, Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90
days prior to the filing date of this annual report (the
"Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: March 13, 2003
/s/ EDMUND P. SEGNER, III
Edmund P. Segner, III
President and Chief of Staff
(Principal Financial Officer)
EOG RESOURCES, INC. AND SUBSIDIARIES
EXHIBITS TO FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
INDEX OF EXHIBITS
Exhibit
Number Description
*3.2 -- By-laws, dated August 23, 1989, as amended and
restated effective as of February 20, 2003.
*10.9(e) -- First Amendment to 1996 Deferral Plan, as amended and
restated effective May 8, 2001, effective as of September
10, 2002.
*10.15(b) -- First Amendment to Change of Control Severance Plan
(As Amended and Restated Effective May 8, 2001), effective
as of September 10, 2002.
*10.17 -- Amended and Restated Savings Plan.
*10.20 -- Form of Grant Agreement to Non-Employee Directors of
Enron Gas & Oil Trinidad Limited.
*10.21 -- Form of Grant Agreement to Non-Employee Directors of EOG.
*12 -- Computation of Ratio of Earnings to Fixed Charges and
Combined Fixed Charges and Preferred Dividends.
*21 -- List of subsidiaries.
*23.1 -- Consent of DeGolyer and MacNaughton.
*23.3 -- Consent of Deloitte & Touche LLP.
*24 -- Powers of Attorney.
*99.1 -- Current Report on Form 8-K, filed on February 20, 2003.
*99.2 -- Certification of Annual Report of Chief Executive Officer.
*99.3 -- Certification of Annual Report of Principal Financial Officer.
*Exhibits filed herewith.