Product revenue break-up
In this article, we’ll discuss the 2Q14 performance of EOG Resources (EOG) from both product and geographical standpoints. In 2Q15, EOG’s three primary products—crude oil and condensate, natural gas, and NGL (natural gas liquids)—registered revenue declines compared to the past year’s corresponding quarter. NGLs posted the steepest decline, by 58%, followed by natural gas (44%) and crude oil and condensate (45%).
United States leads the fall in operating income
The Unites States averaged ~93% of EOG’s operating income in the past ten quarters. In 2Q15, the United States posted $20.2 million in operating income, a 98% fall over 2Q14. Among EOG’s other international assets, Trinidad posted a $46 million operating profit in 2Q15, down 38% from 2Q14.
In 2Q15, however, EOG has continued to improve cost efficiency by reducing its primary cost heads, including lease and well costs, measured on a per-barrel-of-oil-equivalent basis. But the severe decline in realized prices and production volume reduced the overall operating income drastically in 2Q15. We’ll discuss these declines in more detail in the next article in this series.
In 2Q15, falling crude oil prices have led to sharp declines in many of the upstream companies’ net US incomes, including Whiting Petroleum Corporation (WLL), EQT Corporation (EQT), and Concho Resources (CXO). EOG accounts for 3.65% of the Energy Select Sector SPDR ETF (XLE) as well as 2.8% of the iShares US Energy (IYE).
EOG’s production and prices
The primary reason EOG’s revenues and profits declined was that its average realized prices crashed in 2Q15. EOG’s NGL and crude oil realized prices fell 55% and 44%, respectively, in 2Q15 from 2Q14. The realized price of its natural gas declined 41% during the same period.
As the table above shows, natural gas and NGL production volume decreased by 7.2% and 9.1%, respectively, in 2Q15 from 2Q14. Crude oil and condensate production remained relatively steady, falling by a marginal 1.4% during the same period. In 2Q15, EOG’s production portfolio features:
- higher Eagle Ford and the Permian Basin crude oil production
- lower NGL production in the Fort Worth Basin Barnett Shale
- lower natural gas production in the US Upper Gulf Coast, South Texas, and Fort Worth Basin Barnett shales
- lower natural gas production in Trinidad
For further discussion of EOG’s year-to-date performance, please see the next article in this series.