EOG RESOURCES INC (EOG)

2015 Climate Risk Disclosure Analysis

Industry Group: Oil & Gas

Standard Industrial Classification: Crude Petroleum & Natural Gas

Index Membership: FT Global 500, S&P 500, Russell 3000

Financial Year End: Dec 2014

EOG Resources, Inc., a Delaware corporation organized in 1985, together with its subsidiaries (collectively, EOG), explores for, develops, produces and markets crude oil and natural gas primarily in major producing basins in the United States of America (United States or U.S.), Canada, The Republic of Trinidad and Tobago (Trinidad), the United Kingdom (U.K.), The People's Republic of China (China) and, from time to time, select other international areas. EOG's principal producing areas are further described in "Exploration and Production" below. EOG's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports are made available, free of charge, through EOG's website, as soon as reasonably practicable after such reports have been filed with the United States Securities and Exchange Commission (SEC). EOG's website address is www.eogresources.com. At December 31, 2014, EOG's total estimated net proved reserves were 2,497 million barrels of oil equivalent (MMBoe), of which 1,140 million barrels (MMBbl) were crude oil and condensate reserves, 467 MMBbl were natural gas liquids (NGL) reserves and 5,343 billion cubic feet, or 890 MMBoe, were natural gas reserves (see Supplemental Information to Consolidated Financial Statements). At such date, approximately 97% of EOG's net proved reserves, on a crude oil equivalent basis, were located in the United States and 3% in Trinidad... 10-K Filing (2015-02-18)

Disclosure Breakdown

Disclosure Rank

87th percentile in Russell 3000

Disclosure Abstract

item 1. Business
7 Relevance:
2%
EOG also faces competition, to a lesser extent, from competing energy sources, such as alternative energy sources.
9 Relevance:
30%
Moreover, EOG is subject to the U.S. Environmental Protection Agency's (U.S. EPA) rule requiring annual reporting of greenhouse gas (GHG) emissions and may in the future, as discussed further below, be subject to federal, state and local laws and regulations regarding hydraulic fracturing.
Compliance with environmental laws and regulations increases EOG's overall cost of business, but has not had, to date, a material adverse effect on EOG's operations, financial condition or results of operations. It is not anticipated, based on current laws and regulations, that EOG will be required in the near future to expend amounts (whether for environmental control facilities or otherwise) that are material in relation to its total exploration and development expenditure program in order to comply with such laws and regulations. However, given that such laws and regulations are subject to change, EOG is unable to predict the ultimate cost of compliance or the ultimate effect on EOG's operations, financial condition and results of operations.
Climate Change - United States. Local, state, national and international regulatory bodies have been increasingly focused on GHG emissions and climate change issues. In addition to the U.S. EPA's rule requiring annual reporting of GHG emissions, recent U.S. EPA rulemaking may result in the regulation of GHGs as pollutants under the federal Clean Air Act. EOG supports efforts to understand and address the contribution of human activities to global climate change through the application of sound scientific research and analysis. Moreover, EOG believes that its strategy to reduce GHG emissions throughout its operations is in the best interest of the environment and is a generally good business practice.
EOG has developed a system that is utilized in calculating GHG emissions from its operating facilities. This emissions management system calculates emissions based on recognized regulatory methodologies, where applicable, and on commonly accepted engineering practices. EOG is now reporting GHG emissions for facilities covered under the U.S. EPA's Mandatory Reporting of Greenhouse Gases Rule published in October 2009. EOG is unable to predict the timing, scope and effect of any currently proposed or future laws, regulations or treaties regarding climate change and GHG emissions, but the direct and indirect costs of such laws, regulations and treaties (if enacted) could materially and adversely affect EOG's operations, financial condition and results of operations.
10 Relevance:
4%
EOG is unable to predict the timing, scope and effect of any currently proposed or future laws, regulations or treaties, including those regarding climate change and hydraulic fracturing, but the direct and indirect costs of such laws, regulations and treaties (if enacted) could materially and adversely affect EOG's operations, financial condition and results of operations. EOG will continue to review the risks to its business and operations associated with all environmental matters, including climate change and hydraulic fracturing.
11 Relevance:
3%
EOG's onshore and offshore operations are also subject to usual customary perils, including hurricanes and other adverse weather conditions.
item 1a. Risk Factors
13 Relevance:
4%
Among the factors that can or could cause these price fluctuations are:
 * the level of consumer demand;
 * domestic and worldwide supplies of crude oil, NGL and natural gas;
 * the price and quantity of imported and exported crude oil, NGL and natural gas;
 * domestic and international drilling activity;
 * the actions of other crude oil exporting nations, including the Organization of Petroleum Exporting Countries;
 * weather conditions and changes in weather patterns;
 * the availability, proximity and capacity of appropriate transportation facilities, gathering, processing and compression facilities and refining facilities;
 * worldwide economic and political conditions, including political instability or armed conflict in oil and gas producing regions;
 * the price and availability of, and demand for, competing energy sources, including alternative energy sources;
 * the nature and extent of governmental regulation, including environmental regulation, regulation of derivatives transactions and hedging activities, tax laws and regulations and laws and regulations with respect to the import and export of crude oil, natural gas and related commodities;
 * the level and effect of trading in commodity futures markets, including trading by commodity price speculators and others; and the effect of worldwide energy conservation measures.
14 Relevance:
7%
Specifically, we often are uncertain as to the future cost or timing of drilling, completing and operating wells, and our drilling operations and those of our third-party operators may be curtailed, delayed or canceled, the cost of such operations may increase and/or our results of operations and cash flows from such operations may be impacted, as a result of a variety of factors, including:
 * unexpected drilling conditions;
 * title problems;
 * pressure or irregularities in formations;
 * equipment failures or accidents;
 * adverse weather conditions, such as winter storms, flooding and hurricanes, and changes in weather patterns;
 * compliance with, or changes in, environmental, health and safety laws and regulations relating to air emissions, hydraulic fracturing, access to and use of water, and disposal of produced water, drilling fluids and other wastes, laws and regulations imposing conditions or restrictions on drilling and completion operations and on the transportation of crude oil and natural gas, and other laws and regulations, such as tax laws and regulations;
 * the availability and timely issuance of required federal, state, tribal and other permits and licenses, which may be affected by (among other things) government shutdowns or other suspensions of, or delays in, government services;
 * the availability of, costs associated with and terms of contractual arrangements for properties, including mineral licenses and leases, pipelines, rail cars, crude oil hauling trucks and qualified drivers and facilities and equipment to gather, process, compress, transport and market crude oil, natural gas and related commodities; and the costs of, or shortages or delays in the availability of, drilling rigs, hydraulic fracturing services, pressure pumping equipment and supplies, tubular materials, water, sand, disposal facilities, qualified personnel and other necessary facilities, equipment, materials, supplies and services.
Our failure to recover our investment in wells, increases in the costs of our drilling operations or those of our third-party operators, and/or curtailments, delays or cancellations of our drilling operations or those of our third-party operators in each case due to any of the above factors or other factors, may materially and adversely affect our business, financial condition and results of operations. For related discussion of the risks and potential losses and liabilities inherent in our crude oil and natural gas operations generally, see the immediately following risk factor.
Our crude oil and natural gas operations and supporting activities and operations involve many risks and expose us to potential losses and liabilities, and insurance may not fully protect us against these risks and potential losses and liabilities.
Our crude oil and natural gas operations and supporting activities and operations are subject to all of the risks associated with exploring and drilling for, and producing, gathering, processing, compressing and transporting, crude oil and natural gas, including the risks of:
 * well blowouts and cratering;
 * loss of well control;
 * crude oil spills, natural gas leaks and pipeline ruptures;
 * pipe failures and casing collapses;
 * uncontrollable flows of crude oil, natural gas, formation water or drilling fluids;
 * releases of chemicals, wastes or pollutants;
 * adverse weather conditions, such as winter storms, flooding and hurricanes, and other natural disasters;
 * fires and explosions;
 * terrorism, vandalism and physical, electronic and cyber security breaches;
 * formations with abnormal or unexpected pressures;
 * leaks or spills in connection with, or associated with, the gathering, processing, compression and transportation of crude oil and natural gas; and malfunctions of, or damage to, gathering, processing, compression and transportation facilities and equipment and other facilities and equipment utilized in support of our crude oil and natural gas operations.
16 Relevance:
11%
Moreover, we are subject to the United States (U.S.) Environmental Protection Agency's (U.S. EPA) rule requiring annual reporting of greenhouse gas (GHG) emissions. Changes in, or additions to, these regulations could lead to increased operating and compliance costs and, in turn, materially and adversely affect our business, results of operations and financial condition.
Local, state, national and international regulatory bodies have been increasingly focused on GHG emissions and climate change issues in recent years. EOG is unable to predict the timing, scope and effect of any currently proposed or future laws,
 * regulations or treaties regarding climate change and GHG emissions, but the direct and indirect costs of such laws, regulations and treaties (if enacted) could materially and adversely affect EOG's operations, financial condition and results of operations.
16 Relevance:
4%
For additional discussion regarding climate change regulation and hydraulic fracturing regulation, see Climate Change - United States and Hydraulic Fracturing - United States under ITEM 1.
18 Relevance:
2%
We also face competition, to a lesser extent, from competing energy sources, such as alternative energy sources.
18 Relevance:
12%
Weather and climate may have a significant and adverse impact on us.
Demand for crude oil and natural gas is, to a significant degree, dependent on weather and climate, which impacts, among other things, the price we receive for the commodities we produce and, in turn, our cash flows and results of operations. For example, relatively warm temperatures during a winter season generally result in relatively lower demand for natural gas (as less natural gas is used to heat residences and businesses) and, as a result, lower prices for natural gas production.
In addition, our exploration, exploitation and development activities and equipment can be adversely affected by extreme weather conditions, such as winter storms, flooding and hurricanes in the Gulf of Mexico, which may cause a loss of production from temporary cessation of activity or lost or damaged facilities and equipment. Such extreme weather conditions could also impact other areas of our operations, including access to our drilling and production facilities for routine operations, maintenance and repairs, the installation and operation of gathering, processing, compression and transportation facilities and the availability of, and our access to, necessary third-party services, such as gathering, processing, compression and transportation services. Such extreme weather conditions and changes in weather patterns may materially and adversely affect our business and, in turn, our financial condition and results of operations.
item 6. Selected Consolidated Financial Data
44 Relevance:
4%
Important factors that could cause EOG's actual results to differ materially from the expectations reflected in EOG's forward-looking statements include, among others:
 * the timing, extent and duration of changes in prices for, and demand for, crude oil and condensate, NGL, natural gas and related commodities;
 * the extent to which EOG is successful in its efforts to acquire or discover additional reserves;
 * the extent to which EOG is successful in its efforts to economically develop its acreage in, produce reserves and achieve anticipated production levels from, and optimize reserve recovery from, its existing and future crude oil and natural gas exploration and development projects;
 * the extent to which EOG is successful in its efforts to market its crude oil, natural gas and related commodity production;
 * the availability, proximity and capacity of, and costs associated with, appropriate gathering, processing, compression, transportation and refining facilities;
 * the availability, cost, terms and timing of issuance or execution of, and competition for, mineral licenses and leases and governmental and other permits and rights-of-way, and EOG's ability to retain mineral licenses and leases;
 * the impact of, and changes in, government policies, laws and regulations, including tax laws and regulations; environmental, health and safety laws and regulations relating to air emissions, disposal of produced water, drilling fluids and other wastes, hydraulic fracturing and access to and use of water; laws and regulations imposing conditions or restrictions on drilling and completion operations and on the transportation of crude oil and natural gas; laws and regulations with respect to derivatives and hedging activities; and laws and regulations with respect to the import and export of crude oil, natural gas and related commodities;
 * EOG's ability to effectively integrate acquired crude oil and natural gas properties into its operations, fully identify existing and potential problems with respect to such properties and accurately estimate reserves, production and costs with respect to such properties;
 * the extent to which EOG's third-party-operated crude oil and natural gas properties are operated successfully and economically;
 * competition in the oil and gas exploration and production industry for employees and other personnel, facilities, equipment, materials and services;
 * the availability and cost of employees and other personnel, facilities, equipment, materials (such as water) and services;
 * the accuracy of reserve estimates, which by their nature involve the exercise of professional judgment and may therefore be imprecise;
 * weather, including its impact on crude oil and natural gas demand, and weather-related delays in drilling and in the installation and operation (by EOG or third parties) of production, gathering, processing, refining, compression and transportation facilities;
 * the ability of EOG's customers and other contractual counterparties to satisfy their obligations to EOG and, related thereto, to access the credit and capital markets to obtain financing needed to satisfy their obligations to EOG;
 * EOG's ability to access the commercial paper market and other credit and capital markets to obtain financing on terms it deems acceptable, if at all, and to otherwise satisfy its capital expenditure requirements;
 * the extent and effect of any hedging activities engaged in by EOG;
 * the timing and extent of changes in foreign currency exchange rates, interest rates, inflation rates, global and domestic financial market conditions and global and domestic general economic conditions;
 * political conditions and developments around the world (such as political instability and armed conflict), including in the areas in which EOG operates;
 * the use of competing energy sources and the development of alternative energy sources;
 * the extent to which EOG incurs uninsured losses and liabilities or losses and liabilities in excess of its insurance coverage;
 * acts of war and terrorism and responses to these acts;
 * physical, electronic and cyber security breaches; and the other factors described under ITEM 1A, Risk Factors, on pages 13 through 20 of this Annual Report on Form 10-K and any updates to those factors set forth in EOG's subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.

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