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Management’s Discussion and Analysis Management’s Responsibility for Financial Reporting Report of Independent Registered Public Accountanting Firm Consolidated Statements of Income & Comprehensive Income Consolidated Balance Sheets Consolidated Statements of Shareholders’ Equity Consolidated Statements of Cash Flows Supplemental Information to Consolidated Financial Statements Selected Financial Data Quarterly Stock Data and Related Shareholder Matters Reconciliation Schedules Certifications & Glossary of Terms Officers and Directors Shareholder Information |
2. LONG-TERM DEBT  During 2004, EOG utilized commercial paper and during 2003, EOG utilized commercial paper and short-term funding from uncommitted credit facilities, both bearing market interest rates, for various corporate financing purposes. Commercial paper and uncommitted credit borrowings are classified as long-term debt based on EOG’s intent and ability to ultimately replace such amounts with other long-term debt. On July 23, 2003, EOG entered into a new three-year Revolving Credit Agreement (Agreement) with domestic and foreign lenders which provides for $600 million in long-term committed credit, and concurrently cancelled the existing $300 million 364-day credit facility and $300 million five-year credit facility scheduled to expire in July 2003 and July 2004, respectively. This Agreement provides EOG the ability to replace the commercial paper, uncommitted credit borrowing and any maturity of debt. Advances under the Agreement bear interest based upon a base rate or a Eurodollar rate at the option of EOG. The Agreement also provides for the allocation, at the option of EOG, of up to $75 million of the $600 million to its Canadian subsidiary. Advances to the Canadian subsidiary, should they occur, would be guaranteed by EOG and would bear interest at the option of the Canadian subsidiary based upon a Canadian prime rate or a Canadian banker’s acceptance rate. EOG also has the option to issue up to $100 million in letters of credit as part of this Agreement. No amounts were borrowed under this Agreement at December 31, 2004. The applicable base rates for this Facility, had there been any amounts borrowed under this Agreement would have been 5.25% and 4.00% at December 31, 2004 and December 31, 2003, respectively. The applicable Eurodollar rates for this Facility, had there been any amounts borrowed under this Agreement would have been 2.90% and 1.62% at December 31, 2004 and December 31, 2003, respectively. EOG maintains a three-year Senior Unsecured Term Loan Facility (Facility) with a group of banks whereby the banks lent EOG $150 million with a maturity date of October 30, 2005. This Facility calls for interest to be charged at a spread over LIBOR (London InterBank Offering Rate) or the base rate at EOG’s option, and contains substantially the same covenants as those in EOG’s $600 million Long-Term Revolving Credit Agreement. On March 31, 2004, EOG repaid $75 million of the $150 million loan. The remaining $75 million balance is classified as long-term debt based on EOG’s intent and ability to ultimately replace such amounts with other long-term debt. The applicable interest rates for the Facility were 3.17% and 1.88% at December 31, 2004 and December 31, 2003, respectively. On March 9, 2004, under Rule 144A of the Securities Act of 1933, as amended, EOG Resources Canada Inc., a wholly owned subsidiary of EOG, issued notes with a total principal amount of US$150 million, an annual interest rate of 4.75% and a maturity date of March 15, 2014. The notes are guaranteed by EOG. In conjunction with the offering, EOG entered into a foreign currency swap transaction with multiple banks for the equivalent amount of the notes and related interest, which has in effect converted this indebtedness into CAD$201.3 million with a 5.275% interest rate. The 6.00% to 6.70% Notes due 2006 to 2028 were issued through public offerings and have effective interest rates of 6.16% to 6.81%. The Subsidiary Debt due 2011 bears interest at a fixed rate of 7.00% and is guaranteed by EOG. The weighted average interest rate for the commercial paper was 1.45% for 2004. On September 15, 2004, EOG repaid in full upon maturity the $100 million, 6.50% Notes. At December 31, 2004, the aggregate annual maturities of long-term debt were $75 million for 2005, $127 million in 2006, $100 million for 2007, $174 million for 2008 and zero for 2009. Both EOG’s Credit Agreement and Facility contain certain restrictive covenants, including a maximum debt-to-total capitalization ratio of 65% and a minimum ratio of EBITDAX (earnings before interest, taxes, DD&A, and exploration expense) to interest expense of at least three times. Other than these covenants, EOG does not have any other financial covenants in its financing agreements. EOG continues to comply with these two covenants and does not view them as materially restrictive. Shelf Registration. As of February 25, 2005, the amount available under various filed registration statements with the SEC for the offer and sale from time to time of EOG debt securities, preferred stock and/or common stock totaled $688 million. Fair Value Of Long-Term Debt. At December 31, 2004 and 2003, EOG had $1,078 million and $1,109 million, respectively, of long-term debt, which had fair values of approximately $1,146 million and $1,175 million, respectively. The fair value of long-term debt is the value EOG would have to pay to retire the debt, including any premium or discount to the debt-holder for the differential between the stated interest rate and the year-end market rate. The fair value of long-term debt is based upon quoted market prices and, where such quotes were not available, upon interest rates available to EOG at year-end. |
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