EOG Resources 2004 Annual Report to Shareholders

Scroll down to view entire page

back next

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

Notes to Consolidated Financial Statements

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

4. OTHER INCOME (EXPENSE), NET
Other Income (Expense), Net for 2004 included income from equity investments of $11 million, gains on sales of reserves and related assets of $6 million and foreign currency transaction losses of $7 million. Other Income (Expense), Net for 2003 included foreign currency transaction gains of $9 million and income from equity investments of $4 million. The foreign currency transaction gain and loss amounts for 2004 and 2003 are results of applying the changes in the Canadian exchange rate to certain intercompany short-term loans that eliminate in consolidation.

5. INCOME TAXES
The principal components of EOG’s net deferred income tax liability at December 31 were as follows (in thousands):

The components of income before income taxes were as follows (in thousands):

The principal components of EOG’s income tax provision for the years indicated below were as follows (in thousands):

The differences between taxes computed at the United States federal statutory tax rate and EOG’s effective rate were as follows:

    On October 22, 2004, the American Jobs Creation Act of 2004 (the Act) was enacted. The Act creates a temporary incentive for United States corporations to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. The deduction is subject to a number of limitations and, currently, uncertainty remains as to how to interpret some provisions in the Act. The Act limits the qualified dividends to the greater of $500 million or the amount of earnings permanently reinvested outside the United States, as reported in the 2002 financial statements, which was $550 million. In addition, a comprehensive analysis of foreign legal and tax ramifications must be completed before such dividends are declared. As such, EOG is not yet in a position to decide on whether, and to what extent, it might repatriate foreign earnings that have not yet been remitted to the United States. EOG expects to be in a position to complete the assessment by September 30, 2005.
    EOG’s foreign subsidiaries’ undistributed earnings of approximately $1 billion at December 31, 2004 are considered to be indefinitely invested outside the United States and, accordingly, no United States or state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends, EOG may be subject to both foreign withholding taxes and United States income taxes, net of allowable foreign tax credits. Determination of any potential amount of unrecognized deferred income tax liabilities is not practicable.
    EOG incurred a tax net operating loss of $191 million in 2002. During 2003, EOG utilized $176 million of the 2002 net operating loss. The remaining net operating loss of $15 million was utilized in 2004.
    A foreign net operating loss of $80 million, of which $55 million was incurred during 2004, will be carried forward indefinitely until utilized.
    EOG had an alternative minimum tax (AMT) credit carry forward from prior years of $6 million which was used to offset regular income taxes in 2004.

continued

back next