EOG Resources Inc.: One Proud And Well-Paid Papa

Two years before the lid blew off the Enron scandal, Enron Oil & Gas Co. decided to change its name to EOG Resources Inc. -- and for good reason. Who would want to have Enron in their name? Especially amid all the rumors of Enron's irregular accounting.

Also in 1999, the company declared its independence from Enron Corp. and elected a new chairman and CEO, Mark G. Papa.

Since its independence, the Houston-based oil and natural gas company has consistently grown revenues. And in 2006 it increased overall organic year-over-year production by 9% and increased natural gas production in the U.S. by 14%.

"In 2006, EOG remained true to its strategy by focusing on organic production growth, managing costs and maintaining a strong balance sheet," said Papa in a Feb. 1 statement announcing fourth quarter 2006 results. "For the year, we achieved 26% return on equity and 25% return on capital employed."

According to the company, 86% of EOG's production was natural gas and 14% was crude oil and natural gas liquids. Of this production, 79% came from the U.S. and Canada. Specifically, the company produced 1,561 MMcfed (million cubic feet equivalent per day) in 2006, which is up from 1,433 MMcfed in 2005.

In 2006 the company's natural gas reserves were 6,095 billion cubic feet and estimated net proved crude oil, condensate and natural gas liquids reserves were 118 million barrels. Approximately 60% of EOG's reserves on a natural gas equivalent basis were located in the United States, 20% in Canada, 20% in Trinidad and less than 1% in the United Kingdom North Sea.

In addition to strong results in natural gas drilling, EOG has completed five horizontal oil wells to date in the North Dakota Bakken Formation. The most recent was completed in mid-January and is producing over 1,100 barrels of oil per day. EOG plans to increase drilling activity from one to three rigs in early 2007.

"2006 represented a break-out year for EOG; we not only gained a much better understanding of the application of horizontal drilling to resource plays, we also built up a deep drilling inventory," said Papa. "We exited 2006 on track with our operational goals and with strong momentum in the organization."

For his part of the success, Papa was compensated nicely in 2006. According to the company's proxy statement to the SEC dated March 29, 2007, his base salary is $940,000 annually. His stock awards totaled nearly $2.2 million, the open stock appreciation rights awards were $3.2 million, the non-equity incentive plan compensation was $1.14 million and all other compensation was just over $532,000. The grand total for Papa: $7.96 million. Nice work if you can get it.

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