DBRS Upgrades EOG Resources, Inc. to A (low)

Dominion Bond Rating Service (“DBRS”) has today upgraded the ratings of EOG Resources, Inc. (“EOG” or the “Company”) and EOG Resources Canada Inc. to A (low). In addition, DBRS has assigned a rating of R-1 (low) to EOG’s Commercial Paper program.

The rating actions are based on the following factors: (1) EOG has consistently executed its low-risk North American natural gas strategy, investing its strong cash flow to grow its operations through the drill bit, while leading its peer group in cost structure and returns. At the same time as other companies have resorted to acquisitions and more recently share repurchases to boost production and returns respectively, EOG has maintained superior financial flexibility by internally funding its gradually increasing investment program. In aggregate, capex increases have been substantial (127% since 2002 excluding exploration expense) though funded internally, and the Company maintains strong liquidity ($821 million in cash at March 31, 2006) and low leverage (3% net debt to capital), which has been significantly reduced over the past four years. EOG expects to spend $2.5 billion to $2.6 billion in 2006 capex (includes exploration expense), a 35% increase from 2005 that should also be funded from operating cash flow. (2) A continuing challenge for EOG has been its ability to grow production from mature North American gas reserves. EOG has addressed this challenge without compromising its low-risk strategy by increasing its focus on newer unconventional natural gas reserves. The most prominent of these has been the Barnett Shale field in northern Texas, the primary driver of production growth over the past 18 months. The Company has managed its risk by following others into the area and gradually improving its drilling and completion efficiency as its experience has grown. This experience could lead to additional growth as it is being applied to evaluate similar shale gas reserves in North America. (3) The Company has extended its North American gas strategy to offshore Trinidad and Tobago, where its production is converted either to ammonia, methanol, or liquefied natural gas (“LNG”) for sale to U.S. markets. While demand is limited by current export capacity (expected to continue growing) and prices generally capped, the region offers low-risk development opportunities with significant exploration upside over the medium to long term. The Company’s focus on gas exposes it to potentially greater price volatility than a competitor with more balanced oil and gas production. Prices have dropped sharply this year for gas, and rapidly filling North American storage may result in further weakness in the near term.

Anticipating this weakness, EOG has been one of the few companies to hedge a portion of its North American production (~20%) through October of 2006, with lesser volumes through the end of 2007. Long-term contracts in Trinidad and Tobago also provide greater stability for an additional 19% of total production. EOG is positioned to manage intermittent price weakness as a result of its flexible drilling program and strong balance sheet.

Despite the potential for near term gas price weakness, the medium term outlook remains strong, as does the outlook for EOG. Though smaller than most comparably rated companies, EOG’s operating strength and conservative financial strategy support the higher rating. With some modest debt maturities over the next three years, leverage should continue to decline, while DBRS expects significant free cash flow that could be distributed to shareholders without pressuring the balance sheet.

Note: This rating is based on public information.