EOG All Set to Develop More Energy Resources

Buy-recommended EOG Resources (EOG) offers unlevered appreciation potential of 47% to a McDep Ratio of 1.0 and levered appreciation potential of 53% to Net Present Value (NPV) of $110 a share. During the first quarter, according to results released on the evening of May 4, the company generated cash from oil and gas production of about $15 a barrel of oil equivalent as the difference between price of about $24 and cash operating costs of about $9.

Unlevered cash flow (Ebitda) was less than our expectations from three months ago, but reasonable under industry circumstances. We project gradual increases in Ebitda in the next few quarters. Our valuation capitalizes cash flow at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P) for natural gas and oil.

Pointing to expected oil price recovery, futures prices for the next six years averaged near $71 a barrel recently. EOG is an efficient, low-debt, oil and gas finder and developer ready to go when more supply is needed again.

Originally published on May 5, 2009.

Comments

[Shale Gas:]

EOG Resources is working on a some properties in the Northern part of the Barnett Shale that produce a lot more oil relative the rest of the Barnett Shale.

Jun 08 09:10 AM