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Some of the E&P names have sold off recently as oil prices have declined to near six month lows. Investors with "dry powder" can now find more attractive entry points on a variety of major producers. One E & P play seems to be popping up on a couple of "2014Top Picks" in energy lists and has declined some ~$20 a share from its recent highs is Eagle Ford & Bakken producer EOG Resources (NYSE:EOG).

This fast growing producer has picked up several catalysts in the last month or so in the midst of its decline.

Positive Catalysts:

  • Barclays just named the company one of its top four 'Oil & Gas' picks for the New Year. Barclay's analyst sees EOG "Exploiting its first-mover advantage into oil shales, the company has executed superbly over that time period, growing production (adjusted for balance sheet growth) four times as fast as the group."
  • EOG Resources was also announced as one of Credit Suisse's top three E & P plays in 2014. The analyst at Credit Suisse notes EOG's "role in the three biggest tight oil plays makes it a huge player in the exploration and production field." He also states that the company has been speculated as a major acquisition target in 2013.
  • Both of these "Top Picks" came after the company blew through Q3 earnings estimates posting $2.32 in EPS, more than a quarter a share above the consensus. During the quarter, the company increased its U.S. crude oil and condensate production by 41% and total company crude oil and condensate production by 39%; total liquids production rose 33%.
  • Finally, an insider bought over $1mm in new shares in mid-December at current price levels. The same insider bought over $500k in stock in November.

Company Overview:

EOG Resources is the biggest leaseholder in the Eagle Ford shale region where production is exploding and it also has significant acreage in the Bakken, Niobara and Permian shale formations. The company sports a market capitalization of ~$45B.

4 reasons EOG is a buy at $165 a share:

  1. Revenue is tracking to a ~25% year over year gain in FY2013. Analysts project another increase in the low teens should occur in FY2014.
  2. Earnings should post a better than 30% year over year increase in FY2013 and should be in line with revenue growth in FY2014.
  3. The company has easily beat earnings expectations for at least six straight quarters. The average beat over consensus over that time frame has averaged ~30%.
  4. S&P has is highest rating "Strong Buy" and has a price target of $197 a share on the stock. EOG does sport a forward PE of 18.5, but that is a discount to its five year average (26.0).
Source: EOG Resources: 2014 Top Energy Pick At Barclays And Credit Suisse