Don't Ignore EOG Resources' Potential

| About: EOG Resources, (EOG)

Not one to take center stage in the spotlight, the fourth largest U.S. independent oil and natural gas producer by market value, EOG Resources (NYSE:EOG), reported first quarter 2012 crude oil, natural gas liquids and condensate growth of 48% contributed mainly to production from properties in the Permian Basin, the Bakken, Eagle Ford Shale and Barnett Combo play.

Competing with Sonde Resources (NYSEMKT:SOQ), Apache (NYSE:APA) and Anadarko Petroleum (NYSE:APC), the company expects to grow overall oil and gas production in 2012 by 7%, and estimates that crude oil and liquids production will increase by 33% in this year, up from the previous guidance of 30% annual growth. With proved reserves in the United States, Canada, the United Kingdom, China and Trinidad, and great success in Eagle Ford and Bakken Shales, I feel EOG Resources is a great investment now for the long haul. The company has loads of cash and is putting money into smart successful plays now setting a pattern for future success.

The company is doing well in multiple locations including Three Forks in McKenzie County, ND where it reported four successful wells drilled during the first quarter 2012. These wells had initial production rates ranging from 926 to 3,415 barrels of oil per day, with natural gas production between 1.2 million and 3 million cubic feet per day. In the Eagle Ford Shale where EOG Resources has 650,000 net acres, with 92% of the acreage located in the crude oil and/or wet gas windows of the play, the company is the largest oil producer reporting production of 77,000 barrels of oil equivalent [BOE] per day in March.

The Bakken Shale is another good play for EOG Resources. The company is focusing attention in the Williston Basin and reported a gross production of 56,400 BOE per day at the end of 2011. The company initiated a pilot water flood program in the Bakken during the first quarter 2012 to test secondary recovery methods on this formation, with results of this pilot test expected by the end of this year.

Surpassing competitor Cabot (NYSE:COG), EOG Resources' production goal to reach 200,000 barrels per day by the end of 2012, up from 140,000 barrels per day at the close of the first quarter, might need to be reevaluated. As CEO Mark G. Papa stated during the first quarter 2012 results report:

During the first quarter, we made progress toward achieving a number of EOG's 2012 operational goals. Production results and very strong 30-day flow rates from our Eagle Ford wells drilled on tighter spacing indicate we are effectively improving our completions.

In addition, we expanded our Bakken operations in two different areas and confirmed economic infill drilling on our Core sweet spot acreage. Also, we've rapidly moved into development mode in the West Texas Wolfcamp. The momentum in our operations continues to drive every facet of our exploration and development activities. We are very upbeat about EOG's potential.

And upbeat they should be. The company reported first quarter 2012 net income of $324.0 million, or $1.20 per share, compared to first quarter 2011 net income of $134.0 million, or $0.52 per share.

Another of EOG Resources' key plays, the Fort Worth Barnett Combo, is set to deliver the second largest contribution to total company liquids growth in 2012. During the first quarter 2012, the company completed several successful wells with individual maximum crude oil rates ranging from 420 to 700 Bopd with 80 to 184 Bpd of NGLs and 490 to 1,110 Mcfd of natural gas. The company has approximately 99% working interest in these Cooke County wells. Also during the first quarter, the company drilled successful step-out wells that expand the prospective area of its Barnett Combo acreage.

EOG Resources continues making headway internationally as well. The company continues to deliver natural gas in Trinidad, under existing supply contracts utilizing several fields in the South East Coast Consortium Block, as well as the Pelican Field. In what is known as Block 4(a), production from the six wells in the Toucan Field and one in the EMZ Area which began in February 2012, are supplying natural gas under a contract with the National Gas Company of Trinidad and Tobago. In the United Kingdom, the company continues to make progress in field development for its East Irish Sea Conwy/Corfe, which was approved by the U.K. Department of Energy and Climate Change this past March. The company expects to begin facility and pipeline installation in the second half of 2012, with drilling expected to commence at the beginning of 2013.

According to the first quarter 2012 results, through May 1st, 2012, cash proceeds from asset sales were approximately $565 million. The company's total debt outstanding was $5,011 million for a debt-to-total capitalization ratio of 28%. Taking into account cash on the balance sheet of $294 million at the end of the first quarter, EOG Resources' net debt was $4,717 million for a net debt-to-total capitalization ratio of 27%. The company reported first quarter 2012 earnings of $1.17 per share, exceeding last year's first quarter results by 72.06%. The company had first quarter 2012 revenues of $2.8067 billion, 1.21% above the prior year's first quarter results. The revenues for the full year 2011 were $10.1261 billion, 66.00% above the prior year's results. Also, the company reported annual 2011 earnings of $3.79 per share and reported a dividend of 0.64 USD, which represents a 3.23% increase over last year.

A company with this much winning under its belt just has to be included in the oil and gas section of an investor's portfolio. The historical path of successes along with the inspiring leadership of CEO Papa, makes this one of those companies that can't lose.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.