EOG Resources: Drilling for Profits

EOG Resources, Inc. (EOG) is drilling for profits as natural gas prices keep rising. On Feb 28, EOG announced two major new crude discoveries which the company expects to begin producing by next year. The company beat on estimates in the fourth quarter by 20.56% and has surprised in three of the last four quarters by an average of 9.86%.

EOG Resources is a large independent oil and natural gas company with proven reserves in the United States, Canada, offshore Trinidad and the United Kingdom North Sea.

In 2007, 85% of EOG’s production was natural gas and 15% was crude oil and natural gas liquids. A total of 83% of the company's production came from the United States and Canada. For the full year 2007, total company production increased 11% on a daily basis as compared to 2006. In the United States natural gas daily production increased 19%.

On Feb 28, the company, a Zacks #2 Rank (Buy), announced major new crude oil discoveries and raised its production growth forecasts for both 2009 and 2010 to the range of 13% to 15%, compared to the prior growth estimate of 10%. The company believes that crude oil and natural-gas liquid volumes will likely grow faster than natural-gas production.

This bullish news was in addition to the outstanding fourth-quarter earnings the company reported on Feb 7. Profit for the quarter soared 51%, boosted by large one-time gains and a jump in revenue.

EOG earned $358 million, or $1.44 per share, compared with $237.2 million, or 96 cents per share, for the same quarter in 2006. Excluding special items, the company posted $1.29 per share, beating analysts' estimates by 20.56% or 22 cents per share.

Brokerage analysts have been raising estimates on the company for the quarter and the year as natural gas prices remain elevated. For the quarter, nine out of 17 covering analysts raised for the quarter by four cents to $1.47 from $1.43. Two analysts also lowered.

For the year, 12 out of 21 analysts raised consensus estimates by 33 cents to $6.14 from $5.81 per share. Two analysts also lowered.

Analysts expect year-over-year growth in the first quarter of 32.11%. For the year, analysts estimate year-over-year growth of 41.11%.

The company also announced on Feb 7 that it was increasing its dividend by 33% to 12 cents per share, providing a yield of 0.40%.