Can EOG Resources Grow At 25% With Oil At $65?
Richard Zeits • 42 Comments
Richard Zeits • 42 Comments
Sat, Mar. 12, 8:25 AM
- Markets have been waiting for U.S. oil companies to cut production amid lower crude prices, but many of the companies have been paying their top executives to keep the oil flowing, according to a WSJ analysis.
- “You want to know why most of the industry outspent cash flow last year trying to grow production? That's the way they're paid," says EOG Resources (NYSE:EOG) CEO William Thomas.
- An example: Hess (NYSE:HES) CEO John Hess earned more than $1M in 2014 (the most recent year available for pay data), which was more than a third of his bonus, because the company beat production and reserve targets.
- Also: Anadarko Petroleum (NYSE:APC) CEO R.A. Walker earned ~$1.5M because the company’s output rose 8% and exceeded goals for finding new oil and gas deposits.
- Thomas and others at EOG derived just 8% of their bonuses from hitting production and reserve targets in 2014, and instead placed more emphasis on return on capital, relative stock price and spending, WSJ says.
- Some shareholder activists are seeking to limit bonuses tied to production and reserve growth, pitching proxy ballot measures at companies such as Chesapeake Energy (NYSE:CHK), ConocoPhillips (NYSE:COP) and Devon Energy (NYSE:DVN).
- Companies will detail how they calculated 2015 bonuses in proxy filings beginning this month.
Mon, Feb. 29, 1:57 PM
- EOG Resources (EOG -2.8%) is downgraded to Hold from Buy with a $64 price target, cut from $80, at Wunderlich, after concluding its first annual loss since being spun off from Enron in 1999.
- EOG has used the downturn to drill and complete better wells which are able to withstand lower prices for longer, and plans to cut capex in half again in 2016, a decision the firm says it understands and supports.
- EOG is focusing on its premium locations, which can generate 30%-plus rates of return with oil at $40/bbl, and the company plans to divest some very high quality assets to protect its balance sheet and to be super competitive in a global market when crude prices rebound.
Fri, Feb. 26, 1:10 PM
- Chevron's (CVX -0.1%) Aa1 credit rating is placed on review for a downgrade at Moody's, which predicts negative free cash flow this year and next, and possibly even into 2018.
- Moody’s expects CVX's negative free cash flow exceeding $15B in 2016, despite the company's planned 25% capex cut, after recording negative free cash flow of ~$16B in 2015.
- Newly downgraded at Moody's: Occidental Petroleum (OXY +1.2%) to A3, EOG Resources (EOG -2.3%) to Baa1, ConocoPhillips (COP +4.5%) to Baa2, Apache (APA +5.1%) to Baa3, Marathon Oil (MRO +5.5%) to Ba1, Devon Energy (DVN +4.6%) to Ba2 and EnLink Midstream Partners (ENLK +4.9%) to Ba2.
- Earlier: Exxon's AAA rating affirmed by Moody's but outlook turns negative (Feb. 25)
Thu, Feb. 25, 5:35 PM
- EOG Resources (NYSE:EOG) -2.2% AH after reporting a smaller than expected Q4 loss but weaker than expected revenue.
- EOG says it plans $2.4B-$2.6B in capital spending this year, a 45%-50% Y/Y reduction, and will shift its 2016 focus to premium drilling and completions; it says it has identified more than 3,200 premium drilling locations capable of delivering solid rates of return at low commodity prices.
- Says it expects to complete 270 net wells in 2016, vs. 470 net wells last year, and foresees total crude oil production to decline by 5% Y/Y.
- Q4 production fell 7% to 569.5K boe/day.
- EOG also says net proved reserves fell 15% in 2015 to 2.12B boe, comprised of 52% crude oil and condensate, 18% natural gas liquids and 30% natural gas.
Thu, Feb. 25, 4:21 PM
Wed, Feb. 24, 5:35 PM
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Mon, Feb. 22, 3:21 PM
- Bernstein analyst Bob Brackett tags Chesapeake Energy (CHK +17%) and Encana (ECA +5.6%) as the E&P stocks that could cause the most pain for investors going forward.
- CHK already has suffered plenty, but Brackett writes thinks it has the highest risk of bankruptcy in his coverage universe, and the current stock price "essentially shuts it out of the equity market,” while ECA is most likely to issue equity and see its credit rating cut to junk status.
- Meanwhile, Brackett thinks EOG Resources (EOG +3.8%) is the safest play due largely to a returns-oriented culture and relative conservatism in the early part of this cycle, while ConocoPhillips (COP +4.4%) and Devon Resources (DVN +9%) already have made their big moves - a big dividend cut and an equity raise, respectively - which relieves the pressure on management to take further drastic steps.
Wed, Feb. 17, 5:47 PM
- North Dakota's crude oil production fell in December for the first time in three months, down 2.5% to 1,152,280 bbl/day, as oil producers begin to acknowledging the low-price reality rolling over the entire energy industry.
- Only 41 drilling rigs are operating in the state as of Wednesday, the lowest level since July 2009, and North Dakota producers have cut back requests to drill new wells, with only 78 permitted in January compared to 125 in November.
- Bakken shale exposure includes: CLR, HES, WLL, STO, OAS, MRO, EOG, XOM, NOG, CHK, DNR, SM, NFX, OXY, MUR, OXY, COP, SSN, CXO, EOX
Thu, Feb. 11, 2:44 PM
- More dividend cuts and equity raises are coming for oil and gas stocks such as Apache (APA -4.3%), Devon Energy (DVN -5.1%), Encana (ECA -5.7%), Anadarko Petroleum (APC -6.2%) and Marathon Oil (MRO -5.1%), as management teams have become more willing to take stronger steps to strength balance sheets, Barclays believes.
- The firm views 4x debt to pre-interest cash flow as a warning sign that companies may have leverage concerns, at which roughly half of its energy coverage universe remains overlevered.
- Barclays thinks Canadian Natural Resource (CNQ -4.4%) likely will maintain its dividend, while Occidental Petroleum (OXY -0.8%) has the financial strength to maintain or even increase the dividend.
- The firm sees leveraged companies such as DVN, ECA and Range Resources (RRC -3%), and companies with large deficits including DVN and APC as most likely to consider raising equity; it also thinks MRO, WPX Energy (WPX -7.8%), Southwestern Energy (SWN -7.7%), Continental Resources (CLR +0.2%), Noble Energy (NBL -2%) and Newfield Exploration (NFX -1.2%) could issue equity; APA, CNQ, OXY, EOG Resources (EOG -0.9%) and Pioneer Natural Resources (PXD -0.3%) are considered unlikely to issue equity this year.
Wed, Feb. 10, 5:27 PM
- The energy sector will not repeat last year’s mistake of rapidly boosting production the next time the price of oil hits $60/bbl, EOG Resources (NYSE:EOG) Chairman/CEO Bill Thomas says at the NAPE Summit 2016 in Houston.
- That’s the case even though a lot of EOG’s wells in the Eagle Ford and Permian Basin are profitable near $45/bbl, Thomas says: last year, EOG had a “zero” growth goal after previously surging ~40%/year.
- While admitting some disappointment that overall U.S. oil production did not decline more last year, the CEO says he expects sharper cutbacks this year with most producers cutting their capex by at least 40%.
- EOG considers itself the largest producer of oil in the continental U.S., and “we don’t plan on giving up that lead,” Thomas says, adding that “there’s no better time to pick up acreage when the industry is at a low point."
Wed, Feb. 3, 5:17 AM
- Just ten days after Moody's put over half a trillion dollars in energy debt on review for downgrade, S&P decided it wanted to be the first one out of the gate.
- Companies that saw their ratings cut by one notch: Chevron (NYSE:CVX), Apache (NYSE:APA), Continental Resources (NYSE:CLR), Devon Energy (NYSE:DVN), EOG Resources (NYSE:EOG), Hess (NYSE:HES), Hunt Oil, Marathon Oil (NYSE:MRO), Murphy Oil (NYSE:MUR) and Southwestern Energy (NYSE:SWN).
- Oil futures settled below $30 a barrel again on Tuesday, but prices have taken a positive turn this morning after two days of steep declines.
- Previously: Moody's places 175 oil, gas and mining companies on review for downgrade (Jan. 22 2016)
Thu, Jan. 21, 3:49 PM
- Crude oil futures settled more than 4% higher on the back of perceived oversold conditions, despite a higher than expected inventory build; March WTI jumped 4.2% to settle at $29.53/bbl after trading as high as $30.25, while Brent surged 4.9% to $29.25.
- Crude prices were supported by the inventory increase in this morning's EIA report, which was less than the API’s report released on Wednesday, says Phil Flynn, senior market analyst at Price Futures Group; also, reports of Libyan oil tanks on fire eased speculation that Libya would be exporting more oil soon.
- Also supportive for prices, oil production in the lower 48 states edged lower for the first time in seven weeks, “which is at least ‘less bearish’ for the extremely oversupplied global oil market,” says Tyler Richey of The 7:00’s Report.
- The energy sector is bouncing after hitting a multiyear low yesterday: XOM +1.4%, CVX +2.7%, RDS.A +3.8%, BP +3.7%, TOT +2.3%, STO +4.5%, COP +6.2%, MRO +12.2%, APC +10.3%, OXY +2.1%, EOG +6.4%, PXD +2.7%, APA +8.2%, HES +7%, KMI +15.5%, EPD +3.3%, ETP +6.8%.
- ETFs: UNG, USO, OIL, XLE, UGAZ, UCO, DGAZ, UWTI, VDE, ERX, OIH, SCO, XOP, BNO, BOIL, GAZ, DBO, DWTI, ERY, FCG, DIG, GASL, DTO, DUG, KOLD, BGR, USL, XES, IYE, IEO, UNL, IEZ, DNO, FENY, PXE, PXI, FIF, PXJ, OLO, SZO, NDP, RYE, DCNG, FXN, OLEM, DDG
Sat, Jan. 16, 9:15 AM
- Oppenheimer's Fadel Gheit and Luis Amadeo offer a bleak view of the Q4 2015 earnings season for oil and gas producers, warning of sharply lower earnings with deeper losses and wider cash flow deficits Y/Y and Q/Q.
- Among the integrated oil majors, the analysts see overall Q4 earnings falling by more than 50% Y/Y and more than 30% Q/Q; they expect Chevron (NYSE:CVX) to show the steepest earnings decline of 60%-plus Y/Y and 50%-plus Q/Q, while anticipating Exxon Mobil (NYSE:XOM) to report the lowest declines of 40%-plus Y/Y and 25%-plus Q/Q.
- Of the 15 large E&Ps Oppenheimer covers, 13 likely will report losses in Q4 vs. 10 in Q3 and none in Q4 2014, with only Devon Energy (NYSE:DVN) and Range Resources (NYSE:RRC) reporting a profit; the analysts expect most of the other 13 to report steeper declines, including Anadarko Petroleum (NYSE:APC), Apache (NYSE:APA), Chesapeake Energy (NYSE:CHK), EOG Resources (NYSE:EOG), Hess (NYSE:HES), Marathon Oil (NYSE:MRO), Murphy Oil (NYSE:MUR), Pioneer Natural Resources (NYSE:PXD) and Southwestern Energy (NYSE:SWN).
- Earlier this week, Gheit predicted that half of U.S. shale oil producers could go bankrupt before the crude market reaches equilibrium.
Fri, Jan. 15, 3:20 PM
- Nymex crude oil settled -5.7% at $29.42/bbl, its lowest level since November 2003, with concerns that Iran will soon add to the world's glut of crude supplies added to fears about an economic slowdown in China.
- When a decade of trade and banking sanctions against Iran end, perhaps as soon as Monday, the country could lift exports by 500K bbl/day and gradually raise shipments by the same amount again; Iran reportedly has 22 VLCCs floating off its coast, with 13 fully or almost fully loaded.
- Among major energy companies today: XOM -1.8%, CVX -2.2%, RDS.A -5%, BP -5.2%, COP -4.9%, TOT -3.7%, PBR -8.6%, E -4.5%, TOT -3.7%, STO -2.5%, MRO -10.2%, HES -3.6%, OXY -1.8%, DVN -5.8%, APA -4.9%, EOG -3.8%, APC -7.9%, PXD -2.6%, CXO -4.9%.
- ETFs: UNG, USO, OIL, XLE, UGAZ, UCO, DGAZ, UWTI, VDE, ERX, OIH, SCO, XOP, BNO, BOIL, GAZ, DBO, DWTI, ERY, FCG, DIG, GASL, DTO, DUG, KOLD, BGR, USL, XES, IYE, IEO, UNL, IEZ, DNO, FENY, PXE, PXI, PXJ, FIF, DBE, OLO, SZO, NDP, RYE, DCNG, RJN, FXN, OLEM, DDG
Mon, Jan. 11, 4:00 AM
- Stocks to watch for a Barron's bounce are headlined by HanesBrands (NYSE:HBI) which is tapped to rise as much as 30% over the next year. Hanesbrands is poised to benefit from strategic acquisitions and product innovation, according to the publication.
- An interview with Fidelity's John Dowd yields Schulmberger (NYSE:SLB), ExxonMobile (NYSE:XOM), EOG Resources (NYSE:EOG), and Newfield Exploration (NYSE:NFX) as strong long-term picks from the energy sector.
- Deckers Outdoor (NYSE:DECK) is also mentioned favorably. A new line of Uggs is seen helping Deckers recover from its recent slide.
Tue, Jan. 5, 2:47 PM
- An eventual upturn in crude oil prices should turn the tide for the E&P sector In 2016, Citi analyst Robert Morris says as he upgrades Anadarko Petroleum (APC -1%), Canadian Natural Resources (CNQ +1%), EOG Resources (EOG +0.8%) and Cimarex Energy (XEC +1.4%) to Buy from Neutral and ups Oasis Petroleum (OAS -3.3%) to Neutral from Sell.
- For the first time in more than a decade, the per share debt-adjusted growth metrics within the E&P sector showed no correlation to the share price performance in 2015, according to Morris; without a further collapse in commodity prices, he sees debt-adjusted growth metrics, along with key debt metrics and the ability to increase production by spending within cash flow, driving relative E&P share performance.
- Morris maintains Buy ratings on Antero Resources (AR -2.4%), Apache (APA -2.3%), Concho Resources (CXO +1%), Memorial Resource Development (MRD -2%), Range Resources (RRC -0.4%) and Whiting Petroleum (WLL -7.1%), but downgrades Hess (HES -0.5%) to Neutral from Buy.
EOG Resources, Inc. engages in the exploration, development, production and marketing of crude oil and natural gas primarily in major producing basins in the United States, Canada, Trinidad & Tobago, the United Kingdom, Argentina and China. Its operations are all crude oil and natural gas... More
Sector: Basic Materials
Industry: Independent Oil & Gas
Country: United States
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