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EOG Resources Is Well-Positioned To Face The Challenges Of The Oil And Gas Market
- The company has assets in the Eagle Ford area where companies can remain profitable even if crude oil falls to $40 per barrel.
- The sale of Canadian assets will allow the company to increase focus on the U.S. assets, which are cost efficient and have high productivity.
- The majority of EOG's assets will continue to return 10% after tax even if crude prices fall to $40 per barrel.
- EOG Resources will remain cash-flow neutral if oil stays at $60 per barrel over a period of 12 months.
- Unprecedented growth in company's oil production should take a backseat to cash conservation.
- Production uplift and lower completion costs will help somewhat offset lower crude prices.
- EOG is very strongly positioned to weather a most severe oil price trough.
- If oil price remained at $65 per barrel level, EOG would still be able to post oil production growth in 2015, without increasing debt level.
- Given weak hedge protection in 2015, the company’s financial results will be volatile quarter to quarter.
- EOG’s Eagle Ford and Bakken shale formations as well as its Delaware basins are generating triple digit returns despite low crude oil prices.
- These assets are expected to continue generating growth even if oil prices fall below $40 as EOG is currently involved in rigorous efforts which will cut costs even further.
- The company has discovered over 700 locations rich in crude oil content which have added a decade of high return drilling possibilities and potential to generate a 45% return.
- The company can generate positive synergies for investors as it has the power to drive share prices upwards. Investors stand to gain highly by buying into EOG Resources’ stock.
Bakken Update: EOG Antelope Well Has One-Year Payback At $50/Bbl WTI
- EOG continues to be the top US shale operator in the United States.
- In its core acreage, EOG wells still provide excellent returns at today's realized oil prices.
- Improvements of well design have been significant even in timeframes as short as one year.
Building A Core Investment Portfolio For The Next 20 Years: EOG Resources
- EOG Resources is a low-cost oil producer with premium assets in the Eagle Ford, Bakken and Delaware Basin.
- The company can weather any continued downward pressure on oil prices.
- Every investor should have a core portfolio that they can rely on for steady gains without wild fluctuations.
How Did EOG Resources' Earnings Rise Despite Lower Crude Oil Prices?
- For the 3rd quarter of the fiscal year 2014, EOG Resources reported revenues of $5.1 billion, up almost 46% from $3.5 billion in the year ago quarter.
- EOG’s net income for Q3 amounted to $1.1 billion, more than doubling over the course of the year from $462.5 million in Q3 2013. Earnings per share amounted to $2.01.
- Total increased 17% year on year. EOG’s oil production during the quarter was even higher, rising 29% over and above the year ago quarter.
- The surge in oil production was led by massive production gains in the Eagle Ford, North Dakota Bakken and the Delaware Basin.
- The company expects total production to increase 16.5% during the full fiscal year 2014. It had previously forecasted 14% growth during the year.
EOG Resources Has Transformed The Wolfcamp Into A Triple-Digit Play
- EOG Resources is now guiding to generate 100% ATROR from the Delaware Basin portion of the Wolfcamp.
- Boosting its average crude production mix to 50% from 31% translated into much higher returns.
- Even if crude prices fall to $40 a barrel, EOG will still make a 10% ATROR from the Wolfcamp Oil Window.
- The Conwy project continues to be pushed back, delaying a catalyst for EOG's oil production.
EOG Resources Remains Overvalued Relative To Future Earnings Growth
- Despite a recent 20% correction, EOG Resources still trades at a premium P/E multiple to other large cap North American energy companies.
- While EOG boasts a solid balance sheet and impressive land position in the Eagle Ford shale, its lack of free cash flow generation leads to an insignificant dividend yield.
- Relative to analysts' future earnings expectations, EOG Resources appears overvalued to up to 25% based on its current share price.
- EOG Resources raised its guidance once again, boosting company-wide and crude/condensate growth projections for 2014.
- To keep this momentum going, EOG is moving more aggressively into the Delaware Basin.
- The Second Bone Spring and the Leonard plays offer EOG Resources a chance to generate triple-digit returns from its wells.
- EOG reported its 16th consecutive quarterly beat.
- The company offers the best combination of almost 100% U.S. unconventional exposure with top-tier debt adjusted production and cash flow growth.
- EOG's resilient portfolio can generate strong returns even in a low oil prices world.
EOG Reported Solid Production Metrics, But The Market Is Neglecting A 2015 Gamble
- EOG recently announced solid Q3 results.
- 2014 full year total production growth increased to 31%.
- Oil production growth is outpacing gassy growth, as oil is now 48% of production.
- Management announced hedging through 2015, but is it enough?
EOG Resources Q3 Earnings Preview: Delaware Basin, Second Bone Spring, Leonard Shales
- EOG could add hundreds of millions of BOE to its resource potential as it actively explores the Second Bone Spring interval.
- Investors should look out for the production results of EOG's new Second Bone Spring wells.
- If results continue to be strong in the Second Bone Spring interval, EOG will be justified in its plan to ramp up drilling activity next year.
- Downspacing in the Leonard shale above the Second Bone Spring will also help EOG grow its drilling inventory and reserve base.
- Due to the Leonard being on top of the Second Bone Spring, techniques used in the Leonard could possibly be applied to the Second Bone Spring interval.
Is EOG Resources Reaching Success In The Eaglebine?
- ZaZa Energy reported strong well performance for its EOG-operated joint venture in the Eaglebine play area.
- ZaZa indicates that drilling returns may exceed 50%, assuming $80 per barrel WTI and $3.70/MMBtu Henry Hub.
- The read-across may be relevant to SM Energy and Contango Oil & Gas.
EOG Resources: A Best-Of-Breed Selling Below Fair Value
- The market has been most unkind to EOG Resources stock; shares are off 23% from a recent high.
- At these price levels, do EOG shares present investors with an asymmetric risk-reward profile?
- How closely is the price of EOG stock aligned with the movement in WTI spot crude?
EOG Resources: Do Oil Hedges Offset The Saudi Rumor Mill?
- The Saudi price war cauldron is stirring up a brew of negativity.
- Fears are justified, as Saudi Arabia pumps around 30% of OPEC’s oil, or about 9.7 million barrels/day.
- Does EOG's hedging program protect production in the case of a long term oil price drop?
- Oil prices should be expected to be soft for quite some time to come. That means that shale producers, will be further pressured financially.
- EOG Resources is one of the few companies able to turn a net profit, while many companies are still spending twice as much as they earn in revenue.
- The secret to EOG's relative success in shale is the quality of the acreage it is sitting on.
Today, 10:45 AM
- Natural gas prices fall 9.5% to near two-year lows at $3.133/mmBtu, in the biggest one-day percentage loss since February and the lowest intraday price since January 2013, on mild weather forecasts and inventory that is above year-ago levels.
- Prices are now down more than 15% in three straight losing sessions and are 30% lower than the six-month high closing price of $4.489/mmBtu it hit just a month ago.
- Weather has been unseasonably warm for December, limiting demand for home heating and allowing relatively low stockpiles to catch up to where they were a year ago and encouraging traders to sell based on the belief that supply is relatively healthy.
- Gas producers are among the biggest early decliners: XOM -1.1%, CHK -7.3%, APC -2.6%, SWN -6%, DVN -2.2%, COP -2.3%, BP -1.5%, COG -4%, BHP -1.9%, CVX -1.3%, ECA -5.1%, EQT -4.3%, RDS.A -1.7%, UPL -12%, WPX -6.9%, EOG -1%, OXY -1.1%, RRC -6.1%, APA -2.3%, AR -3.2%, CNX -3%, QEP -4.8%, LINE -4.9%, NBL -1.6%, SM -2.6%, XEC -4.2%, PXD -2.9%, NFX -5.1%.
- ETFs: UNG, DGAZ, UGAZ, BOIL, GAZ, FCG, GASL, KOLD, UNL, NAGS, DCNG
Sat, Dec. 20, 1:29 PM
- The super majors are probably the first place to look when oil prices fall, writes Avi Salzman, as their stocks tend to slide less drastically than smaller players, and maintenance of dividends is a priority for management. Favorites: Shell (RDS.A, RDS.B) and Chevron (NYSE:CVX).
- While smaller producers appear risky, Occidental (NYSE:OXY) came into the price plunge well-positioned with one of the industry's cleanest balance sheets.
- EOG Resources (NYSE:EOG) could be the pick among shale drillers, says Salzman, as it's chosen drilling spots carefully and its break-even price is among the lowest in the industry. "[The] best management team in Houston," says one fund manager.
- Oil service stocks look especially vulnerable with capex budgets being cut, but Schlumberger (NYSE:SLB) "should have protection in the downturn," writes Salzman, noting the company repurchased 1% of the float in Q3 and at 1.8% yields more than (soon to-be-merged) Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI).
- See also: Barron's: Five oils to be wary of (Dec. 20, 2014)
Wed, Dec. 17, 2:20 PM
- New York Gov. Cuomo's administration says it will ban fracking statewide, citing health concerns and what it considers as limited economic benefits to drilling.
- NY's acting health commissioner said at a cabinet meeting in Albany today that studies on fracking’s effects on water, air and soil are inconsistent, incomplete and raise too many “red flags” for the state to allow it; the state Department of Environmental Conservation will now issue a legally-binding recommendation prohibiting fracking.
- The state has had a de facto moratorium on fracking for more than six years, so nothing really changes with today's decision.
- Parts of New York sit atop the gas-rich Marcellus shale formation, whose top producers include CHK, RRC, RDS.A, RDS.B, TLM, APC, ATLS, COG, CVX, CNX, EQT, EOG, XOM, WPX, XCO, CRZO, SWN, AR.
Tue, Dec. 16, 7:21 PM
- "Low oil prices cure low oil prices,” meaning that low oil prices will take supply off line - primarily shale oil production in North America - and eventually prices will recover; if that maxim becomes reality, then it could be time pick up select energy stocks today at cheap prices, some analysts say.
- U.S. Global Investors' Brian Hicks, who believes oil is oversold, favors Devon Energy (NYSE:DVN) for its low-cost Eagle Ford acreage purchased earlier this year, solid cash flow, and significant hedges in place on 2015 production; he also likes oil services companies Noble Corp. (NYSE:NE) and Helmerich & Payne (NYSE:HP).
- Hodges Capital's Michael Breard likes North American oil producers that have the flexibility to shift to natural gas - where prices are more likely to hold up, he says - such as Matador Resources (NYSE:MTDR), Comstock Resources (NYSE:CRK) and Panhandle Oil and Gas (NYSE:PHX).
- Deutsche Bank analysts like companies with the balance sheet strength to survive, but also the budget flexibility, asset quality and performance record to suggest they can return to growth when energy prices go back up, including Anadarko (NYSE:APC), EOG Resources (NYSE:EOG), Cimarex (NYSE:XEC) and Concho Resources (NYSE:CXO).
Tue, Dec. 16, 5:22 PM
Thu, Dec. 11, 10:58 AM
- U.S. energy companies are wasting little time in starting to cut drilling, jobs and spending in the wake of declining oil prices, WSJ reports.
- In recent days, ConocoPhillips (NYSE:COP) said it would spend 20% less next year on drilling wells; EOG Resources (NYSE:EOG) said it would shed many of its Canadian oil and gas fields, close its Calgary office and lay off employees; and Matador Resources (NYSE:MTDR) said it may temporarily leave the Eagle Ford Shale area in Texas, where drilling recently fell to 190 rigs after hitting 210 rigs in July.
- Analysts say companies with a lot of debt, low rates of return and little chance of drilling their way to better profitability, such as Triangle Petroleum (NYSEMKT:TPLM), will be hurt if crude remains below $75/bbl.
- "A contraction is unavoidable,” says an economist for the Texas Alliance of Energy Producers.
Tue, Dec. 9, 6:20 PM
- North Dakota issues strict new oil standards that will require energy companies operating in the state to strip explosive gases from crude oil that shows a high vapor pressure reading, in an effort to make crude-by-rail transport safer.
- Under the new mandate, North Dakota oil can’t be transported unless it has a vapor pressure reading of 13.7 lbs./sq. in. or lower.
- The rule, which will take effect on April 1, 2015, is the first major move by regulators to address the role of gaseous, volatile crude oil in railroad accidents which have been linked to several fiery explosions, including one last year in Quebec that killed 47 people.
- Top Bakken producers: CLR, EOG, KOG, WLL, HES, XOM, OAS, NOG, EOX, MRO.
Tue, Dec. 9, 11:15 AM
- EOG Resources (EOG +1.2%) says it sold much of its position in Canada to unnamed buyers in separate deals totaling $410M, unloading all assets in Manitoba and some Alberta holdings.
- EOG says it will reinvest some of the proceeds in high return assets in the U.S. while retaining its position in the Horn River Basin and other exploration areas.
- The assets were forecast to produce 7,050 bbl/day of oil, 580 bbl/day of natural gas liquids and 43.5M cf/day of natural gas. The deal included 5,800 producing wells.
Fri, Dec. 5, 5:38 PM
- The Eagle Ford shale formation in south Texas produced its billionth barrel of oil some time last month, according to analysts at research firm Wood Mackenzie.
- Eagle Ford now accounts for 16% of total U.S. oil production, and the firm forecasts E&P spending of $30.8B in the region next year, ~22% of the total $139.3B expected in U.S. onshore spending.
- Eagle Ford is widely considered the most profitable U.S. shale field, and many analysts speculate the break-even price for production to remain profitable is ~$50/bbl in much of the play.
- Top Eagle Ford producers include EOG, CHK, APC, MRO, BHP, APC, APA, BP, COG, CRZO, CWEI, CRK, COP, XOM, FST, GDP, HES, MTDR, MUR, NFX, PVA, PXD, ROSE, RDS.A, RDS.B, SN, SM, STO, SFY, TLM, ZAZA
Wed, Dec. 3, 11:32 AM
- The energy sector (XLE +1.5%) continues its momentum from yesterday, leading the way again as the best performing sector in early trading with crude oil rising 1.2% so far today and reports that U.S. well permits fell 40% last month.
- Top performers include Clayton Williams (CWEI +7.7%), Transocean Partners (RIGP +10.6%), Gaslog (GLOG +13.8%) and Energy XXI (EXXI +15.7%).
- Other leading energy names are showing stronger recoveries as they clear last Friday's bearish gap zone: XOM +0.2%, CVX +0.4%, COP +2.5%, OXY +2.5%, DVN +2.9%, EOG +2.5%, HES +2.2%, MUR +1.5%, NBL +2.3%, PXD +4.2%, SU +3%, CNQ +1.9%.
- Some analysts warn that the worst may not be over, however, as much of the advance is being driven by investors repurchasing ETFs they used to make short bets; investors also could opt to sell oil shares at a loss in coming weeks to reduce tax burdens.
Tue, Dec. 2, 2:48 PM
- Energy stocks (XLE +1.4%) are posting the day's largest gains among S&P sectors, rebounding from recent losses even as Nymex crude oil fell another $2.05 to $66.97/bbl.
- Refiners Marathon Petroleum (MPC +4%) and Valero (VLO +4.1%) and pipeline operator Williams Cos. (WMB +1.5%) are among the top gainers, while losers include most oil services companies such as Halliburton (HAL -2.2%) and rig operator Transocean (RIG -3.7%).
- Anadarko Petroleum (APC +1.6%), Cimarex Energy (XEC +1%), Devon Energy (DVN +0.7%), EOG Resources (EOG +3.8%) and Marathon Oil (MRO +3.5%) were selected top “safe haven” picks for analysts at Tudor Pickering Holt, which said they are “liquid names with high-quality assets and healthy balance sheets."
Fri, Nov. 28, 7:25 AM
- OPEC yesterday decided to hold production numbers despite the bear market in oil. WTI crude is down about $5 per barrel to $69.
- A premarket look at the top 10 holdings of the XLE: Exxon Mobil (NYSE:XOM) -4.1%, Chevron (NYSE:CVX) -4.1%, Schlumberger (NYSE:SLB) -4.6%, ConocoPhillips (NYSE:COP) -4.4%, EOG Resources (NYSE:EOG) -4.3%, Pioneer Natural Resources (NYSE:PXD) -4.8%, Occidental Petroleum (NYSE:OXY) -4.3%, Haliburton (NYSE:HAL) -4.7%, Anadarko Petroleum (NYSE:APC) -5%, Williams Companies (NYSE:WMB) -1.6%.
- ETFs: ERX, VDE, OIH, XOP, ERY, FCG, DIG, PBW, GASL, DUG, IYE, XES, IEO, QCLN, IEZ, PXE, PXI, FENY, PXJ, PSCE, RYE, PUW, FXN, DDG, HECO
Thu, Nov. 13, 7:23 PM
- North Dakota regulators today proposed standards for requiring energy companies to treat the crude they pump from the Bakken Shale to make it less volatile before shipment by pipeline or train.
- "Our crude oil leaving North Dakota will behave like the gasoline you put in your car," says the head of the state's Department of Mineral Resources, which came up with the recommendations.
- The new rules would require every barrel of oil produced in the state to undergo some kind of treatment, with the goal that all oil-producing Bakken Shale wells ship crude with a vapor pressure below 13.7 psi, similar to 13.5 psi for most automobile gasoline.
- Top Bakken producers: CLR, EOG, KOG, WLL, HES, XOM, OAS, NOG, EOX, MRO.
Thu, Nov. 13, 11:59 AM
- Regulators set to decide on rules for shipping crude oil via railroad are relying on testing methods that may understate the explosive risk of North Dakota crude, according to a WSJ report citing industry and Canadian officials.
- The testing controversy centers on how to determine vapor pressure, a measure of how quickly a liquid fuel evaporates and emits gases; the industry has long relied on a decades-old methodology that does not require sealed or pressurized containers to collect or test crude samples.
- The North Dakota Industrial Commission is set to rule on what steps, if any, producers must take to strip volatile gases out of crude oil before loading it into railroad tank cars.
- Top Bakken producers include CLR, EOG, KOG, WLL, HES, XOM, OAS, NOG, EOX, MRO.
Wed, Nov. 12, 6:45 PM
- Whether or not there is an oil "price war," the U.S. shale industry is flinching only a little, essentially committing to concentrate their efforts where they will be most effective rather than admit defeat, according to an FT report.
- To be sure, activity is starting to slow: Continental Resources (NYSE:CLR), Rosetta Resources (NASDAQ:ROSE) and ConocoPhillips (NYSE:COP) are among leading shale oil companies that have announced reductions in their capital spending plans, and EOG suggested as much last week when it said it would make sure its capital spending plus dividend payments were in line with the cash flow it has coming in.
- If statements from shale industry leaders are even broadly accurate, oil prices may have to go much lower before U.S. oil production starts to fall; EOG CEO William Thomas says that even if oil fell to $40, his company could still earn a 10% return in some areas, such as the Bakken and Eagle Ford.
- Although they may be drilling less than they had expected, oil companies also will focus on maximizing production from the rigs they are already using, which encourages continued expectations for output growth from the likes of Devon Energy (NYSE:DVN), EOG, CLR and Pioneer Natural (NYSE:PXD).
Tue, Nov. 11, 11:26 AM
- A new report from J.P. Morgan says hammered stocks in the energy exploration and production sector may have bottomed, even if the price of oil hasn’t yet.
- JPM says investors looking to buy energy stocks should buy the E&P names with operational momentum and strong balance sheets, including Anadarko Petroleum (NYSE:APC) and EOG Resources (NYSE:EOG), which the firm sees as potential takeover candidates.
- The firm also likes Noble Energy (NYSE:NBL), Pioneer Natural Resources (NYSE:PXD) and Cimarex Energy (NYSE:XEC).
EOG vs. ETF Alternatives
EOG Resources Inc explores for, develops, produces and markets crude oil and natural gas primarily in major producing basins in the USA, Trinidad, United Kingdom, China, Argentina and, from time to time, select other international areas.
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