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EOG Resources: Dividends Are Their Only Choice, 10%+ Yield Possible

Apr. 04, 2022 12:00 PM ETEOG Resources, Inc. (EOG) Stock21 Comments
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Oil Prices Moving Up

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The United States shale oil and gas industry does not necessarily have the best reputation, not only from an environmental perspective but also from an investor perspective who have often been left disappointed over the

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Comments (21)

#EOG is a fabulous company. I invested back in 2018 at $106 a share and stuck through the the "bad time". Collected my divvy and i was happy about that :-)

But with oil at these prices (+$85), EOG makes a ton of money. Not to mention new projects in Australia and the monster Dorado gas discovery in Texas.

“We believe this play represents the lowest cost supply of natural gas in the United States” EOG CEO. Make no mistake, this is major mover for EOG. Natural Gas in the play looking out the next 10 years.
@angelodebo I made some rough calculations on Dorado. This field is enough to supply all of Germany with gas for 7 years. Germany spends around 30 billion USD per year on natural gas. This is massive for a relatively small company such as EOG.
CincinnatiRick profile picture
@Florian Steinberg "This field is enough to supply all of Germany with gas for 7 years." Germany is nice as a yardstick but, of course, the challenge is getting it there.
Limestone Cowboy profile picture
A best in breed operator. EOG's culture stands out among big oil peers for creativity and flexibility. You're buying that, not just the cash flow.

The specials certainly look tempting against and all time high share price, and most of the executive comp thresholds are for TSR. It's a sure fire bet for those in the C suite to get their cabbage at the end of the year.

What will be interesting point forward is the longevity of the super double platinum champagne room inventory, and if it's possible to ramp up activity against a service company backdrop of frustrated shareholders and consolidated companies. It would not be unheard of for capex costs to rise 30% as contracts roll off. HAL, BKR, and SLB want their pound of flesh after giving away product and services for single digit margins for a decade to simply hold market share.

Watch the margins closely.
Jamjack profile picture
Good article. This is exactly the type of company I look for to invest in. Pay a sustainable dividend (whatever that might be). Pay a special dividend when times are good. Don't buy stock back unless it is stupid cheap. Don't buy competition or assets at a high price, leverage up and ask stockholders to sucks it up.

I applaud management at EOG. Long CNQ and EOG.
cenc profile picture
or, they could put that free cash flow to work making more free cash flow. This is a use it or loose it oil price environment.
Mmarrkk profile picture
@cenc The problem is if companies invest too much at this point in the market cycle will they get their money back before the cycle turns downward. We have seen over the years that prices rise and fall and many companies don’t recover their investments before prices turn lower. That’s why many companies go broke. Steady growth is the way to go.
Limestone Cowboy profile picture
@Mmarrkk a 10 rig program over 5 years is far more efficient than a 10 rig program going to a 25 rig program, back to a 5 rig program.

Proper prior planning prevents purchasing from puncturing your pucker.
Mmarrkk profile picture
@Limestone Cowboy Now that’s one heck of a tongue twister! And I agree with your comment for the most part. I would take it a step further though and properly plan for a variable rig program but without the wild swings in that 5-25-5 program. Maybe one with a “governor” rather than slammed brakes. Go with 7 or 8 when prices are high and then 5 when low. A bit easier on people/equipment demands for efficiency but less risk of over-investing.
PT Larry profile picture
Thanks for the article.
damcooldav3 profile picture
Where do you see $EOG stock price going from here? Although their Prospects look amazing with the special dividends, I wonder if I should trim after being up 200%.
@damcooldav3 I did. Sold about half my position. Will keep the rest for forever though.
Limestone Cowboy profile picture
@damcooldav3 It's a bet on inflation. As long as both major parties in the US are completely unwilling or functionally incompetent enough to balance a budget, inflation is the tax paid on the deficit.

Watch what happens to the USD closely if Saudi makes good on their promise to accept Yuan for oil sales. The global petroleum trade and the "black gold" standard is the only thing keeping the dollar from imploding. Globally, there is little faith that the clowns in Washington can continue to manage the world's reserve currency.
damcooldav3 profile picture
@Limestone Cowboy so to translate you’re saying better to hold because oil prices will remain inflated?
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