EOG Resources Q3 Result - Nov 6

[dan_s]

HOUSTON, Nov. 6, 2019 /PRNewswire/ --

Exceeded Crude Oil Production Target Range and Raised Full-Year 2019 U.S. Crude Oil Growth Target from 14 to 15 Percent

Capital Expenditures Near Low End of Target Range

Generated Significant Net Cash From Operating Activities and Free Cash Flow

Reduced YTD Well Costs 5 Percent

Per-Unit Lease and Well and DD&A Expense Rates Below Low End of Target Ranges

Added 1,700 Net Premium Locations to Inventory Now Totaling 10,500 Locations and Representing Over 14 Years of Drilling Inventory

New Delaware Basin Wolfcamp M and Third Bone Spring Plays Add 1.6 BnBoe Net Resource Potential

EOG Resources, Inc. (EOG) today reported third quarter 2019 net income of $615 million, or $1.06 per share, compared with third quarter 2018 net income of $1.2 billion, or $2.05 per share. Net cash provided by operating activities for the third quarter 2019 was $2.1 billion. < Compares to my Q3 forecast for cash flow from operations of $1.9 billion, $3.27/share.

Adjusted non-GAAP net income for the third quarter 2019 was $654 million, or $1.13 per share, compared with adjusted non-GAAP net income of $1.0 billion, or $1.75 per share, for the same prior year period. < Adjusted net income compares to my Q3 forecast of $680.3 million or $1.17/share. Cash flow is much more important.

Third Quarter 2019 Operating Review

Total crude oil volumes of 464,100 barrels of oil per day (Bopd) in the third quarter 2019 increased 12 percent compared to the same prior year period and were above the high end of the target range. Natural gas liquids (NGLs) and natural gas volumes each grew 11 percent. EOG incurred total expenditures of $1.6 billion in the third quarter. Cash capital expenditures before acquisitions of $1.5 billion were near the low end of the target range.

EOG continued to lower operating costs during the third quarter 2019. Per-unit transportation costs declined nine percent compared to the same prior-year period, depreciation, depletion and amortization expenses fell seven percent year-over-year, and lease and well expenses declined three percent year-over-year.

EOG generated $2.0 billion of discretionary cash flow in the third quarter 2019. After considering cash capital expenditures before acquisitions of $1.5 billion and dividend payments of $166 million, EOG generated free cash flow during the third quarter 2019 of $337 million. .

"EOG's operating performance has never been better. The company generated outstanding financial results in the third quarter driven by improvements in every area," said William R. "Bill" Thomas, Chairman and Chief Executive Officer. "We reduced operating expenses, grew volumes at double-digit rates while lowering well costs and generated substantial free cash flow. EOG has never been in a better position to sustain this success long into the future."
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This is a prime example of how out-of-whack the Wall Street Gang is these days. EOG's 52-week trading range is $64 to 110 per share. This company is in MUCH BETTER shape today than it was a year ago. For a company of this size, production growth of 18.1% in 2018 and now on-track to 15% more production growth in 2019 is an incredible accomplishment.

First Call's target price is $101.83 and should be going up after this strong quarterly report.

[dan_s]

I have updated my forecast/valuation model for EOG and it will be posted to the EPG website this evening.

EOG is the largest company in the Sweet 16 by a wide margin, but it is one of the easiest companies to model.
> It has super strong balance sheet
> It gives outstanding and detailed guidance
> It owns some of the most valuable real estate on this planet that will probably produce over 10 Billion Boe of oil, gas and NGLs.

First Call's target price of $101.83 is close to my valuation.