EOG Price Target - May 6

[dan_s]

From Capital One Securities 5-6-2022

EOG 1Q Quick Take: No Longer Afraid of Commitment
$123.42, Overweight, $146.00 Target, Johnston

Positive. Nice 1Q FCF beat with no change in annual CAPEX or production guidance. The special dividend is likely above investor expectations, and, most importantly, EOG has committed to returning at least 60% of FCF to shareholders going forward. EOG has already been returning that much in aggregate over the past three quarters, but this is the type of commitment that the market has sought from the board for some time now. The highest priority will continue to be paying a sustainable & growing base dividend, with the balance composed of special dividends and/or share buybacks.

1Q FCF was >$200MM above expectations on a combo of better-than-expected cash flow and CAPEX. The latter was toward the low end of the guidance range. The 2Q CAPEX guidance is a bit heavy, so we suspect some spending was pulled from 1Q into 2Q (1Q CAPEX was 22% of the FY22 midpoint).

The $1.80/sh special dividend is likely higher than most expected. We were hearing talk of $1.00 - $1.50, and maybe not even that much given EOG's prior disclosure that it had $2.5B of collateral posted as of mid-April related to its hedge book. For perspective, the special dividends in the prior three quarters were $1.00/sh, $2.00/sh, and $1.00/sh.