EOG and NOG notes from Truist Financial - July 20

[dan_s]

Notes below are from Neal Dingmann at Truist Financial, who IMO is one of the best energy sector analysts.
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EOG Resources, Inc. (EOG, $103.62, Buy) - Solid Second
Half Set Up with Diminished Hedges and Gas Leverage - We
expect EOG to realize just half the FCF in 2Q that it did in 1Q
after paying $2.1B for the early termination of hedge contracts
in 2H22 and beyond. While EOG's 2Q22 FCF will be lower,​
the result should be a much improved hedge position going
forward to take advantage of strong commodity prices allowing
for potentially improved shareholder returns based on the 60%
minimum payout. Further, EOG should continue to benefit from
strong gas prices as the company has ~27% dry gas and ~22%
wet gas leverage. Lastly, the exploration program should remain
active providing exciting potential upside. - Neal Dingmann

Northern Oil and Gas, Inc. (NOG, $25.91, Buy) - 2Q22 Likely
In-Line with Solid 2H22 Setup - Northern continues to keep its
eye on the organic and external prices by ensuring strong existing
operational partners and keeping the ground game dialogue
active. We forecast 2Q22 production in-line with consensus with
a slightly lower oil cut. We estimate a sequentially higher capital
spend last quarter as organic activity likely remained stable along
with our expectation of a slight ground game pickup. While we
believe 2Q22 will be largely as expected, we forecast a notable
continued ramp into next year setting up for higher dividends and
incremental stock repurchase activity. - Neal Dingmann
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My current valuations are $181.00 for EOG and $60.00 for NOG. My oil price assumption for Q3 ($115/bbl) now looks a bit too high, but it is offset by my $6.00/MMBtu estimate for HH ngas prices in Q3. HH ngas is trading for $7.88 at the time of this post.

[Fraser921]

>after paying $2.1B for the early termination of hedge contracts
in 2H22 and beyond Ouch get the vasoline out

I applaud them for adjusting, better than sitting there with their thumb up ....

[dan_s]

It is all relative to the company's size.
EOG is still going to generate closet to $15 Billion of operating cash flow this year, which compares to $9.3 Billion in 2021.

[marc.wolin@yahoo.com]

How about a weekly oil and gas report!
Marc Wolin

[Fraser921]

He has one. Do you know how to find it?

[dan_s]

My weekly podcast is focused on oil and gas prices. The next edition of The View from Houston will be published Tuesday morning.