EOG

[dan_s]

I was very close to putting EOG Resources back into the Sweet 16 on January 1st. It looks rock solid to me. One of our Rice University interns has just finished a company profile on it that I hope to finish this week.

EOG is among the largest crude oil producers in both the North Dakota Bakken and South Texas Eagle Ford Plays.

[danross70]

I was very impressed with the EOG conf call where they claimed that they were getting 100% returns on the cost of the Eagle Ford wells. I took that to mean that they were recovering the cost of these wells in the first year. They claimed to be concentrating their capital expenditures in the EF. I took a flyer with some Jan.' 13 and Jan. '14 LEAPs. I'd be interested in your comments on the comparison of the EF and the Baaken in cost of wells, time to recover costs, production/reserves per well, and costs to move liquids to market. I understand that availability of water to frack the wells is an issue in the EF. True?

[mdwitte]

I'm a simpleton...EOG has a ROE of 9%, a P/E or 20+...vs for example WLL, ROE of 18%, P/E of 12, or CLR, ROE of 27%... SHOW ME THE MONEY! ...or is EOG over-priced, perhaps...

[danross70]

Not a simpleton at all. You are looking at current results from existing operations. I am looking at the potential from EOG's ownership of more than 500,000 acres in what they claim is the "oil window" of the EF. I don't believe any company has a position that size in the best part of the Bakken. I don't expect EOG to realize all that potential at once. The real question is, "Is EOG's EF land as good as top quality Bakken land? Or better?" They seem to think it is better. What do we know about that? If EOG is right about its land, is EOG a good long term hold? If EOG is right, how long before they can show superior results?

[dan_s]

I hope to finish our profile on EOG today.

Companies like EOG and RRC should not be valued based simply on PE ratios and CFPS multiples, although they are strong for both companies. These guys have very large acreage positions and infrastructure in some of North America's most promising resource plays. They are both very high on takeover lists of the majors. For example, Brigham Exploration (BEXP) is being taken over at very high multiples because they have such a strong acreage position in the Bakken.

EOG has a lot of de-risked acreage in the Eagle Ford, Bakken and several other basins. They have solid growth locked in for up to ten years just on the acreage they hold today.

[dan_s]

A new company profile, with my Fair Value estimate attached, has been posted under the Watch List Tab.