EOG consistently beats analyst forecasts.
Second Quarter Highlights
Earned adjusted net income of $1.8 billion, or $3.16 per share < Beat my forecast of $1.587 billion net income, or $2.76 per share. Q1 Adjusted Net Income per share was #43.11
Generated $1.4 billion of free cash flow < In line with my forecast.
Declared regular quarterly dividend of $0.91 per share < 2.96% annualized yield.
Repurchased $690 million of shares, totaling $1.4 billion YTD as of June 30, 2024
Volumes and per-unit operating costs better than guidance midpoints
Updated full-year guidance to reflect higher volumes and lower per-unit cash operating costs
From Ezra Yacob, Chairman and Chief Executive Officer
"EOG delivered another quarter of outstanding operational performance. Oil volumes, total volumes, and per-unit operating expenses were all better than expected. We have updated our full-year volume and cost guidance and increased our free cash flow forecast to reflect our strong results, further demonstrating the confidence we have in our multi-basin portfolio of assets.
"Our commitment to operational excellence continues to translate into financial results. Strong free cash flow generation in the quarter helped support $1.2 billion of capital return to shareholders through both our regular dividend and opportunistic share repurchases, all while maintaining our industry-leading balance sheet. Year-to-date we have made significant progress towards our minimum commitment of returning 70% of annual free cash flow to shareholders, with the potential to return additional cash over the balance of the year.
"Our performance this quarter is the result of EOG's distinctive culture. Our employees' focus on unlocking value across all facets of our business, including drilling and completion operations, marketing, and exploration, is our core competitive advantage. Our business has never been stronger. We continue to improve and create more value for our shareholders."
EOG Resources (EOG) Q2 Results beat forecast - Aug 4
EOG Resources (EOG) Q2 Results beat forecast - Aug 4
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
-
Petroleum economist
- Posts: 375
- Joined: Wed Aug 23, 2023 7:01 am
- Location: The Netherlands
EOG Resources – Analysis of Q2 results
Summary
EOG Resources reported solid Q2 results, mostly in line with expectations. Production was above the outlook and will continue to grow. The balance sheet is very solid. Unit costs are low and the profitability good. shareholder returns are decent and can grow. EOG has a rather high PE.
Production
• Q2 production was at 1,048 K BoE/d above the outlook (1015-1044 K BoE/d). This is no surprise. EOG is conservative in their outlook and always is at the high end or above the outlook.
• The Q2 production was also 2% above Q1 (1,020 K BoE/d) with increases in oil and NGL. Gas production was flat.
• Q3 guidance is1,050-1,081 K BoE/d. I expect EOG to be towards the upper end.
• The 2024 outlook was raised 12 K BoE/d from 1,012-1,075 K BoE/d to 1.024 -1.087 K BoE/d. Again, EOG should be at the upper end.
• Production in 2025 should grow 3-4% to 1,080-1,120 K BoE/d. This trend can continue for the foreseeable future or even accelerate.
• Fluids are 47% oil, 23% MHL and 30% gas.
Balance sheet
• The balance sheet is very solid
• Solvency marginally increased from 64.0% (late 2023) to a good 64.5% (Q2)
• Long term debt decreased $ 515 M from $ 3,765 M (late 2023) to $ 3,250 M.
• Debt/EBITDA in 2024 at < 0.3 is very good.
• The balance sheet allows generous shareholder returns.
Profitability
• EOG has a good profitability.
• Unit costs (inclusive interest, depreciation, and overheads) are a medium low $ 25.10/BoE.
• Q2 net profit was $ 1,789 M (eps $ 3.10).
• With WTI at $ 76-80/bbl, I expect for 2024 a net profit of $ 7.030-7.340 M (eps=$ 12.20-12.80, PE=9.9-10.4).
• Over time, the eps can grow to $ 13.60-14.95 (PE=8.5-9.3) in 2028.
• EOG is not a cheap share. The PE in 2024 is rather high.
Shareholder returns
• EOG targets 80% of the FCF for shareholder returns.
• EOG pays a quarterly dividend of $ 0.91.
• EOG bought back $ 760 M of shares in Q1. In Q2 this declined to $ 690 M.
• I expect total share buybacks in 2024 to be $ 2.8 B, for a good total yield of 6.7%
• Over time the yield can climb to 8%
Conclusions
EOG Resources reported solid Q2 results, mostly in line with expectations. Production was above the outlook and will continue to grow. The balance sheet is very solid. Unit costs are low and the profitability good. shareholder returns are decent and can grow. EOG has a rather high PE.
In my oil and gas company ranking EOG ranks a decent 28th out of 81.Listen to today's webinar and I will try to explain what this means.
EOG Resources reported solid Q2 results, mostly in line with expectations. Production was above the outlook and will continue to grow. The balance sheet is very solid. Unit costs are low and the profitability good. shareholder returns are decent and can grow. EOG has a rather high PE.
Production
• Q2 production was at 1,048 K BoE/d above the outlook (1015-1044 K BoE/d). This is no surprise. EOG is conservative in their outlook and always is at the high end or above the outlook.
• The Q2 production was also 2% above Q1 (1,020 K BoE/d) with increases in oil and NGL. Gas production was flat.
• Q3 guidance is1,050-1,081 K BoE/d. I expect EOG to be towards the upper end.
• The 2024 outlook was raised 12 K BoE/d from 1,012-1,075 K BoE/d to 1.024 -1.087 K BoE/d. Again, EOG should be at the upper end.
• Production in 2025 should grow 3-4% to 1,080-1,120 K BoE/d. This trend can continue for the foreseeable future or even accelerate.
• Fluids are 47% oil, 23% MHL and 30% gas.
Balance sheet
• The balance sheet is very solid
• Solvency marginally increased from 64.0% (late 2023) to a good 64.5% (Q2)
• Long term debt decreased $ 515 M from $ 3,765 M (late 2023) to $ 3,250 M.
• Debt/EBITDA in 2024 at < 0.3 is very good.
• The balance sheet allows generous shareholder returns.
Profitability
• EOG has a good profitability.
• Unit costs (inclusive interest, depreciation, and overheads) are a medium low $ 25.10/BoE.
• Q2 net profit was $ 1,789 M (eps $ 3.10).
• With WTI at $ 76-80/bbl, I expect for 2024 a net profit of $ 7.030-7.340 M (eps=$ 12.20-12.80, PE=9.9-10.4).
• Over time, the eps can grow to $ 13.60-14.95 (PE=8.5-9.3) in 2028.
• EOG is not a cheap share. The PE in 2024 is rather high.
Shareholder returns
• EOG targets 80% of the FCF for shareholder returns.
• EOG pays a quarterly dividend of $ 0.91.
• EOG bought back $ 760 M of shares in Q1. In Q2 this declined to $ 690 M.
• I expect total share buybacks in 2024 to be $ 2.8 B, for a good total yield of 6.7%
• Over time the yield can climb to 8%
Conclusions
EOG Resources reported solid Q2 results, mostly in line with expectations. Production was above the outlook and will continue to grow. The balance sheet is very solid. Unit costs are low and the profitability good. shareholder returns are decent and can grow. EOG has a rather high PE.
In my oil and gas company ranking EOG ranks a decent 28th out of 81.Listen to today's webinar and I will try to explain what this means.
Re: EOG Resources (EOG) Q2 Results beat forecast - Aug 4
My updated forecast model for EOG and it will be posted to the EPG website soon. My valuation stays at $150.
EOG is a great company, but very few EPG members ask me about it. It has incredible "Running Room" and deserves to trade at a high multiple.
EOG is a great company, but very few EPG members ask me about it. It has incredible "Running Room" and deserves to trade at a high multiple.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group