EOG Analyst's comments
Posted: Mon Nov 05, 2018 9:50 am
From TPH Morning Notes 11/5/2018
EOG Stock Thoughts
Still a great company but market may look for more of a discount to historic premium before buying in
Sector: NAm E&P | Ticker: EOG | Recommendation: HOLD | Target: $113 | Close: $102.35
While EOG has historically traded at a multiple and NAV premium to its peer group given strong capital discipline and best in class execution, the stock was hit hard on Friday, down over 4%, showing that investors are unwilling to support unexpected upward revisions to capex. This year has been marked by a number of bumps in the road as Q1 fell short of consensus production, capex was directionally raised to the higher end of FY guidance during Q2 and the midpoint of capex was officially raised by $300MM to $5.9B during this quarter (TPHe $6B). The midpoint of US oil production, however, has remained constant with the guidance set in February of 394mbopd (in line with TPHe), while the total number of net turn in lines increasedfrom 690 to 720. Our deep dive analysis in September highlighted that EOG is facing a steep PDP decline in 2018, similar to many small cappeers, given meteoric growth in basins like the Delaware. From a valuation perspective, the name does look attractive on a number of metrics trading at 4.7x EV/EBITDA, 11x P/E, 6% FCF yield post TPHe 1.3% dividend and an 18% ROCE in 2020; however we still remain sidelined as upside to NAV of $113/shr reflects somewhat moderate length of core inventory depth. For a copy of this detailed asset level report please contact your TPH representative.
EOG Stock Thoughts
Still a great company but market may look for more of a discount to historic premium before buying in
Sector: NAm E&P | Ticker: EOG | Recommendation: HOLD | Target: $113 | Close: $102.35
While EOG has historically traded at a multiple and NAV premium to its peer group given strong capital discipline and best in class execution, the stock was hit hard on Friday, down over 4%, showing that investors are unwilling to support unexpected upward revisions to capex. This year has been marked by a number of bumps in the road as Q1 fell short of consensus production, capex was directionally raised to the higher end of FY guidance during Q2 and the midpoint of capex was officially raised by $300MM to $5.9B during this quarter (TPHe $6B). The midpoint of US oil production, however, has remained constant with the guidance set in February of 394mbopd (in line with TPHe), while the total number of net turn in lines increasedfrom 690 to 720. Our deep dive analysis in September highlighted that EOG is facing a steep PDP decline in 2018, similar to many small cappeers, given meteoric growth in basins like the Delaware. From a valuation perspective, the name does look attractive on a number of metrics trading at 4.7x EV/EBITDA, 11x P/E, 6% FCF yield post TPHe 1.3% dividend and an 18% ROCE in 2020; however we still remain sidelined as upside to NAV of $113/shr reflects somewhat moderate length of core inventory depth. For a copy of this detailed asset level report please contact your TPH representative.