EOG Resources Q4 Results - Feb 27

[dan_s]

Motley Fool
Matthew DiLallo
February 27, 2019 at 9:33AM

EOG Resources (NYSE:EOG) delivered a solid finish to 2018 as both oil and natural gas liquids (NGL) production exceeded the midpoint of its guidance range. That strong output enabled the company to generate robust cash flow during the quarter, helping it produce record free cash flow for the year. The oil company expects more of the same in 2019 as it remains well positioned to continue expanding output at a healthy rate while generating significant free cash flow.

Read more: https://www.fool.com/investing/2019/02/ ... -2018.aspx

[dan_s]

Note from Stifel on February 27, 2019:

EOG Resources Inc. (EOG, $93.91, Buy; Target $132.00) - 4Q18 Short, 2019 Guide Inline - Michael S. Scialla - We view the release as neutral. The positives include: i) we project 2019 oil production growth of 13% y/y and post-dividend FCF of $36MM based on updated guidance; ii) 4Q18 oil production slightly beat consensus while 4Q18 capex was 2% below; iii) 2019 capex guidance was 2% below consensus. The negatives include: i) 4Q18 CFPS and EBITDA missed Street estimates.; ii) 1Q19 production guidance was 3% below consensus while capex guidance was 21% above; iii) 2019 production guidance was 3% below consensus.

EOG is the largest company in the Sweet 16 and it should be a "Core Holding" in everyone's portfolio. IMO it is a "Screaming Buy" up to $100/share. My valuation is now $136/share.

[dan_s]

EOG Resources Reports Fourth Quarter and Full Year 2018 Results and Announces 2019
Capital Program
- Earns Record Net Income in 2018 and Generates Significant Net Cash from Operating
Activities and Free Cash Flow
- Exceeds Fourth Quarter Crude Oil and NGL Production Target Midpoints
- Increases Proved Reserves by 16% and Replaces 238% of 2018 Production at Sub-$10
Finding Cost
- Targets Improved Capital Efficiency, Significant Investment in High-Quality New Drilling
Potential and 12-16% U.S. Crude Oil Volume Growth in 2019, Funded with Net Cash from
Operating Activities at $50 Oil

HOUSTON - EOG Resources, Inc. (EOG) today reported fourth quarter 2018 net income of $893
million, or $1.54 per share. This compares to fourth quarter 2017 net income of $2.4 billion, or
$4.20 per share. For the full year 2018, EOG reported a company record net income of $3.4
billion, or $5.89 per share, compared to $2.6 billion, or $4.46 per share, for the full year 2017.
Net cash from operating activities for the fourth quarter and full year 2018 was $2.1 billion and
$7.8 billion, respectively.

Adjusted non-GAAP net income for the fourth quarter 2018 was $718 million, or $1.24 per
share, compared to adjusted non-GAAP net income of $401 million, or $0.69 per share, for the
same prior year period. Adjusted non-GAAP net income for the full year 2018 was $3.2 billion,
or $5.54 per share, compared to adjusted non-GAAP net income of $648 million, or $1.12 per
share, for the full year 2017.

[dan_s]

2019 Capital Plan + slower growth, but a lot more FREE CASH FLOW

EOG’s capital plan is custom-designed each year to increase returns and capital efficiencies. In
2019, EOG is allocating more capital to opportunistic, high quality new drilling potential and
somewhat less capital to drilling in established areas. The company’s disciplined growth
strategy emphasizes generating free cash flow while lowering well costs and per-unit operating
expenses and driving improvement in well productivity. Retaining high-quality equipment and
crews during the fourth quarter of 2018 positioned the company to further improve efficiencies
and returns in 2019.

EOG expects to grow U.S. crude oil production by 12 to 16 percent, fund capital investment and
pay the dividend with net cash from operating activities in 2019 at $50 oil. Exploration and
development expenditures for 2019 are expected to range from $6.1 to $6.5 billion, including
facilities and gathering, processing and other expenditures, excluding acquisitions and non-cash
exchanges. < My cash flow from operations forecast is ~$8.0 Billion for 2019.

EOG expects to complete approximately 740 net wells in 2019 compared to 763 net wells in
2018. Activity will remain focused in EOG’s highest rate-of-return oil assets in the Delaware
Basin, Eagle Ford, Rockies, Woodford and Bakken. The company’s investment in new potential
areas in the United States includes spending for leasing and related infrastructure to drill wells
in a number of new prospects in 2019.

“EOG’s disciplined 2019 capital plan delivers improved capital efficiency and strong high-return
growth while making investments in new organic high-quality drilling potential to improve the
future performance of the company,” Thomas said. “Our focus on innovation and operational
execution, as well as our investment in new drilling potential, will continue to increase the
quality of EOG’s premium portfolio. EOG is poised to further improve its position as one of the
lowest cost oil producers in the global market, able to create shareholder value through
commodity price cycles.”

Reserves
At year-end 2018, total company net proved reserves were 2,928 million barrels of oil
equivalent (MMBoe), an increase of 16 percent compared to year-end 2017. Net proved
reserve additions from all sources, excluding revisions due to price, replaced 238 percent of
EOG’s 2018 production at a finding and development cost of $9.33 per barrel of oil equivalent.

Revisions due to price increased net proved reserves by 35 MMBoe and asset divestitures
decreased net proved reserves by 11 MMBoe. For more reserves detail and a reconciliation of
non-GAAP measures to GAAP measures, please refer to the attached tables.

For the 31st consecutive year, internal reserves estimates were within five percent of estimates
independently prepared by DeGolyer and MacNaughton. < Hess used this firm. They are extremely conservative.