Energy Prospectus

I will be updating my forecast/valuation model for EOG today. EOG is the largest company in the Sweet 16 and at the top of the "Elite Eight". It should be a Core Holding for any of you that believe oil prices will stay over $60/bbl.

Stifel:
EOG Resources Inc. (EOG, $70.59, Buy; Target $99.00) -
4Q Beats on Costs, 2021 Guide Largely Inline - Michael S. Scialla -
We view the release as slightly positive. The positives include: i) 4Q FCF beat consensus by 48% as CF/capex were 14% above/3% below; ii) the dividend increased 10% to an annual $1.65/share, implying a 2.3% yield; iii) EOG further high-graded its near-term inventory to achieve a 60%+ IRR at $40/$2.50. The negatives include: i) 2021 capex guidance was 4% above consensus; 1Q21 capex/production guidance was 9% above/5% below consensus. In summary, cost containment drove a 4Q beat while the 2021 plan to hold oil volumes flat with 4Q20 and generate significant FCF was largely inline, albeit with slightly higher than expected capex.

EOG beat my Q4 forecast by a wide margin

Full‐Year 2020
- Generated $1.6 billion free cash flow at $39 average WTI oil price
- Earned $850 million adjusted net income in 2020, or $1.46 per share
- Reduced well costs 15% and per‐unit cash operating costs 4%
- Replaced 159% of production at $6.98 per Boe finding and development cost

Fourth Quarter 2020
- Generated $666 million free cash flow
- Capital expenditures 6% below guidance midpoint with oil production 1% above guidance midpoint
- Per‐unit cash operating cost 11% below guidance midpoint

2021 Plan
- Increased common stock dividend by 10% to $1.65 indicated annual rate
- Capital plan of $3.7 to $4.1 billion maintains oil production at 4Q 2020 rate and funds growing exploration program along with targeted cost and emissions reduction projects
- 2021 capital plan and dividend funded with discretionary cash flow at less than $40 WTI oil price
- Sets goal to achieve zero routine flaring by 2025 and set ambition to reach net zero scope 1 and Scope 2 GHG emissions by 2040

Recent price targets by the Wall Street Gang:
Stifel 2/26/2021 $99.00
S Williams 2/26/2021 $70.00
RBC Capital 2/22/2021 $82.00

I have updated my forecast/valuation model for EOG and it will be posted to the EPG website this afternoon.
My valuation increases by $3.50 to $84.00.
EOG is trading for $65.46 at the time of this post.