EOG Resources (EOG) Update - May 21
Posted: Fri May 21, 2021 1:20 pm
I have finished my review of the updated profile for EOG and I have raised my valuation by $5 to $114.
After going over their Q1 results and their detailed guidance for full-year 2021 I have more confidence in my forecast model assumptions (increases my valuation multiple from 7.5 to 8.0) and I believe there is a very good chance that EOG's results for 2021 meet or exceed the high end of their production guidance. My valuation is base on the midpoint of their production guidance for both 2021 and 2022.
Plus, none of EOG's oil is hedged beyond September, 2021 except for some insignificant crude oil basis swaps. EOG's realized natural gas price was $5.12/mcf in Q1 2021 primarily thanks to soaring spot market prices due to Winter Storm Uri and because a lot of their gas has high BTU content and they sell a lot of gas in Trinidad. EOG has a an outstanding marketing group that gets them premium prices for a lot of their production.
EOG's realized oil price was $57.44/bbl in Q1 2021. With a full-year 2021 realized oil price of $60/bbl, EOG should generate over $4 Billion of free cash flow from operations this year. If WTI averages $65/bbl and HH gas averages $2.75/MMBtu in 2022, EOG should generate over $6 Billion of FCF from operations next year AND increase production by ~10% year after year. You will be hard pressed to find any company in any industry that can match these kind of numbers and grow by 10%.
Recent price target adjustments by the Wall Street Gang:
$87.00 by Wells Fargo 5/19/21
$78.00 by Morgan Stanley 5/19/21
$108.00 by Mizuho Securities 5/17/21
$104.00 by Raymond James 5/14/21
After going over their Q1 results and their detailed guidance for full-year 2021 I have more confidence in my forecast model assumptions (increases my valuation multiple from 7.5 to 8.0) and I believe there is a very good chance that EOG's results for 2021 meet or exceed the high end of their production guidance. My valuation is base on the midpoint of their production guidance for both 2021 and 2022.
Plus, none of EOG's oil is hedged beyond September, 2021 except for some insignificant crude oil basis swaps. EOG's realized natural gas price was $5.12/mcf in Q1 2021 primarily thanks to soaring spot market prices due to Winter Storm Uri and because a lot of their gas has high BTU content and they sell a lot of gas in Trinidad. EOG has a an outstanding marketing group that gets them premium prices for a lot of their production.
EOG's realized oil price was $57.44/bbl in Q1 2021. With a full-year 2021 realized oil price of $60/bbl, EOG should generate over $4 Billion of free cash flow from operations this year. If WTI averages $65/bbl and HH gas averages $2.75/MMBtu in 2022, EOG should generate over $6 Billion of FCF from operations next year AND increase production by ~10% year after year. You will be hard pressed to find any company in any industry that can match these kind of numbers and grow by 10%.
Recent price target adjustments by the Wall Street Gang:
$87.00 by Wells Fargo 5/19/21
$78.00 by Morgan Stanley 5/19/21
$108.00 by Mizuho Securities 5/17/21
$104.00 by Raymond James 5/14/21