EOG closed at $142.23 on November 4.
TipRanks: "In the last 3 months, 18 ranked analysts set 12-month price targets for EOG. The average price target among the analysts is $154.59. Three of the 18 analysts updated their price targets on November 4 to $160, $160, $155."
My updated current valuation increases by $5 to $177. < My valuation is based on 7.5 X 2022+2023 operating CFPS.
> EOG is the largest company in the Sweet 16 with a market-cap of $83.4 billion (The combined market-cap of the other 15 companies is $92.1 billion)
> EOG is on pace to generated close to $13 billion of operating cash flow and over $8 billion of free cash flow on 2022.
> Despite its size, EOG increases production by ~10% year-over-year < EOG's production should top 1 million Boepd by 2H 2023.
> It has a super strong balance sheet and lots of running room to continue strong YOY production growth.
> Its "Fixed + Special" dividend for Q3 was $2.325. EOG plans to pay out ~60% of FCF to shareholders. < Annualized dividend yield is ~6.5%
> The new "Utica Combo Play" adds another layer of growth for 2023. It is a 395,000-acre natural gas + NGLs development in Ohio.
> They closed out a lot of hedges in Q2, so EOG should have much higher net revenues in 2023.
EOG Resources (EOG) Valuation Update - Nov 6
EOG Resources (EOG) Valuation Update - Nov 6
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: EOG Resources (EOG) Valuation Update - Nov 6
Note from Neal Dingmann at Truist Financial 11-7-2022 His price target is $166
EOG Resources, Inc. (EOG)
Appropriately Sticking with Returns Focused Plan
EOG will likely not deviate for the remainder of this year or next from its operational strategy
of focusing on the returns of its double premium inventory. However, the company has
slightly changed its commodity focus to target more gas, which is likely to continue after
the recent Utica announcement. We anticipate the Utica receiving increased attention given
the return potential and ample takeaway. We also believe the stock should start to once
again begin receiving the operational premium it did in the past given the multiple issues
announced by its peers this quarter.
Utica Positioned to Become EOG’s Next Double-Premium Play
EOG’s 2023 guidance will be dynamic as the company leverages their robust operational
capabilities across six basins and builds upon their early development in its seventh basin,
the Utica. As mentioned, EOG is gaining momentum following its four test wells and plans
for a 20-well program in the Utica. While the capital guidance has not been released, we
anticipate EOG to ramp its Utica D&C plans in FY23. As well, the double-premium upside
that the Utica potentially offers is driven by an integrated value chain approach that EOG
has successfully deployed across all basins that it currently operates in. In turn, its Utica
D&C program will likely also include the initial midstream infrastructure and build out of its
network of takeaway capacity. The success of this integrated value chain approach should
carry forward past 2023, and between the 20-well program and the start of its multi-year
construction of its midstream capability, we anticipate a budget of ~$500MM for the Utica.
Anticipating FY23 Guidance, Delaware & Eagle Ford at the Forefront
Looking more broadly at FY23 planning scenarios, we like the optionality of utilizing its
currently contracted rig fleet of 28 rigs, and layering on additional rigs depending on its
assessment of each basin’s supply chain, inflationary constraints, and service availability.
EOG’s rig deployment is predominantly allocated in the Delaware and Eagle Ford, along with
a 2-rig program in the Powder River Basin. For infrastructure projects, we are enthusiastic
about the construction kickoff of EOG’s 36” pipeline in its emerging play at Dorado. Much
like the wellhead-to-market approach we foresee being deployed in the Utica, EOG should
be able to secure seaborne pricing at the Corpus Christi sales point, while capturing the full
value chain by operating its takeaway capacity from its Webb County development in the
Eagle Ford basin. < This should be a PLUS for SilverBow Resources (SBOW) which also is bullish on their project in Webb County, Texas.
Updating Estimates Reiterating $166 Price Target
We are updating our estimates into the 3Q22 earnings release to true up our realized
pricing, adjusting our hedging loss to account for the company’s pre-released settlements
and lowering our oil and gas realizations. We are anticipating EBITDAX slightly below the
Street, primarily driven by our lower than consensus production estimates. We have updated
2H22/2023 estimates after the 3Q22 release. Specifically, we have raised our production
and capex assumptions in FY23 as we anticipate a more active operational program than
before. Our $166 price target is derived from two equally weighted methodologies, with the
first being our ’23 EV/EBITDAX multiple of 5.0x (5.0x prior vs 3.2x peer multiple average)
applied to our 2023E EBITDAX estimate of $16,996MM ($16,860MM prior and $15,723MM
consensus) and the second being a FCF/EV yield assumption of 8.0%
EOG Resources, Inc. (EOG)
Appropriately Sticking with Returns Focused Plan
EOG will likely not deviate for the remainder of this year or next from its operational strategy
of focusing on the returns of its double premium inventory. However, the company has
slightly changed its commodity focus to target more gas, which is likely to continue after
the recent Utica announcement. We anticipate the Utica receiving increased attention given
the return potential and ample takeaway. We also believe the stock should start to once
again begin receiving the operational premium it did in the past given the multiple issues
announced by its peers this quarter.
Utica Positioned to Become EOG’s Next Double-Premium Play
EOG’s 2023 guidance will be dynamic as the company leverages their robust operational
capabilities across six basins and builds upon their early development in its seventh basin,
the Utica. As mentioned, EOG is gaining momentum following its four test wells and plans
for a 20-well program in the Utica. While the capital guidance has not been released, we
anticipate EOG to ramp its Utica D&C plans in FY23. As well, the double-premium upside
that the Utica potentially offers is driven by an integrated value chain approach that EOG
has successfully deployed across all basins that it currently operates in. In turn, its Utica
D&C program will likely also include the initial midstream infrastructure and build out of its
network of takeaway capacity. The success of this integrated value chain approach should
carry forward past 2023, and between the 20-well program and the start of its multi-year
construction of its midstream capability, we anticipate a budget of ~$500MM for the Utica.
Anticipating FY23 Guidance, Delaware & Eagle Ford at the Forefront
Looking more broadly at FY23 planning scenarios, we like the optionality of utilizing its
currently contracted rig fleet of 28 rigs, and layering on additional rigs depending on its
assessment of each basin’s supply chain, inflationary constraints, and service availability.
EOG’s rig deployment is predominantly allocated in the Delaware and Eagle Ford, along with
a 2-rig program in the Powder River Basin. For infrastructure projects, we are enthusiastic
about the construction kickoff of EOG’s 36” pipeline in its emerging play at Dorado. Much
like the wellhead-to-market approach we foresee being deployed in the Utica, EOG should
be able to secure seaborne pricing at the Corpus Christi sales point, while capturing the full
value chain by operating its takeaway capacity from its Webb County development in the
Eagle Ford basin. < This should be a PLUS for SilverBow Resources (SBOW) which also is bullish on their project in Webb County, Texas.
Updating Estimates Reiterating $166 Price Target
We are updating our estimates into the 3Q22 earnings release to true up our realized
pricing, adjusting our hedging loss to account for the company’s pre-released settlements
and lowering our oil and gas realizations. We are anticipating EBITDAX slightly below the
Street, primarily driven by our lower than consensus production estimates. We have updated
2H22/2023 estimates after the 3Q22 release. Specifically, we have raised our production
and capex assumptions in FY23 as we anticipate a more active operational program than
before. Our $166 price target is derived from two equally weighted methodologies, with the
first being our ’23 EV/EBITDAX multiple of 5.0x (5.0x prior vs 3.2x peer multiple average)
applied to our 2023E EBITDAX estimate of $16,996MM ($16,860MM prior and $15,723MM
consensus) and the second being a FCF/EV yield assumption of 8.0%
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group