EOG Resources (EOG) Valuation Update - May 2

[dan_s]

At the time of this post EOG was trading for $110.07.

I have updated my forecast/valuation model for EOG's stronger than expected Q1 results and their updated guidance.

EOG is the largest company in the Sweet 16 and it is an incredible growth story. With a significant stock buyback underway and solid year-over-year production growth, the per share value keeps going up.
> It pays a decent dividend with ~3.5% annual yield, but it is more of a steady growth company.
> Annual production growth was 9.59% in 2022, 8.41% in 2023 and 7.86% in 2024.
> If EOG decided to go "Drill Baby Drill", it definitely could ramp up to 10% annual production growth because it has a deep inventory of high-rate drilling locations.
> Q1 production was 1,090,400 Boepd with a mix of 46% crude oil, 22.2% NGLs and 31.8% NGLs.
> Based on my forecast, EOG should generate approximately $10.7 billion of Operating Cash Flow and $4.7 billion of free cash flow this year. If the Company's realized prices go to $75/bbl of oil, $28/bbl of NGLs and $4.25/mcf of natural gas, they could generate over $15 billion of operating cash flow next year (more than $27/share). < 6X operating cash flow per share is a reasonable price target for a company of this size and quality.
> It has a "pristine" balance sheet.

I have increased my valuation by $7 to $152 per share.

TipRanks: "In the last 3 months, 25 ranked analysts set 12-month price targets for EOG. The average price target among the analysts is $137.64." < The 25 price targets range from $114 to $156. The 6 price targets that have been updated since EOG released Q1 results average $137.