EOG Resources (EOG)

[dan_s]

I have updated my forecast model for EOG, which will be available on the EPG website this evening.

EOG is unhedged after 2015, so revenues are going to drop sharply during the first half of 2016. My valuation is now $80.40/share, compared to First Call's price target of $80.76.

EOG has a strong balance sheet and plenty of liquidity. If oil stays at $30/bbl all year, they will still generate $1.2 Billion in cash flow from operations this year.
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Houston Business Journal
The message from his pulpit at the 2016 NAPE Summit was clear. William Thomas, the chairman and CEO of Houston-based EOG Resources Inc. (NYSE: EOG), does not plan to lose the lead his company has achieved as the largest onshore oil producer of the lower 48 states, a claim the company touts on its website.

"We really don't plan on giving up our lead," Thomas said on Feb. 10 at the NAPE Summit at the George R. Brown Convention Center in Houston.

The formula for staying competitive, said Thomas, is a deep inventory of lower cost wells, and focusing on better wells instead of new wells.

Thomas replaced former CEO Mark Papa in June 2013, after which Papa remained on the board until December 2014, when he stepped down from that role for personal reasons.

One of the big turning points in EOG's oil recovery improvement per well was when the company stopped using gel in its fractures. The use of gel needlessly added cost and the company hasn't missed it. Instead, EOG has improved well productivity since that decision was made, said Thomas.

Thomas didn't stop with gel. Producers likely have a number of unnecessary products in their arsenal that oil field service companies sold them.

"We don’t rely on the service industry to get our costs down," said Thomas. "We take ownership."

Indeed. Thomas went on to say that two thirds of EOG's cost reductions have come from technology and efficiency gains, with only one third coming from cutting rates with its service providers.

"I don’t think there’s much more to give on the service company side," said Thomas, whereas the tech side still has ample room to grow.

"Completion technology is not anywhere close to peaked,” said Thomas.

But even as well productivity improves, something has got to give when it comes to oil prices, said Thomas.

“Nobody believes that the current prices are anywhere close to sustainable," said Thomas. "Even the Saudis are stressed right now.”

In Thomas' view, oil will have to recover to levels around $70 or $80 a barrel at some point.