EOG Updated Forecast
Posted: Sat Feb 19, 2011 2:35 pm
I've completed my work on EOG and sent the forecast model to Kim for posting. Since she is visiting her family in Vietnam this week it may be a few days before it is posted to the EPG website.
Here is a summary and my remarks which will be in the Feb. 28th "Sweet 16 Detailed Update".
NOTE: I consider the "Sweet 16 Detailed Update" to be the most important document on our website. It is updated the Monday before each newsletter comes out. Premium Members should read it carefully. It contains my current thoughts on each of the Sweet 16 companies.
EOG Resources (from my forecast model)
Year _ EPS _ CFPS _ Production
2009A _ $2.20 _ $ 6.45 _ 352,967 boepd (22.3% oil and NGLs)
2010A _ $0.62 _ $11.00 _ 386,275 boepd (27.2% oil and NGLs)
2011E _ $4.11 _ $15.67 _ 422,950 boepd (37.8% oil and NGLs)
2012E _ $7.35 _ $20.62 _ 473,200 boepd (43.6% oil and NGLs)
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EOG Resources (NYSE: EOG) was down ~6% in 2010. Management is following through on their strategy to increase liquids production and the market has responded. The stock price is up more than 19% year-to-date. If EOG is successful in their goal of increasing oil production by more than 55% in 2011 the share price will move a lot higher, especially if oil prices continue to trend higher as well.
It has a large stake in the Bakken Shale play as well as most of North America’s resource plays. The Company is also a major player in the emerging South Texas Eagle Ford Shale, a zone that many believe will produce significant oil volumes, similar to the Bakken. The Bakken and the Eagle Ford will be fueling a high percentage of the Company’s growth for many years to come.
EOG reported 4th quarter adjusted earnings per share of $0.36, which beat the markets consensus of $0.26/share. By now you know that I could care less about earnings per share. Cash is King! EOG reported cash flow per share of $3.26, which topped my forecast as well as the Street’s.
EOG’s production was up 6% sequentially and 19% year-over-year. The company is now forecasting 9.5% production grow in 2011. More important to me, they are forecasting 55% growth in crude oil production and 34% grow in production of natural gas liquids.
Like everyone else, EOG is still having trouble getting wells completed in the Bakken and the Eagle Ford due to the stunning increase in drilling activity in North America’s two most promising oil plays. Oilfield service firms and the suppliers of proppant are having trouble keeping up with demand.
The major service firms are adding pressure pumping capacity to both the Bakken and the Eagle Ford. I’m now expecting EOG well completions to catch up to their drilling program by mid-2011.
The Company’s cash flow is very strong and 9.5% production growth for a company of this size is excellent. EOG has outstanding acreage in the Bakken and the Eagle Ford. Plus, they have established large acreage positions in the Marcellus Shale, Niobrara and Permian Basin. All three have outstanding long-term upside.
My Fair Value estimate for EOG has been raised to $125/share
EOG is the largest company in the Sweet – 16 with a market cap of approximately $27 Billion.
My take on the 4th quarter conference call
• EOG has now shifted to a “liquids company”
• Their budget is heavily weighted to increase oil production in North America
• Their Eagle Ford drilling program will generate even higher rates of return on capital employed than their Bakken program, which is outstanding
• They are committed to maintaining a strong Balance Sheet with a Debt / Total Capital ratio under 35 percent
• Development programs in the Marcellus Shale, Permian Basin and Niobrara will really kick in during 2012 and be major drivers for 2013 and beyond.
• EOG has double digit production and reserve growth locked in for many years to come
Here is a summary and my remarks which will be in the Feb. 28th "Sweet 16 Detailed Update".
NOTE: I consider the "Sweet 16 Detailed Update" to be the most important document on our website. It is updated the Monday before each newsletter comes out. Premium Members should read it carefully. It contains my current thoughts on each of the Sweet 16 companies.
EOG Resources (from my forecast model)
Year _ EPS _ CFPS _ Production
2009A _ $2.20 _ $ 6.45 _ 352,967 boepd (22.3% oil and NGLs)
2010A _ $0.62 _ $11.00 _ 386,275 boepd (27.2% oil and NGLs)
2011E _ $4.11 _ $15.67 _ 422,950 boepd (37.8% oil and NGLs)
2012E _ $7.35 _ $20.62 _ 473,200 boepd (43.6% oil and NGLs)
---------------------------------------------------------------------------------
EOG Resources (NYSE: EOG) was down ~6% in 2010. Management is following through on their strategy to increase liquids production and the market has responded. The stock price is up more than 19% year-to-date. If EOG is successful in their goal of increasing oil production by more than 55% in 2011 the share price will move a lot higher, especially if oil prices continue to trend higher as well.
It has a large stake in the Bakken Shale play as well as most of North America’s resource plays. The Company is also a major player in the emerging South Texas Eagle Ford Shale, a zone that many believe will produce significant oil volumes, similar to the Bakken. The Bakken and the Eagle Ford will be fueling a high percentage of the Company’s growth for many years to come.
EOG reported 4th quarter adjusted earnings per share of $0.36, which beat the markets consensus of $0.26/share. By now you know that I could care less about earnings per share. Cash is King! EOG reported cash flow per share of $3.26, which topped my forecast as well as the Street’s.
EOG’s production was up 6% sequentially and 19% year-over-year. The company is now forecasting 9.5% production grow in 2011. More important to me, they are forecasting 55% growth in crude oil production and 34% grow in production of natural gas liquids.
Like everyone else, EOG is still having trouble getting wells completed in the Bakken and the Eagle Ford due to the stunning increase in drilling activity in North America’s two most promising oil plays. Oilfield service firms and the suppliers of proppant are having trouble keeping up with demand.
The major service firms are adding pressure pumping capacity to both the Bakken and the Eagle Ford. I’m now expecting EOG well completions to catch up to their drilling program by mid-2011.
The Company’s cash flow is very strong and 9.5% production growth for a company of this size is excellent. EOG has outstanding acreage in the Bakken and the Eagle Ford. Plus, they have established large acreage positions in the Marcellus Shale, Niobrara and Permian Basin. All three have outstanding long-term upside.
My Fair Value estimate for EOG has been raised to $125/share
EOG is the largest company in the Sweet – 16 with a market cap of approximately $27 Billion.
My take on the 4th quarter conference call
• EOG has now shifted to a “liquids company”
• Their budget is heavily weighted to increase oil production in North America
• Their Eagle Ford drilling program will generate even higher rates of return on capital employed than their Bakken program, which is outstanding
• They are committed to maintaining a strong Balance Sheet with a Debt / Total Capital ratio under 35 percent
• Development programs in the Marcellus Shale, Permian Basin and Niobrara will really kick in during 2012 and be major drivers for 2013 and beyond.
• EOG has double digit production and reserve growth locked in for many years to come