Energy Prospectus

HOUSTON, Feb. 27, 2017

EOG Resources 4th Quarter Results:

> Exceeds High-end of Fourth Quarter and Full Year 2016 Crude Oil Production Targets
> Beats Fourth Quarter and Full Year 2016 Targets for Lease and Well, Transportation and DD&A Expenses
> Achieves Record Capital Efficiency Gains in 2016
> Replaces 163 Percent of 2016 Production at Low Finding Cost of $5.22/Boe and Increases Total Net Proved Reserves by 1.4 Percent in 2016
> Targets 18 Percent Crude Oil Production Growth for 2017 within Cash Flow at Flat $50 Oil
> Forecasts Flat to Lower Well Costs in 2017

EOG Resources, Inc. (EOG) today reported a fourth quarter 2016 net loss of $142.4 million, or $0.25 per share. This compares to a fourth quarter 2015 net loss of $284.3 million, or $0.52 per share. For full year 2016, EOG reported a net loss of $1.1 billion, or $1.98 per share, compared to a net loss of $4.5 billion, or $8.29 per share, for the full year 2015.

Adjusted non-GAAP net loss for the fourth quarter 2016 was $6.7 million, or $0.01 per share - beat my forecast by a wide margin.

Adjusted non-GAAP net income (loss) is calculated by matching hedge realizations to settlement months and making certain other adjustments in order to exclude non-recurring and certain other items. For a reconciliation of non-GAAP measures to GAAP measures, please refer to the attached tables.

Higher crude oil, NGL and natural gas prices, significant well productivity improvements, and lease and well cost reductions resulted in increases in adjusted non-GAAP net income, discretionary cash flow and EBITDAX for the fourth quarter 2016 compared to the fourth quarter 2015.

Operational Highlights
Tremendous capital efficiency improvements in 2016 offset the impact of a significant reduction in capital expenditures resulting from low oil prices. 2016 total company crude oil and condensate volumes declined less than one percent to 282,500 barrels of oil per day (Bopd) while exploration and development expenditures (excluding acquisitions) decreased 42 percent compared to 2015. Increased development activity and significant well productivity improvements drove substantial volume increases in the Delaware Basin, with additional growth from the Powder River and DJ Basins. These contributions were offset by volume declines in the Bakken and Eagle Ford resulting from lower activity levels. Natural gas liquids volumes grew 6 percent while natural gas volumes decreased 7 percent primarily due to natural decline and the sale of the company's Barnett and Haynesville Shale dry gas assets. Compared to the same prior year period, lease and well expenses decreased 20 percent and transportation expenses decreased 8 percent, both on a per-unit basis. Total operating costs, which includes lease and well, transportation, gathering and processing, and general and administrative expenses, were down 15 percent year over year.

"EOG achieved near company-record returns on new capital in 2016 in spite of the lowest crude oil prices in 13 years," said William R. "Bill" Thomas, Chairman and Chief Executive Officer. "Through continued improvements in well productivity, cost reductions and expanded resource potential, EOG is positioned to excel as crude oil prices continue to recover. More than ever, EOG continues to lead the industry through its innovative technology and disciplined culture."

2017 Capital Plan
EOG's 2017 plan is designed to maximize returns and grow crude oil volumes while maintaining a strong balance sheet through disciplined spending. EOG expects to grow total company crude oil volumes by 18 percent, assuming investment and dividend payments within cash flow at a $50 average oil price.

Capital expenditures for 2017 are expected to range from $3.7 to $4.1 billion, including production facilities and gathering, processing and other expenditures, and excluding acquisitions. The company expects to complete approximately 480 net wells in 2017, compared to 445 net wells in 2016. EOG anticipates flat to lower completed well costs in 2017 versus 2016 levels as continued efficiencies and service contract expirations are expected to offset potential cost increases.

Capital will be allocated primarily to EOG's highest rate-of-return oil assets in the Eagle Ford, Delaware Basin, Rockies and the Bakken. After reducing the drilled uncompleted well inventory to a normal operating level in 2016, the company will increase its focus on its 6,000 remaining premium drilling locations. EOG is capable of delivering very strong rates of return in the current commodity price environment through premium drilling combined with the company's expectations that well costs will remain flat or lower in 2017. Premium inventory includes wells with a direct after-tax rate of return of at least 30 percent assuming $40 flat crude oil prices.

"EOG's goal during the last two years was to exit the industry downturn in better shape than when we entered it," Thomas said. "We clearly accomplished that goal with spectacular improvements in all facets of the business. We made major technology advances in our proprietary well targeting, completion designs, drilling practices and production operations. EOG is now set to resume strong oil growth within cash flow."

I have updated my EOG forecast/valuation model. This is one rock solid company with decades of running room in several key oil producing basins.

My valuation increases by $3.40 to $117.00, compared to First Call's price target of $112.56.

EOG has very little production hedged, which may be a good thing if you think oil, gas and NGL prices are going up.

Based on my forecast, EOG should generate approximately $5.0 Billion of cash flow from operations this year. That compares to their CapEx budget of $3.7 to $4.1 Billion.