QUOTE AND NEWS
Benzinga  3 hrs ago  Comment 
KLR Group upgraded EOG Resources Inc (NYSE: EOG) to Buy on Thursday with a $140 price target. Analyst John Gerdes claimed that EOG has achieved "outstanding asset productivity complemented by execution." Gerdes viewed EOG’s growth coming...
Benzinga  3 hrs ago  Comment 
Analysts at Credit Suisse upgraded Autodesk (NASDAQ: ADSK) from Outperform to Neutral. The target price for Autodesk has been raised from $50.00 to $70.00. Autodesk's shares rose 2.77% to $57.20 in pre-market trading. Analysts at Bank of...
Motley Fool  Sep 23  Comment 
Thinking of buying EOG Resources Inc stock? Read this first.
Market Intelligence Center  Sep 23  Comment 
Monday’s trading in EOG Resources Inc. (EOG) gives options traders an opportunity for a 6.08% return. By selling the Nov. '14 $100.00 call and buying the Jan. '16 call at the $45.00 level for a net debit of $51.85, traders will book a profit as...
SeekingAlpha  Sep 20  Comment 
By Callum Turcan: Cimarex Energy (NYSE:XEC) is a promising E&P player that is utilizing the Permian Basin to shift its production mix towards more profitable liquids production. This year, Cimarex is going to spend 74% of its capex budget...
Market Intelligence Center  Sep 19  Comment 
MarketIntelligenceCenter.com's patented algorithms have selected a trade on EOG Resources Inc. (EOG) that returns 6.58% in 120 days for an annualized return rate of 20%. This diagonal spread pairs a short position in the Jan. '15 $100.00 call,...
Benzinga  Sep 17  Comment 
Speaking on CNBC's Fast Money, Dan Nathan said that he owns put options in Apple Inc. (NASDAQ: AAPL), which lost 0.76 percent on Tuesday. Brian Kelly thinks that the energy space is very exciting right now. He wants to buy EOG Resources Inc...
Forbes  Sep 16  Comment 
In afternoon trading on Tuesday, Energy stocks are the best performing sector, higher by 1.6%. Within that group, EOG Resources (NYSE: EOG) and Phillips 66 (NYSE: PSX) are two large stocks leading the way, showing a gain of 3.7% and 3.1%,...
Market Intelligence Center  Sep 16  Comment 
EOG Resources Inc. (EOG) was selected by MarketIntelligenceCenter.com’s trade-picking algorithms today after trading between $100.12 and $102.41 on Monday before closing at $101.91. A diagonal spread using a long position in the Jan. '16 $65.00...
Motley Fool  Sep 15  Comment 
EOG Resources Inc. battles Pioneer Natural Resources for the best returning oil stock for investors.




 
TOP CONTRIBUTORS

EOG Resources Inc. (NYSE: EOG) is one of the largest independent natural gas producers in the United States. EOG’s reserves are primarily located in major basins within the United States, but the firm also has international operations in Canada, Trinidad, the United Kingdom, and the North Sea. [1]

With approximately 85% of its production in natural gas, EOG has responded to the depletion of conventional sources of this commodity by shifting its focus to unconventional deposits such as the Barnett Shale near Fort Worth, Texas. The difficult process of extracting gas from unconventional resources has only become economically feasible in recent years, and EOG has become highly efficient in these operations. In the Barnett Shale, it has reduced costs by cutting the time it takes to drill a well in half, and it plans to apply lessons learned at this unconventional field to other shale-based resources in the next two years.[2]

The Barnett Shale has become one of North America's "hot spots" for natural gas and EOG owns about 610,000 acres of this area. In general, EOG avoids pricey acquisitions and relies on its ability to develop existing operations in order to keep costs low. Although EOG’s competitors have generated more impressive production growth, EOG maintains one of the industry’s lowest-cost asset bases. The firm has also outlined plans to build its own gathering, processing, and transportation infrastructure for its resources in Texas and North Dakota, which will create vertical efficiencies and maximize margins in the long term.

Company Overview

Traditional oil and natural gas deposits are being depleted and the importance of developing new technologies and discovering new basins is at the core of EOG’s ability to sustain economic growth since they do not rely on expensive acquisitions to grow. EOG’s decision to avoid acquisitions has kept the company from enjoying impressive production growth but allowed it maintain efficient operating margins. In comparison with some of its leading competitors such as XTO Energy and Devon Energy, EOG has not grown as rapidly which might lead some investors to think the company's success has been congruent with its growth. However, EOG’s low cost mentality in its holdings in some of the most productive and promising areas for natural gas (the Barnett Shale) has allowed it to generate better margins and returns than other companies with properties in the same regions.

As of 2007, EOG’s estimated net proved natural gas reserves were 6,095 Bcf and estimated net proved crude oil, condensate and natural gas liquids reserves were 118 million barrels. Approximately 60 percent of EOG’s reserves on a natural gas equivalent basis were located in the United States, 20 percent in Canada, 20 percent in Trinidad and less than 1 percent in the United Kingdom North Sea.[3]

[4]
[5]

Trends and Forces

  • The Company Prefers to Avoid Acquisitions- Historically, EOG's business model has shunned acquisitions and preferred to find and develop resource basins on its own. By avoiding pricey acquisitions EOG has kept its operating expenses and capital costs in check. EOG's low-cost mentality has allowed the company to invest in existing operations in unconventional deposits such as the Barnett Shale which, as of late, has developed into one of the most prolific natural gas producing basins in North America.
  • High Natural Gas and Oil Prices Have Doubled EOG's Profits- Coupled with the company's low operation costs, the dramatic increase in gas and oil prices have more than doubled EOG's revenue since 2004. With approximately 88% of the company's proved reserves natural gas, only 12% account for crude oil.[6] Unfortunately, the price of natural gas has not erupted as significantly as oil prices. So although the company has benefited from price increases, it hasn't had the same acceleration of revenue and operating profit as more oil-focused competitors.
    • OPEC's Role- OPEC plays an important role in regulating the high market prices that have benefited EOG. Artificially high oil and gas prices are important to the company's profitability because these resources are commodity goods, making their markets subject to volatile price cycles and harsh price competition.
  • Emerging Markets in Hybrid and Alternative Energy Technology Might Compete with EOG in the Long Term - Rising oil prices have led both consumers and companies to seek out alternative sources of energy and invest in renewable energy such as nuclear, solar, wind, biofuels, and ethanol. As the global consumer demand shifts toward renewable energy sources due to recent environmental concerns over climate change, this change in consumer consciousness may adversely affect the oil and gas industry. With the advent of hybrid and fuel cell vehicles and the cost of gasoline becoming dangerously close to $4 per gallon, consumers have become less inclined to purchase gas guzzling SUV’s opposed to more fuel-efficient cars. As a result oil and gas companies stand to lose if the industry encounters a sudden decrease in demand.

Great insight! That's the awnser we've been looking for.

Footnotes

  1. EOG Annual 10-k Report, “Business” pg. 1
  2. Naturalgas.org
  3. EOG Corporate Website
  4. Google Finance
  5. EOG 2006 Annual 10-k Report, "Business" pg.1
  6. EOG 2006 Annual 10-k Report, "Business" pg.1


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