QUOTE AND NEWS
SeekingAlpha  Aug 29  Comment 
By Callum Turcan: An emerging independent oil major that can still grow its 500,000+ BOE/d production base by double digits offers investors a good chance at making money. EOG Resources (NYSE:EOG) grew its production levels by 17% year-over-year,...
Motley Fool  Aug 27  Comment 
EOG Resources stock is up more than 40% over the past year. Here’s why it could continue to rise.
SeekingAlpha  Aug 25  Comment 
By Price Point: EOG Resources (NYSE:EOG) has built a reputation of quietly building positions in areas before their potential is widely recognized. The company is a leading independent exploration and production company [E&P] and has one of the...
SeekingAlpha  Aug 21  Comment 
By Alpha Strategist: EOG Resources (NYSE:EOG) has become one of the top U.S. oil producers primarily due to the shale oil boom, and it just keeps getting better. The company's crude oil production has been steadily rising over the last couple of...
SeekingAlpha  Aug 20  Comment 
By Bret Jensen: My regular readers know that I feel the overall market is slightly overvalued at current levels especially given escalating geopolitical concerns (Iraq, ISIS, Ukraine, Syria, etc.) and the fact we are about two months away from the...
Motley Fool  Aug 20  Comment 
EOG Resources CEO Bill Thomas has five important takeaways for the company’s investors.
SeekingAlpha  Aug 20  Comment 
By SA Editor Miriam Metzinger: Stocks discussed on the Lightning Round segment of Jim Cramer's Mad Money Program, Tuesday August 19. Bullish Calls: St Jude Medical (NYSE:STJ): "It has the best new products. It is a buy." EOG Resources...
Forbes  Aug 15  Comment 
Looking at the sectors faring best as of midday Friday, shares of Energy companies are outperforming other sectors, up 0.6%. Within that group, Kinder Morgan (NYSE: KMI) and EOG Resources (NYSE: EOG) are two large stocks leading the way, showing a...
SeekingAlpha  Aug 14  Comment 
By David White: EOG Resources Inc. (NYSE:EOG) is one of the largest (non-integrated) oil and gas producers in the US. It has proved reserves in the US, Canada, Trinidad, The UK, and China. It is also the largest acreage holder (632,000 net acres)...
Motley Fool  Aug 12  Comment 
EOG Resources gives its investors two big surprises this quarter.




 
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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