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On May 31, Zacks Investment Research upgraded independent oil and gas exploration and production (E&P) company, EOG Resources Inc. (EOG - Analyst Report)  to a Zacks Rank #2 (Buy).

Why the Upgrade?

Operating environment and growth prospects seem bright for EOG, as reflected by the rising earnings estimates for this leading Houston, Texas-based company. Over the last 30 days, the Zacks Consensus Estimate for the second quarter of 2013 has increased 19.5% to $1.59 per share, while that for 2013 rose 11.9% to $6.68 per share.

The momentum has been strong since EOG released its first quarter earnings results on May 6. Adjusted earnings per share came in at $1.80 per share, exceeding the Zacks Consensus Estimate of $1.13 by 59.3% and improving 53.8% from $1.17 a year ago. The outperformance was aided by a striking improvement in high margin crude oil production.

With respect to the earnings trend, EOG delivered positive earnings surprises in all the last four quarters with an average beat of 39.78%. The long-term expected earnings and sales growth projections of 11.81% and 20.65%, respectively, are also fairly impressive.

Going forward, EOG’s increasing interest in oil is appreciable in a favorable price environment. It will be augmented by its deep focus on major oil and liquids rich plays, while holding core natural gas and Combo acreage in the Barnett, Leonard and Wolfcamp plays for the long term.

Other Stocks to Consider

There are certain other E&P firms in the energy sector that are worth considering. Those include EPL Oil & Gas Inc. as well as Abraxas Petroleum Corporation (AXAS - Snapshot Report) with Zacks Rank #1 (Strong Buy) and Sandridge Mississippian Trust II with Zacks Rank #2.

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