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Planning for Upstream Bet? Consider EOG Resources (EOG)

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EOG Resources, Inc.’s (EOG - Free Report) stock appears to be a solid bet now, based on strong fundamentals and compelling business prospects. It has witnessed five and four upward estimate revisions for 2020 and 2021 earnings, respectively, in the past 60 days.

Headquartered in Houston, TX, EOG Resources is primarily involved in exploring and producing oil and natural gas. This leading upstream energy player’s operations are located in the United States and abroad. It employs technologies like horizontal drilling and advanced completion techniques to maximize production from wells. The company has recorded an earnings growth rate of 10.3% in the past five years, outperforming the industry’s 0.4% growth. This momentum is likely to continue, as indicated by EOG Resources’ projected earnings per share growth of 8.4% for the next five years.

Let's see what makes this Zacks Rank #2 (Buy) stock an attractive investment option at the moment.

Growth Drivers

The upstream energy player has an attractive growth profile, huge inventory of drilling opportunities, upper quartile returns and a disciplined management team. The company has significant acreages in oil shale plays like Permian, Bakken and Eagle Ford. Most importantly, EOG Resources is among the leading players in the Bakken play and the largest in the Eagle Ford. The upstream player’s extensive reach to these key shale resources will likely support long-term production growth.

In the promising shale plays, EOG Resources has identified 10,500 undrilled premium wells that could provide access to 10.2 billion barrels of oil equivalent estimated potential reserves. In the Eagle Ford alone, the company identified 1,900 undrilled premium locations with 3.2 billion barrels of oil equivalent of estimated potential reserves.

The company’s balance sheet is significantly less levered than the composite stocks belonging to the industry. In fact, its debt-to-capitalization ratio has consistently been lower than the industry over the past five years. Notably, the company’s cash balance of $2,416.5 million is more than sufficient to pay the current debt of only $21.1 million. It had a long-term debt of $5,703.1 million at second quarter-end.

The company also has a strong focus on lowering well costs. From $8.5 million in well costs in the Eagle Ford shale play in 2013, the company expects expenses to drastically fall to $5.3 million in 2020. Its lower operating costs — comprising lease operating, transportation and general and administrative expenses — have been providing support to margins and returns.

EOG Resources, Inc. Price

Other Stocks to Consider

Other top-ranked players in the energy space include Equinor ASA (EQNR), Apache Corporation (APA), and Cabot Oil & Gas Corporation (COG), each holding a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Equinor’s bottom line for 2021 is expected to skyrocket 80.3% year over year.

Apache’s bottom line for 2021 is expected to surge 84.3% year over year.

Cabot Oil & Gas’ sales for 2021 are expected to rise 37% year over year.

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