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EOG Resources Incorporated

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We are revising EOG Resources rating to “Sell” from “Hold”. The company has huge exposure to North American shale plays where the business environment is highly competitive and volatile. On top of that, long-term debt of EOG Resources has been rising since 2015 which is a matter of concern. Moreover, the credit ratings of the company’s bonds have been downgraded by credit rating agencies.  Given high debt load and weak credit ratings we think that the company might face difficulties in generating debt capital for financing future growth projects. Volatile oil and gas prices also remain a drag. This is evident from the pressure its top line is facing and has decreased at a CAGR of 34.9% over the last three years. Under these headwinds, we expect shares of EOG Resources to be under pressure in the near future.

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