EOG Resources, Inc. ( EOG Quick Quote EOG - Free Report) recently clarified production growth strategy in the Evercore ISI Elite Energy conference. CEO William Thomas stressed on the company’s intention to boost output only when the market demand rises to the adequate level. It also highlighted its game plan for 2021.
The company’s shares fell 8.5% on Feb 26 after it stated that oil production growth will resume to 10% by 2022, which was not appreciated by investors as a volatile environment still persists in the global oil energy space. The share price rebounded a few days later. On Mar 17, following clarification from the company on production growth plan, the stock rose 3.6%.
3 Factors to Determine Supply Growth
The company expects crude oil demand to recover to pre-coronavirus levels by the end of the second half of this year. So, in 2022, crude demand will likely be in line with the pre-pandemic level. EOG Resources is not only looking for demand recovery to drive production growth, but also global inventory levels to reduce to five-year average or even below. Moreover, the company’s decision will depend on the Organization of the Petroleum Exporting Countries’ ability to restore production cuts without affecting the price level.
If the above-mentioned factors align, the company might boost production by 8-10%. However, if the requirements are not met, EOG Resources may not increase output at all or do so at a smaller rate. It expects 2021 crude output to be flat with the fourth-quarter 2020 level at 440 thousand barrels per day.
The company’s 2021 goals include generation of $2.4 billion in free cash flow at the $50 per barrel of crude oil mark. Moreover, it intends to boost shareholder value via hiking dividend by 10% and strengthening the balance sheet. The company intends to boost returns through developing “double premium” wells that can earn higher profits even at the $40 per barrel of oil level. Also, the Zacks Rank #1 (Strong Buy) company is eyeing to boost profits by reducing well costs by 5%. You can see
the complete list of today’s Zacks #1 Rank stocks here .
Its ESG performance plan is also noteworthy. The company is planning for zero routine flaring by 2025. Also, it intends to achieve net zero status on Scope 1 and 2GHG Emissions by 2040.
Shares of the company have gained 88.6% in the past six months.
Other Stocks to Consider
Other top-ranked players in the energy space include
DCP Midstream, LP ( DCP Quick Quote DCP - Free Report) , Frank's International N.V. ( FI Quick Quote FI - Free Report) and Pembina Pipeline Corporation ( PBA Quick Quote PBA - Free Report) , each carrying a Zacks Rank #2 (Buy).
DCP Midstream’s bottom line for 2021 is expected to jump 45.3% year over year.
Frank's International’s bottom line for 2021 is expected to rise 46.7% year over year.
Pembina Pipeline’s bottom line for 2021 is expected to increase 29.3% year over year.
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