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Why Is EOG Resources (EOG) Down 8.5% Since Last Earnings Report?

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A month has gone by since the last earnings report for EOG Resources (EOG - Free Report) . Shares have lost about 8.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is EOG Resources due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

EOG Resources Q2 Earnings Miss Estimates, Decline Y/Y

EOG Resourcesdelivered second-quarter 2019 adjusted earnings per share of $1.31, which missed the Zacks Consensus Estimate of $1.33 and declined from the year-ago $1.37. The underperformance was mainly because of lower price realization for crude oil and condensates, and higher lease and well operating expenses.

Total revenues in the quarter rose 10.8% year over year to $4,698 million. Moreover, the top line beat the Zacks Consensus Estimate of $4,403 million, thanks to the surge in oil equivalent volumes.

Operational Performance

In the quarter under review, EOG Resources’ total volume rose 16% year over year to 74 million barrels of oil equivalent (MMBoe).

Crude oil and condensate production in the quarter totaled 455.7 thousand barrels per day (MBbl/d), up 18% from the year-ago quarter level. Natural gas liquids (NGL) volumes increased 16% year over year to 131.1 MBbl/d. Natural gas volumes rose to 1,356 million cubic feet per day (MMcf/d) from the year-earlier quarter’s level of 1,228 MMcf/d.  

Average price realization for crude oil and condensates fell 10% year over year to $60.99 per barrel. Quarterly NGL prices declined 44% from $27.86 in the year-ago quarter to $15.63 per barrel. Moreover, natural gas was sold at $2.19 per thousand cubic feet (Mcf), representing a decline of 19% year over year.

Operating Cost

Total operating cost increased to $3,566.9 million from $3,273.1 million a year ago. Lease and Well expenses increased 10.4%, while exploration costs declined 31.5%.

Liquidity Position

At the end of the second quarter, the company had cash and cash equivalents of $1,160.5 million and long-term debt of $4,165.3 million. This represents a net debt-to-capitalization ratio of 16%. 

During the quarter, the company generated $2.1 billion in discretionary cash flow, nearly the same as the year-ago comparable quarter.

Guidance

For 2019, the company expects crude oil equivalent volumes in the range of 793.8-822.6 thousand barrels of oil equivalent per day (MBoE/D). For the third quarter of 2019, the company expects crude oil equivalent volumes in the band of 794-831.1 MBoE/D. Moreover, the company projects capital budget in the range of $6.1-$6.5 billion for 2019.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -6.14% due to these changes.

VGM Scores

At this time, EOG Resources has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, EOG Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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