EOG Resources Inc (EOG - Free Report) lost 14.9% in the first nine months of 2019, significantly underperforming the Oil-Energy sector’s 1.2% decline. The prolonged weakness in the crude pricing scenario has been among the major factors marring the upstream energy player’s prospects.
Factors Plaguing EOG Resources
Per the U.S. Energy Information Administration (EIA), the average prices of West Texas Intermediate (WTI) crude for all the first eight months of 2019 were significantly lower than the respective periods of 2018.
The global economic slowdown and the intensified tariff dispute between the United States and China have dented energy demand. Moreover, the market has been oversupplied with crude as shale producers in America have been ramping up production volumes of the commodity. Thus, weak demand and crude glut primarily led to the year-over-year underperformance of the monthly commodity prices.
Since crude oil accounts for more than 55% of the company’s total production, the weakness in commodity prices have hurt the explorer’s bottom line. Other energy majors that bore the brunt of crude underperformance were Concho Resources Inc. (CXO - Free Report) , Cimarex Energy Co. (XEC - Free Report) and Diamondback Energy, Inc. (FANG - Free Report) .
Moreover, rising lease & well operating expenses have affected EOG Resources’ earnings. Notably, there have been a significant increase in the company’s lease & well expenses and gathering & processing costs over the first six months of 2019.
The company has also been persistently paying considerably lower dividend yields than the Oil-Energy sector in the first three quarters of 2019.
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