EOG Resources (EOG - Free Report) has premium drilling locations in all key oil and gas basins in the United States. Notably, the company has a trailing four-quarter positive earnings surprise of 1.4%, on average.
Let’s delve deeper to find out why this Zacks Rank #3 (Hold) stock is worth retaining in your portfolio at the moment.
Factors Favoring the Stock
The company has footprint in major shale resources in America which include the Rocky Mountain Area, Permian Basin, Eagle Ford and Mid-Continent. EOG Resources projected roughly 10,500 net undrilled premium locations in the shale plays that could lend access to 10.2 billion barrel of oil equivalent resources.
The upstream energy player expects a minimum of 30% return from the drilling locations even if oil price is at a low of $40 per barrel. Importantly, the company has managed to ramp up its well productivity significantly over the past few years. In 2014, the minimum oil price required by the company to generate 10% return on capital employed (ROCE) was $83 a barrel. In 2022, the company expects to generate 10% ROCE from the drilling sites even if oil is below $50 a barrel.
EOG Resources is also planning to strengthen its balance sheet. From 2018 to 2021, the company is planning to lower its total debt burden by $3 billion.
Factors Deterring the Stock
EOG Resources produces more than 93% of its crude equivalent volumes from the United States, with insignificant exposure to Trinidad and other international resources. With the U.S. business scenario being very competitive, the company is losing out on the opportunity to capitalize on profitable international exploration and production operations.
Stocks to Consider
Some better-ranked players in the energy space are Murphy USA Inc (MUSA - Free Report) , Sasol Limited (SSL - Free Report) and CNX Resources Corporation (CNX - Free Report) . While Murphy USA and Sasol sport a Zacks Rank #1 (Strong Buy), CNX Resources carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Murphy USA beat the Zacks Consensus Estimate in three of the prior four quarters.
For fiscal 2020, Sasol is likely to post earnings growth of 30%.
CNX Resources surpassed the Zacks Consensus Estimate in two of the prior four quarters. It has a positive earnings surprise of 34.8%, on average, for the trailing four quarters.
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