EOG Resources Inc. (EOG - Free Report) is among the largest upstream energy players in the United States. Though the stock has lost 23.5% in the past year, the company has potential to grow in the near term. It should be on investors’ watchlist, despite limited international exposure and weak oil pricing environment. In fact, most of the analysts have raised their estimates for EOG Resources for 2020 in the past 60 days.
Let's dig deeper.
Premium Drilling Locations
The company has strong foothold in major oil resources in the United States, which includes Eagle Ford shale play, Permian Basin, Rocky Mountain and Mid-Continent regions. It has roughly 10,500 net undrilled premium drilling locations in crude oil plays with resource potential of 10.2 billion barrel of oil equivalent.
Over the years, the premium drilling strategy has been transforming the explorer. With the advancement in drilling technologies, EOG Resources has become successful in significantly lowering the minimum oil price required to generate handsome returns from the wells. Notably, the company expects the premium wells to generate 10% return on capital employed at oil price lower than $50 per barrel by 2022.
Efforts to Lower Operating Costs
EOG Resources has managed to lower its cash operating costs, including lease operating expenses, transportation expenses and general and administrative costs, by 31% from 2014 through 2019. This has been aiding the company’s bottom line.
The company has also been focusing on reducing well costs. It projects Eagle Ford’s 2019 well cost to be $5.6 million, considerably lower than 2013’s $8.5 million.
Strong Balance Sheet
The upstream energy player is planning to lower debt by $3 billion in the 2018-2021 period. Thus, the company’s financials will be strong enough to allow capital spending across all the commodity cycles.
Notably, EOG Resources’ efforts to lower debt are to primarily protect dividend payment and financial strength. In fact, in the past year, the company’s median dividend yield has been 1.4%, marginally higher than the industry’s 1.3%.
Earnings Beat Ahead?
EOG Resources is set release fourth-quarter 2019 earnings on Feb 27, after the closing bell. Our proven model predicts an earnings beat for EOG Resources this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.
Earnings ESP: The company’s Earnings ESP is +0.18%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The stock currently carries a Zacks Rank #3.
Stocks to Buy
Some better-ranked players in the energy sector are Denbury Resources Inc. (DNR - Free Report) , Chevron Corporation (CVX - Free Report) and Hess Corporation (HES - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Denbury Resources’ earnings per share estimates of 30 cents for 2020 have been unchanged over past seven days.
Chevron’s bottom line for 2020 is expected to rise 12.8% year over year.
Hess’ bottom line for 2020 is expected to rise 93.7% year over year.
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