EOG Posts Strong Earnings


EOG Resources Inc. (EOG) reported solid adjusted second-quarter 2013 results on the back strong revenue growth and higher production volumes.

Quarterly adjusted earnings of $2.10 per share exceeded the Zacks Consensus Estimate of $1.76 by 19.3% and were 81.0% higher than the year-ago adjusted earnings of $1.16.

Total revenue in the quarter increased almost 32.0% year over year to $3,840.2 million and comfortably exceeded the Zacks Consensus Estimate of $3,534.0 million.

Operational Performance

During the quarter, EOG’s total volume expanded 5.3% from the year-earlier level to 46.0 million barrels of oil equivalent (MMBoe).

Crude oil and condensate production in the quarter was 214.4 thousand barrels per day (MBbl/d), up approximately 35% from the year-ago level. Natural gas liquids (NGL) volumes increased 16.6% from the year-ago quarter to 64.7 MBbl/d. On the other hand, natural gas volumes contracted 14.8% to 1,361 million cubic feet per day (MMcf/d) from the year-earlier level of 1,598 MMcf/d.

Average price realization for crude oil and condensates increased approximately 8.4% year over year to $103.19 per barrel. Quarterly NGL prices were down 10.1% at $30.33 per barrel from the year-ago level of $33.72. Natural gas was sold at $3.73 per thousand cubic feet (Mcf), showing an improvement of 51.0% year over year.

Liquidity Position

At the end of the second quarter, EOG had cash and cash equivalents of $1,228.0 million and long-term debt of $5,906.2 million (including current portion), representing a debt-to-capitalization ratio of 31%.

During the quarter, the company generated approximately $1,867.5 million in discretionary cash flow, compared with $1,381.7 million in the year-ago quarter.


Looking ahead, the company projects total crude oil production for the third quarter in the range of 214.3 MBoe/d to 232.4 MBoe/d.

Citing strong performance during the first half of 2013, EOG raised its full-year crude oil and condensate production target to 35% from 28%. The company also raised its outlook for total NGL production to 14% from 10%. Natural gas production is projected to decline 11.5% year over year.

The company now forecasts full-year crude oil and condensate production of 208.0 MBbls/d to 219.6 MBbls/d, up from the prior range of 193.0 MBbls/d to 211.2 MBbls/d.


One of the largest U.S. independent oil and gas exploration and production companies, EOG is proactive in its liquids ventures. These efforts will be further aided by its deep focus on major oil and liquids rich plays, while holding its core natural gas and Combo acreage in the Barnett, Leonard and Wolfcamp plays for the long term.

The company has also maintained its total capital expenditure budget between $7 billion to $7.2 billion for 2013. This compares with the $7.6 billion capex in 2012. Moreover, EOG Resource is keen on its asset divestiture program.

Though we view EOG as a favorable long-term story, the risk-reward pay-off for the company is still uncertain due to its natural gas weighted production and reserves base as well as cost overruns. EOG's large portfolio of high-return projects and strong technical competence are the key long-term drivers.

The company retains a Zacks Rank #3, which is equivalent to a Hold rating for the period of one to three months. However, there are other sector stocks with a Zacks Rank #1 (Strong Buy) that offer value and are worth buying now. These include Niska Gas Storage Partners LLC (NKA), Range Resources Corporation (RRC) and Cabot Oil & Gas Corporation (COG).


Read the Full Research Report on RRC

Read the Full Research Report on COG

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Read the Full Research Report on NKA

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