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EOG Resources (EOG) Up 13.1% QTD: More Room for Upside Left?

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Shares of EOG Resources, Inc. EOG have jumped 13.1% quarter to date (QTD) compared with the 5.5% gain of the composite stocks belonging to the industry. EOG Resources’ earnings per share for 2021 has witnessed upward estimate revisions over the past 30 days.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Let’s delve into the factors behind the stock’s price appreciation.

What's Favoring the Stock?

The West Texas Intermediate crude price is trading above $75 per barrel again, marking an improvement of more than 15% since the beginning of December. With coronavirus vaccines being rolled out on a massive scale and the announcements that booster doses and antiviral pills are effective against Omicron, the demand for fuel will possibly improve further. This will likely continue to aid the rally in oil price.

The crude price rally has also been backed by the positive news that The People’s Bank of China has decided to stimulate the country’s economy, the second largest in the world, with targeted policy measures. The news lend support to oil price since China is the biggest importer of crude in the world.

Having a strong presence in prolific resources like Delaware Basin and South Texas Eagle Ford, EOG Resources is well placed to capitalize on the improvement in crude price. EOG Resources’ production outlook looks bright since it has 6,300 net undrilled premium locations in Delaware Basin and 1,900 net undrilled premium locations in Eagle Ford.

Banking on innovation and efficiency, EOG Resources is focusing on sustainable cost-reduction initiatives. In 2021, EOG plans to reduce well costs by 7%, thereby spurring its bottom line.

Numerous factors are aiding the stock price surge for EOG Resources, which is currently carrying a Zacks Rank #3 (Hold), and are creating more room for upside. One factor that could offset the positives to some extent is EOG has consistently been paying a lower dividend yield than the composite stocks belonging to the energy sector over the past year.

Stocks to Consider

Better-ranked players in the energy space include PDC Energy, Inc. PDCE, Sunoco LP SUN and SM Energy SM. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PDC Energy is focusing on significant value creation with a strong presence in the Delaware Basin – a sub-basin of Permian – where the company’s operations are spread across roughly 25,000 net acres. PDC Energy has done pretty well this year despite the coronavirus pandemic and is projecting 2021 free cash flow of more than $900 million.

PDC Energy is also focusing on debt reduction. In order to strengthen its balance sheet further, PDC Energy is anticipating reducing its debt load by more than 40% in 2021.

Sunoco LP generates stable cashflows since it is a leading independent fuel distributor in the United States. With a growing energy infrastructure platform, Sunoco LP secures roughly 2,500 commercial customers.

Over the past 60 days, Sunoco LP has witnessed upward earnings estimate revisions for 2021 and 2022, respectively. Overall, with demand for traditional motor fuels to continue to remain in place, Sunoco LP is well placed to continue to generate stable cashflows.

SM Energy is also a leading upstream player with strong footprint in top-tier assets. SM Energy is delivering the best-in-class well performances. Since the beginning of 2021 to third-quarter end, SM Energy has completed 78 net wells with the projection for the completion of 82 net wells.

Over the past seven days, SM Energy has witnessed upward earnings estimate revisions for 2021. So far this year, SM Energy gained 409.6%, outpacing the surge of 98.1% of the composite stocks belonging to the industry.


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Sunoco LP (SUN) : Free Stock Analysis Report

EOG Resources, Inc. (EOG) : Free Stock Analysis Report

SM Energy Company (SM) : Free Stock Analysis Report

PDC Energy, Inc. (PDCE) : Free Stock Analysis Report

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