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EOG Resources (EOG) Jumps 76.9% In a Year: More Room to Run?

·3 min read

EOG Resources, Inc. EOG has gained 76.9% in the past year, surpassing the 42.5% rise of the composite stocks belonging to the energy sector. The leading upstream energy firm is likely to see earnings growth of 82.4% this year.

Zacks Investment Research
Zacks Investment Research


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Factors Working in Favor

The price of West Texas Intermediate crude, trading at more than $85 per barrel, is still favorable for upstream operations. EOG Resources, a leading oil and natural gas exploration and production company currently carrying a Zacks Rank #3 (Hold), is thus well-placed to capitalize on the promising business scenario. EOG has an estimated 11,500 net undrilled premium locations, resulting in a brightened production outlook.

EOG Resources is strongly committed to returning capital to shareholders. Since its transition to premium drilling, the company has returned roughly $10 billion in cash to stockholders. With the employment of premium drilling, EOG will be able to reduce its cash operating costs per barrel of oil equivalent, thereby aiding its bottom line.

Risks

Although EOG Resources is committed to returning capital to shareholders, it has consistently been paying lower dividend yields than the composite stocks belonging to the energy sector over the past five years.

Rising lease and well-operating costs are hurting EOG Resources’ bottom line.

Last Word

Overall, the business scenario will possibly continue to be favorable for EOG Resources. With the transition to premium drilling and footprint in prolific basins, EOG has more room to gain.

Stocks to Consider

Some better-ranked players in the energy space are Exxon Mobil Corporation XOM, BP plc BP and Eni SpA E. Eni carries a Zacks Rank #2 (Buy), ExxonMobil and BP sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ExxonMobil’s upstream operation is benefiting from high oil price. XOM reported strong earnings thanks to higher realized commodity prices and solid refinery utilization, offset partially by increased ethane feed costs in North America. In 2022, ExxonMobil is likely to see earnings growth of 131%.

High oil prices are aiding BP’s upstream operations. Its sizable refining and marketing operations will protect it if the crude pricing scenario turns unfavorable again. For 2022, it is likely to witness earnings growth of 116.2%. Over the past few quarters, BP has successfully been reducing long-term debt.

Eni is expecting the discovery of 700 million barrels of oil equivalent (BoE) of new exploration resources this year, suggesting an improvement from the prior guidance of 600 million BoE. For 2022, Eni is likely to witness earnings growth of 165.9%.


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