EOG Resources (EOG) Prepares for 50% Less US Oil Growth in 2024
EOG Resources’ EOG CEO, Billy Helms, anticipates the growth rate of U.S. crude oil production for 2024 to be less than half of what was observed in 2023, given the decline in domestic drilling activity.
Growth of U.S. oil is expected to significantly slow down after ending 2023 with an estimated production increase of 900,000 barrels per day, exceeding the 2022 levels. Per EOG Resources, production is not expected to maintain the same growth rate as the preceding year.
According to U.S. government estimates, U.S. oil production hit a record peak of 13.25 million barrels per day in September. However, it has faced a decline due to lower energy prices and market oversupply. This downturn is, in part, linked to a decrease in active drilling rigs, which dropped 20% in 2023.
Oil drillers in areas like the Permian Basin and Bakken Shale exceeded analysts’ expectations last year by increasing oil production. This surge in production happened just as OPEC and its allies were cutting back on supplies to stabilize prices. Per Helms, EOG anticipates reporting 3% growth in its 2023 oil output when announcing fourth-quarter earnings in the upcoming weeks.
According to Helms, EOG does not anticipate the necessity to boost activity significantly, particularly in its core regions this year. However, there might be an expansion of drilling in its emerging Utica Shale fields, spanning Ohio, West Virginia and Pennsylvania.
EOG Resources is satisfied with its existing activity levels and does not foresee the need for an increase. The company intends to sustain activity at its Dorado natural gas play in South Texas, even though it postponed some completions there last year due to low natural gas prices.
The slowdown in growth is mostly due to a reduction in drilling within the country. This reflects a bigger pattern in the oil industry, where companies are dealing with issues like supply-chain problems and rising costs. Even with these challenges, EOG is optimistic about its operations, especially in the Utica Shale fields.
Overall, the U.S. oil industry is heading into a phase of slower growth, and this could impact the domestic and global energy markets.
Zacks Rank & Stocks to Consider
Currently, EOG carries a Zack Rank #3 (Hold).
Investors interested in the energy sector might look at the following companies that presently sport a Zacks Rank #1 (Strong Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cenovus Energy Inc. CVE is a leading integrated energy firm. The Zacks Consensus Estimate for CVE’s 2023 and 2024 earnings per share (EPS) is pegged at $1.69 and $2.37, respectively.
Cenovus stands out in terms of financial stability compared with its industry peers, maintaining a stronger balance sheet. This is evident from its consistently lower debt-to-capitalization ratio, which remains at 20%.
Sunoco LP SUN is among the biggest motor fuel distributors in the U.S. wholesale market in terms of volumes. The Zacks Consensus Estimate for SUN’s 2023 and 2024 EPS is pegged at $5.19 and $3.83, respectively.
Sunoco has a core competency in terms of its history of disciplined expense management. Over the past few years, it has demonstrated a remarkable ability to control total operating expenses, with an annual growth rate of only around 2% since 2019.
The Williams Companies WMB is a premier energy infrastructure provider in North America. WMB has a thriving deepwater transportation business. The company’s deepwater portfolio includes a 3,500-mile natural gas and oil gathering and transmission pipeline, and is important for future cash flows.
WMB’s debt maturity profile is in good shape, with its $4.5-billion revolver maturing in 2023. It is also paying shareholders an attractive dividend yielding around 5%. Beside this, the company has a share repurchase program worth $1.5 billion, highlighting its commitment to shareholders.
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