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Here's Why You Should Retain EOG Resources (EOG) Stock Now

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EOG Resources, Inc. EOG has witnessed upward estimate revisions for 2021 and 2022 earnings in the past seven days. Moreover, the leading upstream energy firm is likely to record earnings growth of 318.5% and 6.4%, in 2021 and 2022, respectively.

Factors Working in Favor

The price of West Texas Intermediate crude, trading at more than $73 per barrel mark, has improved drastically from the pandemic-hit lows of April last year, when oil price was in the negative territory. With coronavirus vaccines being rolled out at a massive scale, the demand for fuel will possibly improve further.

EOG Resources, a leading oil and natural gas exploration and production company carrying a Zacks Rank #3 (Hold), is well placed to capitalize on the crude rally. The company has estimated roughly 11,500 net undrilled premium locations, resulting in brightened production outlook. In the Eagle Ford shale play alone, the company identified 1,900 undrilled premium locations, while in the prolific Delaware Basin, the upstream firm identified 6,300 drilling sites.

The company has also been strongly focused on lowering cash operating costs. From $11.02 per barrel of oil equivalent (BoE) cash operating cost in 2018, the company has reduced the cost to $9.94 per BoE, aiding the bottom line.

EOG Resources is also committed to returning cash back to shareholders. The company announced $1.00 per share special dividend and decided to return as high as $1.5 billion cash to shareholders through special and regular dividends this year.

Risks

Despite the positives, the EOG Resources stock failed to surpass the industry when it comes to price chart. Year to date, the stock gained 72.6% as compared with the industry’s 86.8% rally.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Investors should know that although the upstream firm is committed to returning capital to shareholders, it has been paying lower dividend yield than the composite stocks belonging to the energy sector over the past five years.

Moreover, the company expects its 2021 production in the range of 774.8-831.9 MBoe/d, a reduction from its previous guidance of 779.8- 856.9 MBoe/d. Thus, lower production estimates can affect the company’s bottom line.

Stocks to Consider

Some better-ranked players in the energy space include Whiting Petroleum Corporation WLL, Extraction Oil & Gas, Inc. XOG and Oasis Petroleum Inc. OAS. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Whiting Petroleum has witnessed upward earnings estimate revisions for 2021 in the past 30 days.

Extraction is expected to witness earnings growth of 450.8% in 2021.

Oasis Petroleum has witnessed upward earnings estimate revisions for 2021 in the past 30 days.

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