Here's Why it is Worth Investing in EOG Resources (EOG) Stock
EOG Resources Inc. EOG possesses an attractive growth outlook and achieves returns in the upper quartile. The oil stock stands out, characterized by substantial reserves and highly efficient operations.
The prominent upstream energy player has experienced significant growth in earnings per share over the past three years. This could indicate that the business has reached a pivotal inflection point.
Earlier this month, EOG disclosed third-quarter 2023 earnings, which surpassed expectations. This achievement was attributed to an increase in oil equivalent production volumes.
The upstream energy stock maintains a Zacks Rank #2 (Buy), indicating favorable prospects. This ranking is attributed to a series of positive developments within the company.
Investors should buy the stock of the energy major as it has gained 11.7% in the past six months in comparison with the S&P 500 Index’s growth of 8%.
Factors Favoring the Stock
EOG’s Shareholder Commitment
EOG Resources has a strong focus on returning capital to shareholders. Since 1999 through 2024, the company has been committed to raising its regular dividend at a compound annual growth rate of 21%.
Notably, EOG has maintained its dividend without suspension or reduction, even amid business challenges, underscoring the resilience of its underlying business. Furthermore, the company retains a $4.3-billion authorization for opportunistic share repurchases.
Solid Upstream Presence
EOG’s operations span across key productive basins in the United States, with a primary emphasis on crude oil, and, to a lesser extent, natural gas activities. The company’s portfolio includes around 537,000 net acres in the Eagle Ford play and approximately 160,000 net acres in the Dorado gas play.
In 2023, EOG will concentrate its efforts on the Delaware Basin Wolfcamp, Bone Spring and Leonard plays, targeting the completion of 370 net wells. With substantial acreage in prolific oil shale plays like Permian and Eagle Ford, EOG is poised for a positive production outlook, benefitting from numerous untapped premium drilling locations.
Strong Balance Sheet
EOG Resources maintains a robust balance sheet, strengthening its ability to withstand challenges and uncertainties in the business environment. The exploration and production company has consistently observed a significant decline in the debt-to-total capitalization ratio over the past five reported quarters, showcasing an effective debt reduction strategy. Notably, this ratio has decreased from 17.6 to 12.1 during this period, underscoring the company's commitment to sustaining a healthy financial position.
Technological Growth
EOG Resources is recognized for its technological advancement, marked by substantial investments in cutting-edge technologies to boost its exploration and production capabilities. The company’s focus on technology and innovation is not only reducing well costs but also cutting exploration and development expenses, thereby aligning with broader objectives of cost reduction and emissions mitigation.
Other Stocks to Consider
Investors interested in the energy sector might look at the following companies that also presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Murphy Oil Corporation MUR possesses one of the best upstream portfolios among the domestic oil and natural gas integrated companies and independent E&P group.
The company has a long history of increasing the value of its shareholders, courtesy of steady cash flows. The company’s board of directors approved a 10% increase in the quarterly dividend rate beginning in the first quarter of 2023, taking the total annualized figure to $1.10 per share. The company's current dividend yield is 2.57%, better than the Zacks S&P 500 composite's average of 1.7%.
Suncor Energy, Inc. SU is Canada's premier integrated energy company. Suncor boasts an impressive supply-chain network, owning significant oil sands and conventional production platforms.
Suncor's robust liquidity position will allow it to sustain its dividend even if oil prices stay lower for longer. Notably, the company recently hiked its dividend by 5% to 54.5 Canadian cents per share (over the prior quarter) and increased the buyback authorization to roughly 10% of its public float.
Liberty Energy LBRT reported third-quarter 2023 earnings of 85 cents per share, which beat the Zacks Consensus Estimate of earnings of 74 cents. The Denver, CO-based oil and gas equipment company’s outperformance reflects the impacts of strong execution and increased service pricing.
Liberty’s board of directors announced a cash dividend of seven cents per common share, payable Dec 20, 2023, to stockholders of record as of Dec 6, 2023. This dividend reflects a 40% rise from the previous quarter’s level. As part of its shareholder return policy, LBRT repurchased shares worth $29 million at an average price of $16.38 per share.
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EOG Resources, Inc. (EOG) : Free Stock Analysis Report
Murphy Oil Corporation (MUR) : Free Stock Analysis Report
Suncor Energy Inc. (SU) : Free Stock Analysis Report
Liberty Energy Inc. (LBRT) : Free Stock Analysis Report
