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What's in the Cards for EOG Resources' (EOG) Q1 Earnings?

Zacks Equity Research

EOG Resources, Inc. EOG is expected to release first-quarter 2019 results on May 3.

The upstream energy player beat the Zacks Consensus Estimate for earnings in three of the last four quarters, recording a positive surprise of 8%. Let’s see how things are shaping up for this announcement.

EOG Resources, Inc. Price and EPS Surprise

EOG Resources, Inc. Price and EPS Surprise | EOG Resources, Inc. Quote

Which Way are Estimates Trending?

Let’s take a look at estimate revisions to get a clear picture of what analysts are thinking about the company before the earnings release.

The Zacks Consensus Estimate for revenues is pegged at $4.1 billion for the to-be-reported quarter, indicating an increase of 11.3% from the year-ago reported figure.

The consensus estimate for earnings of $1.03 per share for the first quarter has seen six upward and six downward revisions in the past 30 days. This estimated figure suggests a year-over-year decline of about 13.5%.

Factors Likely to Influence Upcoming Quarterly Results

EOG Resources, which is a leading upstream energy player with an attractive growth profile, has significant acreage in Eagle Ford, Permian, Bakken and Powder River Basin, enabling the company to maintain an oil-heavy portfolio. Its presence in these areas also boosts output from domestic resources and the to-be-reported quarter’s results are expected to reflect the same. In the first quarter, the company is anticipated to produce crude oil equivalent volumes in the range of 746.1-779.2 thousand barrels per day (Mboe/d). The expected figure is much higher than year-ago period’s 659.9 Mboe/d.

Crude production in first-quarter 2019 is expected in the range of 427- 435 thousand barrels per day (MBD), higher than the year-ago reported figure of 363.3 MBD. This can play a significantly positive role in first-quarter earnings. However, the West Texas Intermediate (WTI) crude price in first-quarter 2019 was lower than the year-ago period. In January, February and March, WTI averaged $51.38, $54.95 and $58.15 per barrel, respectively, per the U.S. Energy Information Administration. In comparison, WTI averaged $63.70, $62.23 and $62.73 per barrel, respectively, in the first three months of 2018. This can offset the positives derived from the year-over-year increase in volumes.

Capital expenditure in the to-be-reported quarter is expected in the range of $1,750-$1,950 million. Lease and Well cost in the quarter is anticipated in the range of $4.90-$5.30 per barrel.

To conclude, higher production volumes are expected to boost EOG Resources’ first-quarter 2019 earnings, which will be offset by lower crude price realization that is likely to result in a 13.5% year-over-year decline in earnings per share.

What Our Model Unveils

Our proven model does not conclusively show that EOG Resources is likely to beat the Zacks Consensus Estimate in the quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Earnings ESP: Earnings ESP represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate. EOG Resources has an Earnings ESP of -1.46% as the Most Accurate Estimate of $1.02 is below the Zacks Consensus Estimate of $1.03. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: EOG Resources currently carries a Zacks Rank #3. Though a Zacks Rank of 3 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Energy Stocks WithFavorable Combination

Here are some companies from the energy space which, according to our model, have the right combination of elements to post an earnings beat in the upcoming quarterly reports.

Houston, TX-based Apache Corporation APA has a Zacks Rank #2 and an Earnings ESP of +12.55%. The company is scheduled to report first-quarter earnings on May 1.

San Antonio, TX-based Abraxas Petroleum Corporation AXAS has a Zacks Rank #3 and an Earnings ESP of +133.33%. The company is slated to report first-quarter 2019 earnings on May 6.

Oklahoma City, OK-based Chaparral Energy, Inc. CHAP has a Zacks Rank #2 and an Earnings ESP of +110.00%. The company is set to report first-quarter 2019 earnings on May 9.

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