EOG Resources Inc.
), a major independent oil and gas exploration and production
company, has reported stellar adjusted fourth-quarter 2011 results
on the back of an almost 54% growth in crude oil production.
Quarterly adjusted earnings of $1.15 per share topped the Zacks
Consensus Estimate of 89 cents and showed a substantial improvement
from 36 cents earned in the year-earlier quarter.
Full-year 2011 adjusted earnings of $3.79 per share also
surpassed our expectation of $3.73 and the year-earlier profit of
Total revenue in the quarter shot up nearly 55% year over year
to $2,773.0 million, and exceeded the Zacks Consensus Estimate of
$2,458.0 million. Full-year 2011 total revenue increased 66% year
over year to $10,126.1 million.
During the quarter, total volume expanded 4.9% from the
year-earlier level to 40.6 million barrels of oil equivalent
(MMBoe), or 441.5 thousand barrels of oil equivalent per day
Crude oil and condensate production was 135.3 thousand barrels
per day (MBbl/d), up 54.1% from the year-ago level. This was
primarily driven by significant contributions from the South Texas
Eagle Ford play followed by the Fort Worth Barnett Shale Combo.
Natural gas liquids (
) volumes increased almost 39% from the year-ago quarter to 50.7
MBbl/d. On the other hand, natural gas volumes shrunk 13.8% to
1,533 million cubic feet per day (MMcf/d) from the year-earlier
level of 1,778 MMcf/d.
Average price realization for crude oil and condensates
increased approximately 20.4% year over year to $95.75 per barrel.
Quarterly NGL prices jumped more than 17% to $51.53 per barrel from
the year-ago level of $43.97. Natural gas was sold at $3.40 per
Mcf, showing a deterioration of roughly 5.3% year over year.
At the end of 2011, EOG had cash and cash equivalents of $615.7
million and total debt of $5,009.2 million, representing a
debt-to-capitalization ratio of 28.4%, which it plans to keep below
30% in 2012.
During the quarter, the company generated approximately $1,297.6
million in discretionary cash flow, compared with $826.6 million in
the year-ago quarter.
For 2012, the company appears on track to achieve its targeted
5.5% production growth, which experienced a 9.4% increase in 2011.
EOG now expects its total organic liquids production growth at 30%
versus its prior expectation of 27% for the year. Total liquids
growth will likely comprise a 30% increase in crude oil and
condensate production and a 30% increase in NGLs production.
For 2012, natural gas production is expected to decline 11% from
2011, reflecting additional producing property sales and a further
de-emphasis on natural gas drilling in a weak price environment in
For the first quarter, total production is expected between
411.2 MBoe/d and 448.6 MBoe/d, with 46.6-54 MBbls/d of NGL and
1,429-1,508 MMcf/d of gas. For the full year, EOG expects total
volume between 423.0 MBoe/d and 469.4 MBoe/d, NGL in the 49.8-60.2
MBbl/d range and natural gas in the 1,420-1,510 MMcf/d range.
For the first quarter as well as full-year 2012, the company
expects Crude Oil and Condensate volumes to fall in the range of
126.5 MBbls/d to 143.3 MBbls/d and 136.6 MBbls/d to 157.5 MBbls/d,
EOG's increasing interest in oil is appreciable in a favorable
price environment, which will be further augmented by its deep
focus on major oil and liquids rich plays, such as South Texas
Eagle Ford play, Fort Worth Barnett Shale Combo, as well as
Colorado Niobrara, Oklahoma Marmaton, West Texas Wolfcamp and New
Mexico Leonard. The company expects its exploration and production
expenditures to range from $7,400 million to $7,600 million for
2012, including exploration, development and production facilities
as well as midstream expenditures.
Moreover, the company remains busy with its asset divestiture
program in order to focus on the liquid-rich plays, like its peer
Chesapeake Energy Corporation
). During 2011, the company monetized approximately $1,430 million
worth of assets, which it expects to be approximately $1,200
million for 2012.
Although we view EOG as a favorable long-term story, risk-reward
pay-off for the company is still uncertain over the near term due
to its natural gas weighted production and reserves base as well as
cost overruns. EOG's large portfolio of high-return projects and
strong technical competence are the key long-term drivers. Hence,
we maintain our long-term Neutral recommendation for the EOG stock.
The company currently retains a Zacks #2 Rank (short-term Buy
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EOG RES INC (
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