EOG Resources Inc.
) reported solid adjusted fourth-quarter as well as full-year
2012 results on the back of a striking improvement at its high
margin organic crude oil production.
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Quarterly adjusted earnings of $1.61 per share exceeded the Zacks
Consensus Estimate of $1.37 by 17.5% and were 40% higher than the
year-ago adjusted earnings level of $1.15.
Total revenue in the quarter increased 8.6% year over year to
$3,011.8 million and comfortably exceeded the Zacks Consensus
Estimate of $2,915.0 million.
Full-year adjusted earnings came in at $5.67 per share, up almost
50% from the year-earlier earnings of $3.79. The quarterly figure
also surpassed our projection of $5.41.
Total revenue surged 15.4% to $11,682.6 million in 2012 from the
year-ago level of $10,126.1 million in 2011. The reported figure
also came above our expectation of $11,291.0 million.
During the quarter, EOG's total volume expanded 3.2% from the
year-earlier level to 41.9 million barrels of oil equivalent
(MMBoe), or 455.1 thousand barrels of oil equivalent per day
(MBoe/d). Full-year 2012 total production was 170.7 MMBoe or
466.4 MBoe/d, representing a 10.6% annualized growth.
Crude oil and condensate production in the quarter was 162.7
thousand barrels per day (MBbl/d), up approximately 20.3% from
the year-ago level. Full-year crude oil and condensate production
climbed 39.2% year over year. This was primarily driven by
significant contributions from the company's South Texas Eagle
Ford; North Dakota Bakken and Three Forks; and Permian Basin
Wolfcamp and Leonard plays.
Natural gas liquids (NGL) volumes increased 14.0% from the
year-ago quarter to 57.8 MBbl/d. On the other hand, natural gas
volumes shrunk 8.2% to 1,408 million cubic feet per day (MMcf/d)
from the year-earlier level of 1,533 MMcf/d.
Average price realization in the fourth quarter for crude oil and
condensates increased approximately 2.4% year over year to $98.02
per barrel. Quarterly NGL prices were down 31.2% at $35.45 per
barrel from the year-ago level of $51.53. Natural gas was sold at
$3.23 per thousand cubic feet (Mcf), showing a deterioration of
5.0% year over year.
At the end of the fourth quarter, EOG had cash and cash
equivalents of $876.4 million and long-term debt of $6,312.2
million (including current portion), representing a
debt-to-capitalization ratio of 32.2%.
During the quarter, the company generated approximately $1,437.2
million in discretionary cash flow, compared with $1,297.6
million in the year-ago quarter.
EOG set its full-year 2013 crude oil production growth target at
28%. Total liquid production is expected to surge 23% in 2013. On
the strength of its high margin, domestic crude oil production,
the company also expects its total company production to boost 4%
on a year-over-year basis.
For the upcoming first quarter of 2013, total production is
expected between 438.6 MBoe/d and 469.7 MBoe/d, with 52.5-56.9
MBbls/d of NGL and 1,313-1,391 MMcf/d of gas. For full-year 2013,
EOG expects total volume between 462.5 MBoe/d and 507.1 MBoe/d,
NGL in the 56.0-66.8 MBbl/d range and natural gas in the
1,287-1,370 MMcf/d range.
For the upcoming quarter as well as full year, the company
expects crude oil and condensate volumes in the range of 167.3
MBbls/d to 181.0 MBbls/d and 192.0 MBbls/d to 212.0 MBbls/d,
The fourth-largest U.S. independent oil and gas exploration and
production company, EOG remains proactive with its liquid
ventures. It will be further aided by its deep focus on major oil
and liquids rich plays, while holding its core natural gas and
Combo acreage in the Barnett, Leonard and Wolfcamp plays for the
The company has also updated its total capital expenditure budget
between $7 billion to $7.2 billion for 2013. This compares with
$7.6 billion capex in 2012.
Moreover, EOG Resource is keen on its asset divestiture program.
This brings greater focus to the liquid-rich plays of both these
companies. Through December 31, the company monetized
approximately $1.3 billion worth of assets.
Recently, EOG Resources signed a purchase and sale agreement with
the Canadian counterpart of
). Per the agreement, EOG will divest its stake in the Kitimat
LNG facility to Chevron. This divestiture is in sync with its
strategy of concentrating on domestic onshore crude oil output,
which has an immediate reinvestment prospect.
The company's liquids rich production growth profile as well as
huge inventory of drilling opportunities remain somewhat tempered
by its natural gas weighted production and reserves base.
Unless the outlook for natural gas prices improves, we expect the
stock to perform in line with the market as well as the sector in
the coming quarters.
The company retains a Zacks Rank #3, which is equivalent to a
Hold rating for the period of one to three months. However, there
are certain companies in the oil and gas industry like
Cabot Oil & Gas Corporation
Range Resources Corporation
) that offer value and are worth buying now. Cabot Oil sports a
Zacks Rank #1 (Strong Buy), while Range Resources holds a Zacks
Rank #2 (Buy).