Key Takeaways From EOG’s Fourth Quarter Results
EOG Resources (NYSE: EOG) reported its fourth quarter and full year 2017 results on 27th February 2017. The company reported a better than expected rise in both revenue and earnings, driven by higher volumes and better price realization. Further, the company’s low-cost structure aided to its earnings growth.
We have a price estimate of $107 per share for EOG Resources, which is in above its current market price. We will revise our model shortly, based on the company’s full-year 2017 results to reflect its actual numbers and future guidance.
Q4 Overview
EOG benefited from the price rise experienced with the extension of Organization of Petroleum Exporting Countries’ (OPEC) production cuts in the fourth quarter. Additionally, the company’s focus on premium drilling locations resulted in the total production and crude oil production in Q4 2017 to rise by 8% and 18% year-on-year (Y-o-Y), respectively. The company estimates at least 90% of the wells completed in 2018 to be premium, which would continue to drive higher production volume in the upcoming year. Total crude oil production is expected to display a growth rate of 18% in 2018.
The company continued to use longer laterals and advanced technologies to bring down its operating costs throughout 2017. Furthermore, premium wells developed by the company have low finding and development cost per barrels of oil equivalent (Boe) and thus have been making a significant difference to the company’s bottom line.
At year-end 2017, EOG’s net proved reserves were at 2,527 million barrels of oil equivalent (MMBoe), an 18% increase from the reserves at year-end 2016. Completed net wells in 2018 are expected to be approximately 690, compared to 536 net wells in 2017. The company plans to fund its estimated capital expenditure of $5.4 to $5.8 billion through its discretionary cash flows, as operational efficiency increases.
Key highlights from the company’s Q4 results and expected Q1 2018 results are highlighted in our interactive dashboard.
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