What To Expect From EOG Resources’ First Quarter Results

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EOG Resources

EOG Resources (NYSE: EOG) will release its first-quarter 2018 results on 3rd May and conduct a conference call with analysts the following day. The company is expected to benefit from a higher volume output throughout 2018 as it continues to focus on its premium drilling locations. Additionally, the prevailing higher crude oil prices are expected to augment the impact of higher production volume and provide a considerable boost to the company’s performance in 2018. Consensus market estimates depict an average EPS (Non-GAAP) estimate of $1 per share vs an EPS (Non-GAAP) of $0.15 reported a year ago. Revenue is expected to grow by 32% year-on-year (y-o-y) per consensus estimates and is expected to reside at $3.45 billion.

Oil prices have displayed stellar performance in the first quarter of 2018 with the extension of the oil production cuts by the Organization of Petroleum Exporting Countries (OPEC) and Non-OPEC allies coupled with the recent geopolitical tension in the Middle East and a weaker dollar. Crude oil spot price (average spot price of Brent, Dubai, and West Texas Intermediate, equally weighed) averaged $64.62 per barrel for the March ’18 quarter, in comparison to $58.68 per barrel in the previous quarter, depicting a 10% growth rate. EOG’s crude oil segment is likely to significantly benefit from such a price increase in the first quarter.

Additionally, given the company’s focus on premium drilling locations, EOG expects to achieve a target of 18% oil production growth and 16% overall output growth for 2018. The company estimates at least 90% of the wells completed in 2018 to be premium, which would reinforce its objective of achieving a higher volume growth. This strong improvement in the company’s production volume is expected to drive its revenue growth throughout 2018. However, the company expects its first-quarter daily crude oil and condensate volume to range between 350.5 to 365.7 thousand barrels per day (MBbld), lower than the full-year expected output of 389.4 to 405.6 MBbld as a result of activity and inventory build-up in the first-quarter. Increased output in the remainder of the year is likely to compensate for the lower output in the first quarter.

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Moreover, EOG’s increased focus on premium drilling locations is expected to reduce the company’s completed well cost by another 5% in 2018 from the initial 7% reduction experienced in 2017. Unit operating costs are also expected to decline as a result of the company’s persistent focus on improving its operational efficiency. Lower expected costs are presumed to provide a significant jump to the company’s bottom line. Our key expectations from the company’s 2018 results are summarized in our interactive dashboard. You can make changes to our assumptions to arrive at your own fair price estimate for the company.

 

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