EOG’s Revenue Could Jump Significantly In 2020 As Oil Prices Recover

January 3rd, 2020 by Trefis Team
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EOG: EOG Resources logo
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EOG Resources

EOG Resources (NYSE:EOG) is an oil exploration and production company based out of Houston, Texas. It competes with other E&P companies including ConocoPhillips, Chesapeake Energy and Occidental Petroleum. EOG has one of the lowest break-even barrel cost of oil among its peers, which has led to its current out-performance and allowed the company to come through the recent low-price environment. With oil prices rising again, EOG will in all likelihood increase crude output – helping it improve both its revenue and margins. Trefis highlights trends in EOG’s Revenues over the years along with our forecast for 2019 and 2020 in an interactive dashboard, parts of which are highlighted below.

 

An Overview of EOG’s Revenues

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EOG Resources has 3 operating segments that generated $11.9 billion in revenues in 2018.

  • Crude: The company drills and recovers crude oil from a range of sources, largely shale formations in the Permian basin, and other shale formations in the U.S. This segment contributed $9.5 billion or 79% of total revenues in 2018.
  • Natural Gas: The company drills and recovers natural gas from a range of reserves across North America, Trinidad & Tobago, and other international operations. This segment contributed $1.3 billion or 11% of total revenues in 2018.
  • Natural Gas Liquids (NGL): The company has NGL operations across the world, including North America, and the Caribbean. This segment contributed $1.1 billion or 9% of total revenues in 2018.

 

EOG’s break-even price of oil remains key to both its revenues and its level of output.

  • With operations based primarily in the Eagle-Ford and the Permian Basin, EOG has one of the lowest levels of break-even prices per barrel of oil among its E&P peers.
  • This level of efficiency and EOG’s recent focus on producing crude over natural gas has led the company to a record level of cash flow.
  • With the price of oil rising once again, the company’s cash flows are only set to increase as it looks to take advantage of higher oil prices.
  • Currently, we expect revenue to grow in the double-digits in 2020, as crude output increases by 10-15% for the year.
  • Our estimate for growth is based on our median estimate for WTI, which is currently at $63 dollars per barrel.
  • Should crude prices improve further to $65 a barrel, we believe that output may increase by 20-25% y-o-y.

 

Natural Gas and NGL to remain subdued until their prices recover:

  • Natural gas and natural gas liquids both saw their prices decline in 2020, and with little expectation that these prices will rise again in 2020, we see little movement in output and revenue from the divisions.

 

EOG will very likely see its revenue improve significantly in 2020, as operational efficiency and higher commodity prices drive the top line higher.

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