Is EOG Stock Still Attractive?

by Trefis Team
EOG Resources
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After OPEC’s extended production curtailments, crude oil prices rallied from $50/bbl in January to $60/bbl at present – triggering a rally in oil stocks including EOG Resources (NYSE: EOG). The company’s premium drilling strategy has been supporting higher production despite a reduction in net operating wells. As the company did not slash dividends to improve capital efficiency and preserve cash, the stock has been a key choice to play oil demand recovery. However, Trefis believes that EOG stock has reached its near-term potential largely due to lower benchmark price expectation by the EIA and a likelihood of higher production by OPEC. Also, high crude oil inventory levels and a slump in travel demand continue to weigh on rig-count figures. Trefis highlights the historical trends in revenues, earnings, and stock prices in an interactive dashboard analysis on EOG Earnings Preview: How Did EOG Fare In 2020?

Q4 2020 revenues to drop by 34% (y-o-y)

After observing a steep 76% (y-o-y) decline during the second quarter, the company’s fourth-quarter revenues are expected to show a substantial improvement for the fourth quarter. However, the $2 billion of impairment charges are expected to be a drag on the full year 2020 earnings. As the company’s U.S. operations contribute 94% of crude oil production volumes, lower production costs coupled with stable benchmark prices from OPEC mandated cuts are likely to support the top line in 2021.

EOG stock has almost reached pre-Covid levels

EOG stock declined from levels of around $77 in February 2020 (pre-crisis peak) to levels of around $34 in March 2020 (as the markets bottomed out), implying EOG stock lost 55% from its approximate pre-crisis peak. With the easing of restriction measures and OPEC mandated cuts, the stock gained 95% to reach $67 and we believe that it has reached its near-term potential. In comparison, the S&P 500 Index first fell 34% as Covid-19 cases accelerated outside China and gained 73% after the Fed’s intervention coupled with Pfizer’s vaccine launch.


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