EOG Resources (NYSE: EOG), an energy company engaging in the exploration, development, production, and marketing of crude oil and natural gas, is scheduled to announce its fiscal third-quarter results on Friday, November 3. We expect EOG stock to likely see little movement past Q3 with revenue missing but earnings beating market expectations. Oil prices were surprisingly lower than expected at the beginning of this year. However, crude oil picked up on expectations of tighter supply ever since Saudi Arabia and Russia extended their voluntary output cuts of a combined 1.3 million barrels per day (bpd) to the end of the year 2023 – in order to support prices. Among the most significant risks to oil markets since Russia’s invasion of Ukraine last year is the latest geopolitical tension between Hamas and Israel. There have not yet been any impacts on oil flows due to the conflict, but there could be major repercussions if it escalates. The growing tight supplies due to geopolitical uncertainty and the soaring demand from the reopening of China’s economy could likely bode well for energy prices by the end of 2023. Oil inventories remain below five-year averages and refinery utilization remains high as a result of strong inventory drawdowns since the start of the year.
For 2023, EOG Resources forecasts total production between 965.0K-991.5K barrels of oil equivalent per day (boe/day), representing an increase of nearly 7.7% (mid-point) year-over-year (y-o-y). The company’s capital expenditure is expected to be $5,800-$6,200 million for the year, with $1,560-$1,760 million likely used in the third quarter.
EOG stock has seen extremely strong gains of 150% from levels of $50 in early January 2021 to around current levels, vs. an increase of about 10% for the S&P 500 over this roughly 3-year period. However, the increase in EOG stock has been far from consistent. Returns for the stock were 78% in 2021, 46% in 2022, and -3% in 2023 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 9% in 2023 (YTD) – indicating that EOG underperformed the S&P in 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Energy sector including XOM, CVX, and COP, and even for the mega-cap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could EOG face a similar situation as it did in 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?
Our forecast indicates that EOG’s valuation is around $123 per share, which is inline with the current market price. Look at our interactive dashboard analysis on EOG Resources Earnings Preview: What To Expect in Q3? for more details.
(1) Revenues expected to be slightly below the consensus estimates
Trefis estimates EOG’s Q3 2023 revenues to be around $5.5 Bil, slightly below the consensus estimate. In Q2, EOG’s revenues fell 25% year-over-year (y-o-y) to $5.6 billion. The company’s total volumes increased 6.8% y-o-y to 84.9M Boe/day, driven by higher U.S. production. EOG has a strong cash position with net cash of $1.2 billion in Q2 2023 and provided guidance for increased production in 2023. The quarter’s crude oil and condensate production totaled 476.6K boe/day, up 2.4% from the year-ago level. Natural gas liquids volumes increased by 6.8% yearly to 215.7K bpd. Natural gas volume rose to 278K boe/day from the year-earlier quarter’s 254.7K boe/day. EOG Resources produces oil and gas from its U.S. shale assets. The production from the U.S. comes from five basins: Bakken, Powder River, Wyoming DJ, Delaware, and Eagle Ford.
(2) EPS likely to beat consensus estimates marginally
EOG’s Q3 2023 earnings per share (EPS) is expected to be $3.02 as per Trefis analysis, marginally beating the consensus estimate. In Q2, the company’s EPS came in at $2.49, down 9% y-o-y.
(3) Stock price estimate in line with the current market price
Going by our EOG’s Valuation, with an EPS estimate of around $11.86 and a P/E multiple of around 10.4x in fiscal 2023, this translates into a price of nearly $123, which is in line with the current market price.
It is helpful to see how its peers stack up. EOG Resources Peers shows how EOG stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
|S&P 500 Return||1%||10%||89%|
|Trefis Reinforced Value Portfolio||1%||19%||509%|
 Month-to-date and year-to-date as of 11/2/2023
 Cumulative total returns since the end of 2016