EOG stock seems to have assessed its strong fundamentals
Shares of EOG Resources (NYSE: EOG) observed a 20% correction over the past month, as benchmark prices fell as OPEC eased production cuts. The company has not cut dividends in the past year as its assets have continued to generate returns despite uncertain demand for crude oil. This is largely due to the company’s premium drilling strategy and only $ 2 billion in asset write-downs in 2020. The company is committed to maintaining a strong balance sheet and returning capital to shareholders in the years to come. to come. Thus, the company remains a good choice for stable dividend yields. Second quarter revenue is expected to improve significantly from the previous year quarter, leading to strong profit expansion. Trefis highlights quarterly trends in revenue, earnings, share price and expectations for Q2 2021 in an interactive dashboard analysis, Overview of EOG Resource Revenues.
How did EOG Resources perform in the first quarter?
In the first quarter, EOG Resources recorded 30% (year-over-year) growth in operating revenues (excluding gains and collection and processing revenues) supported by relatively stable production volumes and higher realized prices. The company reported 779 MBOEDs of production of crude oil, natural gas and other chemicals, a decrease of only 3% from the first quarter of 2020. Taking into account the improvement in the average realized price of $ 46 / b in the first quarter of 2020 at $ 58 / b in the first quarter of 2021, the net profit increased from $ 10 million in the first quarter of 2020 to $ 677 million in the first quarter of 2021. In the last quarter, the company reported 1 , $ 8 billion in operating cash, invested $ 917 million in property, plant and equipment, paid off $ 750 million in debt, and returned $ 219 million to shareholders as dividends.
[Updated 2021/05/05] – Will the premium drilling strategy propel the stock of EOG resources this year?
Last quarter, EOG Resources (NYSE: EOG) turned to a more aggressive capital conservation plan to support dividend growth and maintain a strong balance sheet. The company is targeting $ 2.4 billion in free cash flow generation at an average WTI benchmark price of $ 50. After slashing the capital expenditure budget by 50% from $ 6.1 billion in 2019 to $ 3.2 billion in 2020, the company plans to keep the capital expenditure target lower this year while still maintaining total production volumes relatively similar to 2019 levels, supported by the premium drilling strategy. . As operational efficiency targets drive cash generation, the company announced dividend growth of 10% for 2021. Given the stability of benchmark prices due to production cuts by OPEC +, earnings from ‘EOG should be stimulated by the expansion of its turnover and operational efficiency. Trefis highlights the company’s quarterly revenue trends as well as our estimates for the first quarter of 2021 and year 2021 in an interactive dashboard, Overview of EOG Resource Revenues.
A closer look at key financial and operational parameters
After switching to the premium drilling strategy, which focuses on extracting oil from higher yielding wells, the company has been able to increase its dividend by 124% since 2016. Notably, the total cash cost per boe (barrel of oil equivalent), which includes the rental and well, general and administrative expenses and other cash costs, decreased 9% from $ 13.64 / Boe in 2016 to $ 12.39 / Boe in 2020. In addition, the company is targeting a 5-10% reduction in rental and well costs from $ 3.85 / Boe in 2020 to $ 3.50 / Boe in 2021. Thus, benchmark prices Stables coupled with an aggressive plan to cut operating costs are expected to increase EOG’s profits this year.
Will EOG’s stock increase further?
EOG’s stock rose from levels of around $ 77 in February 2020 (pre-crisis peak) to levels of around $ 34 in March 2020 (as markets bottomed out), implying that EOG stock has lost 55% from its approximate pre-crisis peak. With the lifting of the restraint measures and the cuts imposed by OPEC, the stock has gained 123% to reach $ 76 today. At the recent ministerial meeting, OPEC did not ease production cuts and plans to gradually increase supply by 0.35 mb / d in June and 0.44 mb / d in July subject to demand growth and macroeconomic stability. Currently, the production of the OPEC consortium is down 6.5 mb / d, or nearly 7% of world production, compared to the baseline.
While EOG Resources remains a good investment, it is helpful to see how its peers stack up. Check out EOG Resources Stock Comparison With Peers to see how EOG stacks up against its peers on the metrics that matter. You may find other useful comparisons on peer-to-peer comparisons.
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