This report is an updated version of the report published on 20 October 2022 at 1:20 PM (PDT)

EOG Details

EOG Resources, Inc. (NYSE: EOG) is amongst the largest crude oil and natural gas exploration and production companies in the United States. It has proved reserves in the United States and Trinidad.

Financial Results for the 2QFY22

• The company’s overall equivalent production increased by 4% compared with 1QFY22.
• The company earned an adjusted net income of USD1.6 billion or USD2.74 per share in 2QFY22.
• EOG generated cash flow from operations before changes in working capital of USD2.4 billion, and with USD1.1 billion of cash capital expenditures, the company achieved USD1.3 billion of free cash flow.

Key Updates

• On 4 October 2022, EOG announced the retirement of William R. "Bill" Thomas from the board of directors. Further, it has appointed Ezra Y. Yacob, the company's Chief Executive Officer, to the position of Chairman of the Board, with immediate effect.
• On 29 September 2022, the company's Board of Directors declared a dividend of USD0.75 per share on its common stock, which will be paid on 31 October 2022.
• On 20 September 2022, the company mentioned holding a conference call and webcast for its 3QFY22 results on 4 November 2022.

Outlook

The company holds a healthy exploration pipeline of potential new plays, which provides opportunities for future growth. Further, the company is looking at further cost savings in 2023 and is further advancing new technology and innovative projects to continue to lower its environmental footprint.

Key Risks

The group is exposed to drilling crude oil and natural gas wells risk due to unexpected drilling conditions, adverse weather conditions, etc. Limitations or restrictions on access to sufficient water could impact operations.

Valuation Methodology: EV/EBITDA Based Relative Valuation (Illustrative)

Stock Recommendation

Over the last three months, the stock has given a return of ~28.63%. The stock is trading higher than the average price of the 52-week low-high range for the stock at ~USD77.99-USD144.20, respectively.

The stock has been valued using EV/EBITDA multiple-based illustrative relative valuation, and the target price so arrived reflects a fall of low double-digit (in % terms). A slight discount has been applied to the EV/EBITDA Multiple (NTM) (Peer Average), considering the decline in cash and cash equivalents in its books and current trading levels.

Considering the resistance near current trading levels, uncertainties hovering over energy prices due to the Russia-Ukraine standoff, and volatile market conditions on the back of rising interest rates, a ‘Sell’ rating is assigned to ‘EOG’ at the current market price of USD 134.26 (as of 20 October 2022, at 8:40 AM PDT). 

Technical Overview:

Daily Price Chart

(Source: Refinitiv, Analysis: Kalkine Group)

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

EOG Resources, Inc. (EOG) is a part of Kalkine’s Global Big Money Product

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for share price chart and all other data such as stock price performance is based on October 20, 2022. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Disclaimer

Kalkine New Zealand Limited is a Financial Advice Provider (“FAP”) and is authorised by a Transitional FAP license issued by Financial Markets Authority (“FMA”) to provide financial advice. Kalkine provides only general financial advice through its research reports following a person becoming a member. The reports contain buy/sell/hold and other recommendations in relation to equity financial products. The recommendations and opinions [on this website] / [in this report] do not take into account any of your investment objectives, financial situation or needs. Before you make a decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement from the product issuer. You should consider the appropriateness of advice taking into account your own objectives, financial situation and needs and seek independent financial advice before making any financial decisions. If you act on the advice in the research reports, you may have to pay fees, expenses or other amounts (but not to Kalkine).  Further information about the complaints and dispute resolution process, as well as information about Kalkine’s duties are available on Kalkine’s website.  Please read our Financial Advice Provider (FAP) disclosure statement and Complaints Handling Guide, which are available on the website.