EOG Resources Inc. (EOG) reported solid adjusted third-quarter 2014 results on the back of an improvement in its crude and liquids production.
Quarterly adjusted earnings of $1.31 per share exceeded the Zacks Consensus Estimate of $1.28 and were higher than the year-ago quarter figure of $1.16.
Total revenue increased from $3,541.4 million in the year-ago quarter to $5,118.6 million and also came above the Zacks Consensus Estimate of $4,019.0 million.
Operational Performance
In the quarter, EOG’s total volume rose 16.7% from the year-earlier level to 56.5 million barrels of oil equivalent (MMBoe).
Crude oil and condensate production in the quarter was 299.5 thousand barrels per day (MBbl/d), up from the year-ago level of $235.0 MBbl/d. This growth was primarily driven by significant contribution from the company’s South Texas Eagle Ford, along with North Dakota Bakken and Delaware Basin.
Natural gas liquids (NGL) volumes increased from $69.1 MBbl/d in the year-ago quarter to 86.4 MBbl/d. On the other hand, natural gas volumes rose to 1,369 million cubic feet per day (MMcf/d) from the year-earlier level of 1,334 MMcf/d.
Average price realization for crude oil and condensates dropped from $108.20 per barrel a year ago to $97.13 per barrel. Quarterly NGL prices were down to $32.67 per barrel from the year-ago level of $32.74. Natural gas was sold at $3.52 per thousand cubic feet (Mcf), marking a year-over-year improvement from $3.23 Mcf.
Liquidity Position
At the end of the third quarter, EOG had cash and cash equivalents of $1,481.1 million and long-term debt of $5,903.2 million, representing a debt-to-capitalization ratio of 25%.
During the quarter, the company generated approximately $2,336.5 million of cash flow from operating activities, compared with $2,012.5 million in the year-ago quarter.
Guidance
EOG raised its full-year 2014 crude oil and condensate production growth target to 31% from 29% and total production growth target to 16.5% from 14%, as it continues to increase well productivity in its key domestic crude oil plays.
For the fourth quarter of 2014, total production is expected between 597.5 MBoe/d and 624.7 MBoe/d, with 81.4–87.6 MBbls/d of NGL and 1,297.0–1,373.0 MMcf/d of gas. For full-year 2014, EOG expects total volume between 591.6 MBoe/d and 598.6 MBoe/d, with NGL in the 79.7–81.3 MBbl/d range and natural gas in the 1,349–1,369 MMcf/d band.
For the upcoming quarter as well as full year, the company expects crude oil and condensate volumes in the range of 300.0 MBbls/d to 308.2 MBbls/d and 286.9 MBbls/d to 289.1 MBbls/d, respectively.
Outlook
One of the major U.S. independent oil and gas exploration and production companies, EOG is proactive in its liquids ventures. These efforts will be further aided by its focus on major oil and liquids rich plays, while holding core natural gas and Combo acreage in the Barnett, Leonard and Wolfcamp plays for the long term.
Though we believe that EOG is poised favorably for the long term, the risk-reward pay-off for the company is still uncertain due to its natural gas weighted production and reserves base as well as cost overruns. The company’s large portfolio of high-return projects and strong technical competence are its key long-term drivers.
EOG Resources currently carries a short-term Zacks Rank #3 (Hold). Investors interested in the oil and gas sector could consider stocks like Magellan Midstream Partners LP (MMP), Cobalt International Energy Inc. (CIE) and Murphy USA Inc. (MUSA). All of these carry a Zacks Rank #1 (Strong Buy).
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