EOG Resources, Inc. EOG is set to release first-quarter 2015 financial results after the closing bell on May 4.
Last quarter, the company’s earnings of 79 cents per share decreased 21% from $1.00 earned in the year-ago quarter. The results also came below the Zacks Consensus Estimate of 99 cents. Let’s see how things are shaping up for this announcement.
Factors Likely to Affect Earnings
EOG Resources is an exploration and production firm with a large oil exposure – about 46% net proved reserves. This makes it highly susceptible to the weakness in commodity price that has nearly halved since last June. Due to this, the company expects total capital expenditure budget between $4.9 billion and $5.1 billion for 2015, down 40% from 2014.
EOG’s first-quarter 2015 total production is expected between 568.3MBoe/d and 597.9MBoe/d, with 75.0–83.0MBbls/d of NGL and 1,234–1,300MMcf/d of gas. For the first quarter as well as full year, the company expects crude oil and condensate volumes in the range of 287.6–298.2 MBbls/d and 270.7–304.9 MBbls/d, respectively.
However, EOG Resources’ sensitivity to gas/oil price volatility, as well as drilling results, costs, geo-political risks and project delays, limited the upside potential in the quarter. Price realization is an important component of the margin of exploration and production firms, considering the persistent rise in exploration costs.
Earnings Whispers
Our proven model does not conclusively show that EOG Resources is likely to beat earnings this quarter as it does not have the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%.
Zacks Rank: EOG Resources currently has a Zacks Rank #3 (Hold). Though Zacks this increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies from the same space which, according to our model, have the right combination of elements to post an earnings beat this quarter.
Energy Transfer Equity LP ETE has an Earnings ESP of +27.27% and a Zacks Rank #1 (Strong Buy). The company is slated to release earnings on May 6.
Western Refining Inc. WNR has an Earnings ESP of +6.86% and a Zacks Rank #2 (Buy). The company is slated to release earnings on May 5.
TC PipeLines LP TCP has an Earnings ESP of +10.67% and a Zacks Rank #2. The company is expected to release earnings on May 7.
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