This company is riding soaring natural gas and crude prices to big gains as it beat Wall Street estimates three out of four quarters in 2007 on average of 9.86%.
EOG Resources, Inc. ( EOG ) is a large independent oil and natural gas company with proven reserves in the United States, Canada, offshore Trinidad and the United Kingdom North Sea.
EOG, a Zacks #1 Rank (Strong Buy), is a bigger play on natural gas than it is in on crude. In 2007, 85% of EOG’s production was natural gas and 15% was crude oil and natural gas liquids. A total of 83% of the company's production came from the United States and Canada.
EOG Easily Beats Estimates for the Fourth Quarter
On Feb 7, the company reported an excellent fourth-quarter and beat Wall Street estimates by 20.56%. Profit for the quarter soared 51%, boosted by large one-time gains and a jump in revenue.
EOG earned $358 million, or $1.44 per share, compared with $237.2 million, or 96 cents per share, for the same quarter in 2006. Excluding special items, the company posted $1.29 per share, beating analysts' estimates by 22 cents per share.
For the full year 2007, total company production increased 11% on a daily basis as compared to 2006. In the United States natural gas daily production increased 19%.
On Feb 28, the bullish news continued for the company when it announced major new crude discoveries and raised its production growth forecasts for both 2009 and 2010 to the range of 13% to 15% compared to the prior growth estimate of 10%. The company believes that crude oil and natural-gas liquid volumes will likely grow faster than natural-gas production.
On Apr 8, the company announced it expects to record mark-to-market losses of nearly $470 million from its hedging program in the first quarter of 2008.
In an SEC filing, EOG anticipates a loss of $442.5 million from its natural gas contracts and a $27.3 million loss from its crude oil hedges in the quarter.
EOG is currently hedge-less. The company said it has not entered into any new hedges on its production since the end of February. The average gas price for its remaining hedges is $8.43 per million British thermal unit (MMBtu) for 2008 and $8.63 per MMBtu for 2009.
Analysts' Estimates Rise for the Quarter and the Year
Brokerage analysts have been raising estimates for the first quarter and the year as natural gas prices rise. Consensus estimates for the first quarter are up 11 cents to $1.59 from $1.48 in the last 30 days. Ninety days ago estimates were at $1.39 a share.
For the year, 13 out of 22 covering analysts raised estimates over the last month on average of 89 cents to $7.05 from $6.16 per share. Analysts were looking for $5.44 per share 90 days ago.
EOG has a 2008 P/E of 18.92. The company has an outstanding five year average return on equity of 24.47%. EOG also pays a small dividend of 0.30%. EOG Resources reports first-quarter earnings on May 2.
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$135.58 (04/24/08)
