EOG Resources Is Set to Impress Us Again


It's generally not good form for analysts to become overly fond of the companies they follow. But with EOG Resources (NYS: EOG) , as one who has monitored the energy industry for longer than I care to consider, I must admit to being somewhat smitten. Given EOG's operating locations, its oil and gas balance, and its consistently impressive growth, the company is nearly in a class by itself.

EOG will begin next week by telling us about its third-quarter results on Monday, and conducting its post-release conference call the following day. At present, the analysts who follow the company expect per-share earnings to increase about 35% year-on-year to $1.12, from $0.83 a year ago. Obviously based on lower crude and natural gas prices, revenues are expected to come in at about $2.74 billion, a slight decline from the $2.89 billion in the third quarter of 2011.

Mr. Popularity
It appears that I'm not alone in being impressed by EOG Resources. Of the 33 analysts who follow the company, 25 currently rate it either a "Buy" or a "Strong Buy." At least in part for that reason, the company's share price has increased by 30% just since the close of the second quarter of this year.

With production in two of the most prolific oil and liquids plays in the U.S., EOG managed to increase its crude and condensate output by 52% year-on-year in the second quarter, a result that will have been difficult to duplicate for the most recent period. Beyond that, even including its natural gas production, the company still managed to expand its total output by 49% in the second quarter.

The company's U.S. operations occur in the Eagle Ford play of South Texas, the Bakken of North Dakota and Montana, and the Permian Basin of southwest Texas and southeastern New Mexico. It also operates in the liquids-prone Powder River and Denver-Julesburg basins, which are centered in Wyoming and Colorado, respectively. It's natural gas production occurs in such major shale plays as the Haynesville of northern Louisiana and eastern Texas, along with the Marcellus in Pennsylvania and surrounding states.

The overseas sites
Internationally, EOG has initiated operations in the promising Neuguen Basin of Argentina. I'll also be interested in an update on its upcoming call regarding the progress of its operations in the East Irish Sea, where it holds a 100% working interest in a crude development where start-up has been scheduled for the second half of this year. Other EOG international activities occur in the Columbus Basin, near Trinidad & Tobago. In British Columbia, it holds a 30% participation in the Kitimat LNG export facility, which is operated by Apache (NYS: APA) .

The targets
Regarding both EOG and Apache, I've noted to Fools in other contexts of late that both companies, along with Anadarko Petroleum (NYS: APC) , are being touted in some quarters as potential acquisition targets for ExxonMobil (NYS: XOM) . Such scuttlebutt is hardly new for Anadarko, which has frequently been discussed as an ideal target for Australia's BHP Billiton (NYS: BHP) , the world's biggest minerals miner and a rapidly expanding factor in global petroleum production.

The obvious fit between Exxon and EOG would involve the former's position as the largest producer of natural gas in the U.S. At the same time EOG is heavily weighted to liquids production on this continent. Indeed, at the close of the second quarter of this year, a whopping 86% of its wellhead revenues in North America were derived from crude oil, condensate, and natural gas liquids. So while companies like Chesapeake (NYS: CHK) are striving mightily to increase the percentage of their production tied to liquids, EOG has achieved that objective in spades.

I's eagerly awaiting Monday's fresh round of news from EOG Resources. In the meantime, if you're interested in this strong, liquids-based company, I suggest you add its name to My Watchlist.

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The article EOG Resources Is Set to Impress Us Again originally appeared on Fool.com.

David Lee Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of Apache and ExxonMobil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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