In today’s Daily Alert The Energy Strategist editor Igor Greenwald recommends
picking up this soaring play on the Eagle Ford Shale while you can get it below his
buy-under price.
“In 1999, Enron Oil & Gas Company was spun off from Enron as EOG
Resources (EOG $137 NYSE). Today, EOG is the fifth largest non-integrated oil
and natural gas company in the United States, and one of the top five oil and gas
producers in the Bakken. However, EOG is also the largest oil producer in the Eagle
Ford formation in Texas, and as such the company is usually primarily associated
with the Eagle Ford. ...
“When EOG reported first-quarter operating earnings of $1.80 a share last week, it
beat analysts’ consensus estimate by 62 cents, and 52%.
“And there was no gimmick involved, unless you want to count as the gimmick the
skill of drilling surprisingly prolific oil wells and dramatically lower costs in the
continent’s most lucrative new play. That would be the Eagle Ford Shale formation
in South Texas, which was primarily responsible for the 33% year-over-year jump
in production, the 28% cash flow surge and faster than expected declines in drilling
costs, which will permit EOG to throw more resources into south Texas without
exceeding is annual capital spending plans.
“Positive free cash flow is in sight, and the future looks bright thanks to newly
drilled Eagle Ford Wells the CEO described as ‘monster.’ ‘The rate of change from
this asset is not slowing,’ he said. EOG’s adjusted annualized rate of return in the
formation exceeded 100% during the most recent quarter, nice work if you can get
it.
“All in all, there’s a lot more price appreciation to come and we feel good about
boosting the maximum buy point to $145 in mid-March, and sticking with it when
the stock fell to $115 a month later.
“The combination of booming domestic production growth from the most profitable
and advantageously located U.S. tight oil play could make EOG a takeover target
sooner than later. The stock remains a Growth Portfolio Best Buy below $145, and
we’ll review that target promptly if the stock gets there shortly, as it may.”
Igor Greenwald, The Energy Strategist, www.energystrategist.com, 800-832-2330,
5/8/13