EUR 850.00 For Business Accounts Only

Morningstar | EOG Resources Enjoys Exceptional Start to 2019

Narrow-moat rated EOG delivered production of 774 mboe/d in the first quarter, which was 1% higher sequentially and 17% higher year over year. This compares with our forecast of 765 mboe/d, and was within guidance, albeit at the high end of the range (oil volumes, at 436 mboe/d, exceeded the target range). And the firm’s financial results were similarly strong, with adjusted EBITDA and adjusted earnings per share coming in at $1.87 billion and $1.19, respectively (consensus estimates were $1.78 billion and $1.03).

Operational data was generally strong. Compared with prior guidance, the firm achieved higher realized oil prices, and lower unit production costs (after the prior quarter we commented that cash operating costs had risen by about $0.80 sequentially, and roughly half of that increase has now been reversed). Capital expenditures were below the target range, as well. But despite positive surprises for both production and capital, there was no change to full-year guidance (increasing the likelihood of an upward revision later in the year). Guidance for U.S. crude basis differentials was increased, by $0.50 at the midpoint. EOG now expects to earn a premium to West Texas Intermediate.

We plan to incorporate these operating and financial results in our model shortly, but after this first look our fair value estimate and no-moat rating remain unchanged.