EOG - Embedded Expectations Analysis - 2019 09 13
EOG Resources, Inc. (EOG:USA) currently trades below historical averages relative to UAFRS-based (Uniform) Assets, with a 1.1x Uniform P/B. At these levels, the market has muted expectations for the firm, and management may be concerned about drilling efficiency, operating costs, and creating shareholder value.Specifically, management may lack confidence in their ability to continuously improve the company, and they may be concerned about the sustainability of recent gains in drilling efficiency. Moreover, they may be overstating the competitive advantage their premium inventory provides, and they may lack confidence in their ability to generate the highest returns of any E&P company. Furthermore, they may lack confidence in their ability to leverage their scale to reduce operating expenses and to create significant long-term value for their shareholders. Finally, management may lack confidence in their ability to meet their full-year unit cost guidance, and they may be concerned about the sustainability of recent daily oil production rates.
EOG Resources, together with its subsidiaries, explores for, develops, produces and markets crude oil, natural gas liquids and natural gas primarily in main producing basins in the United States, The Republic of Trinidad and Tobago, The People's Republic of China, Canada and, from time to time, select other international areas.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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