EOG - Embedded Expectations Analysis - 2020 04 01
ï€ 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 bearish expectations for the firm, and management may be concerned about their return on capital employed, capex spending, and the commodities cycleï€ Specifically, management may lack confidence in their ability to sustain dividend increases, expand their return on capital employed, and continue to reduce total well costs. Moreover, they may be exaggerating their capex flexibility and disciplined capital spending program, their technology and innovation capabilities, and their ability to drive future financial and environmental success. Also, they may be concerned about the commodities market, inventory increases, and the potential impact of COVID-19. Finally, they may lack confidence in their ability to drive double-digit growth through commodities cycles, and they may be concerned about their acreage and exploration plays
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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