EOG - Embedded Expectations Analysis - 2021 05 18
EOG Resources, Inc. (EOG:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 23.2x Uniform P/E. At these levels, the market has expectations for profitability to expand, but management appears concerned about capital allocation, free cash flow generation, and their oil production ratesSpecifically, management may lack confidence in their ability to find opportunities to spend their excess capital, meet double premium inventory targets, and expand their dividend. Additionally, they may lack confidence in their ability to optimize capital efficiency, generate significant free cash flow, and sustain cost reductions. Furthermore, they may have concerns about their year-end reserve balance and their positioning to capture leasehold benefits. Moreover, management may lack confidence in their ability to maintain wellhead gas capture rates and capitalize on exploration activities countercyclically
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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