Can EOG Resources, Inc. (EOG) Possibly Be Topped?

Thus far, earnings season for the energy sector has provided a mix of solid and disappointing results. On Thursday, for instance, a pair of U.S. independent producers turned up on opposite sides of the spectrum, with Apache Corp. falling short of expectations and EOG Resources, Inc. (NYSE:EOG) topping estimates by a wide margin.

EOG’s as solid as they come
Focusing on EOG, the company’s adjusted earnings for the final quarter of 2012 reached $1.61 per share, more than 17% above the consensus expectation of $1.37 per share among the analysts who follow the company. Of equal importance, that result topped the comparable year-earlier per-share figure of $1.15 by 40%. Revenue for the quarter was $3.01 billion, compared with analysts’ prediction of $2.92 billion. For the full 2012 year, EOG earned an adjusted $5.67 per share, higher than its comparable result for all of 2011.

From a production perspective, the company’s crude oil and condensate production in the quarter came to 162.7 thousand barrels per day, a healthy hike in excess of 20% vs. the final quarter of 2011. Natural gas liquids output was up 14% to 57.8 thousand barrels a day, while — with drilling efforts having been reduced in the dry gas plays — natural gas volumes slid to 1,408 million cubic feet per day, a year-over-year decline from 1,533 million cubic feet per day.

EOG Resources, Inc. (NYSE:EOG) operates in several locations. However, the core of the company’s compelling story boils down to its successes in the Eagle Ford Shale of South Texas, North Dakota’s Bakken and Three Forks in the Williston Basin, and the Wolfcamp and Leonard plays of the Permian Basin of southwestern Texas and southeastern New Mexico.

Winning with an eagle
As CEO Mark Papa said during his company’s call with analysts following the release of its results, “The Eagle Ford continues to be our flagship oil asset… .” In the play, which management expects to surpass the Bakken from the perspective of total industry production within the next two years, the company has 569,000 net oil acres. Papa noted that this figure constitutes “the largest and highest quality oil position in the entire play.”

Through the end of last year, the company drilled and completed fully 630 net wells on its acreage. Perhaps Papa’s key assessment regarding the Eagle Ford vis-a-vis the company’s future in the play was that “… we understand the reservoir much better than we did a year ago, and we reached several important conclusions. The bottom line answer is that we are increasing our net potential recoverable reserve estimate (for the play) by 600 million Boe… .”

North to Dakota
Regarding the Bakken/Three Forks, EOG President William Thomas pointed to several reasons for recent and anticipated success in the big play. Included is the application of beneficial new fracking technology, along with a planned concentration in 2013 on a drilling program that is directed to prolific Parshall Core and Antelope Extension areas of the play. The company plans to complete 46 net wells in these two areas this year, up from 28 in 2012.