Oil & Gas Stocks

EOG Resources Inc Valuation – July 2016 $EOG

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – July 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how EOG Resources Inc (EOG) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): EOG Resources, Inc. (EOG) explores for, develops, produces and markets crude oil and natural gas primarily in major producing basins in the United States, The Republic of Trinidad and Tobago (Trinidad), the United Kingdom, The People’s Republic of China (China), Canada and, from time to time, select other international areas. The Company’s operations are all crude oil and natural gas exploration and production related. EOG’s total estimated net proved reserves include approximately 2,118 million barrels of oil equivalent (MMBoe), of which over 1,098 million barrels (MMBbl) is crude oil and condensate reserves, approximately 383 MMBbl include natural gas liquids (NGLs) reserves and over 3,825 billion cubic feet, or 637 MMBoe, includes natural gas reserves. The Company’s operations are focused in most of the productive basins in the United States with a focus on crude oil and, to a lesser extent, liquids-rich natural gas plays.


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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of EOG – July 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $45,025,208,272 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.53 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -164.08% Fail
6. Moderate PEmg Ratio PEmg < 20 -63.48 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.60 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.53 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 8.53 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

Stage 2: Determination of Intrinsic Value

EOG value chart July 2016

EPSmg -$1.29
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth -$18.66
MG Value based on 0% Growth -$10.94
Market Implied Growth Rate -35.99%
Current Price $81.70
% of Intrinsic Value N/A

EOG Resources Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.43 in 2012 to an estimated $-1.29 for 2016. This level of negative earnings does not support a positive valuation.As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

EOG Resources Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

EOG charts July 2016

Net Current Asset Value (NCAV) -$21.16
Graham Number $0.00
PEmg -63.48
Current Ratio 1.53
PB Ratio 3.60
Current Dividend $0.67
Dividend Yield 0.82%
Number of Consecutive Years of Dividend Growth 18


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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $2,365,812,000
Total Current Liabilities $1,547,972,000
Long-Term Debt $6,979,029,000
Total Assets $26,338,423,000
Intangible Assets $0
Total Liabilities $13,932,935,000
Shares Outstanding (Diluted Average) 546,715,000

Earnings Per Share History

Next Fiscal Year Estimate -$2.24
Dec2015 -$8.29
Dec2014 $5.32
Dec2013 $4.02
Dec2012 $1.06
Dec2011 $2.05
Dec2010 $0.32
Dec2009 $1.09
Dec2008 $4.86
Dec2007 $2.19
Dec2006 $2.62
Dec2005 $2.57
Dec2004 $1.29
Dec2003 $0.90
Dec2002 $0.16
Dec2001 $0.83
Dec2000 $0.81
Dec1999 $1.00
Dec1998 $0.09
Dec1997 $0.19
Dec1996 $0.22

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate -$1.29
Dec2015 -$0.26
Dec2014 $3.35
Dec2013 $2.15
Dec2012 $1.43
Dec2011 $1.78
Dec2010 $1.83
Dec2009 $2.62
Dec2008 $3.15
Dec2007 $2.17
Dec2006 $1.95
Dec2005 $1.46
Dec2004 $0.87
Dec2003 $0.68
Dec2002 $0.58
Dec2001 $0.72
Dec2000 $0.59

Recommended Reading:

Other ModernGraham posts about the company

EOG Resources Analysis – 2015 Annual Update $EOG
15 Companies in the Spotlight This Week – 5/31/14
EOG Resources Inc. 2014 Annual Valuation $EOG

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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