EOG's aggressive move to increase oil production has helped the company's bottom line and benefited its shareholders. While EOG's stock price has increased by 13% over the last 52 weeks, the stock prices of its competitors have slumped ... While I think that EOG is "best-of-breed" amongst the large exploration and development companies, because of its revenue growth, expanding profit margins, and relatively low debt level, I would not recommend buying the stock. I do not foresee any significant gains for stocks in the gas and oil exploration industry as a whole. The combination of low gas and oil prices, fierce competition, and a flat U.S. economy will prevent any of these companies from achieving significant earnings increases.Say what?
Let's go through that summary: the writer says EOG is "best of breed," because of its revenue growth, expanding profit margins, and relatively low debt level. What the heck does the writer want: that sounds pretty good to me -- revenue growth, expanding profit margins, and relatively low debt level.
Now for the second part: "... low gas and oil prices, fierce competition, and a flat U.S. economy."
Natural gas prices are low; that was the whole point of the article: EOG writing off its natural gas assets and simultaneously switching from being a natural-gas-centric company to a crude oil company. And, is EOG succeeding? I don't know but the write seems to think so: he says the company is "best of breed."
Low natural gas prices: yes. But that's an old story. And it may be a changing story. There's not much talk of natural gas returning to its old lows.
Low crude oil prices: absolutely inaccurate. Compared to what. The average price of crude oil in 2012 set an all-time record -- again, the average over the entire year. And the price of crude so far this year has exceeded last year's average and there are no signs of the price of crude dropping. In fact, even as the dollar has gotten stronger, the price of crude oil has gone up. Not supposed to happen.
With regard to pricing, three other points: a) the WTI/Brent spread is narrowing; b) Bakken at Clearbrook, MN, is actually selling at a premium to WTI; and, c) EOG has its operations in the best two oily plays in the US: the Bakken and the Eagle Ford.
"Fierce competition." Say what? Isn't that what capitalism all about? And the author states that EOG is "best of breed." Talk about an argument being internally inconsistent.
And finally, "a flat US economy." Like so many American investors, journalists, and Congressmen, they think only about the US and forget about China. China now makes and sells/buys more automobiles than the US, just as one example. Tea leaves suggest the US economy is improving and will continue to improve, but even if the US economy remains flat, the Fed is going to keep "printing money."
EOG has had a terrific run and whether it's a good entry point or not, I don't know. This is not an investment site and I am clearly out of my comfort zone with regard to recommendations for investing. But the arguments of the writer at the linked article are either based on inaccurate interpretation of the data, or are internally inconsistent: "best of breed, because of revenue growth, expanding profit margins, and relatively low debt level but don't buy."
I can't make this stuff up.
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For the record:
- EOG closed up $.08 to $124.98
- One week ago: closed at $130.42
- Two weeks ago: closed at $126.68