Wunderlich Visited EOG HQ...And Is Excited About The Future

In a report published Friday, Wunderlich analyst Irene O. Haas maintained a Buy rating and $116 price target on

. The analyst believes that the company is well positioned to return to growth in 2016. Following a visit to the company's Houston office, the analyst believes that EOG resources is "reasonably" bullish on the outlook for crude oil. "Based on its own analysis, the company is feeling more bullish about crude prices than the current forward curve might suggest," Haas stated, adding, "The massive rig count reduction should lead to a drop in production with a 4-to-6 month lag due to pad drilling. Furthermore, the company believes that the magnitude of the "frac log" might be smaller than estimated and that fewer players are delaying completions than the market thinks." On the other hand, EOG Resources seemed bearish on natural gas prospects for the next 6-12 months. The company intends to instead concentrate of oil-based plays, which offer higher returns. In the long run, however, the company expects a firming up of prices and increase in demand, driven by infrastructure and LNG export improvements. "In their view, natural gas remains the fuel of the future. Typically, the company layers on hedges during the fall for the following year; last year, EOG missed its window as crude prices began its free-fall. The company has recently added more natural gas hedges while still waiting to layer in additional crude oil hedges," the Wunderlich report said. While EOG Resources has successfully offset its extra expenses by bringing drilling costs and time down, it does not believe that there are viable acquisition targets available at present. For now, the company is focused on smaller but targeted bolt-on acreage purchases. The company expects to complete ramping up in 3Q15, while anticipating robust momentum going into 2016.