Susquehanna Turns Bullish On EOG Resources After Q1 Print

EOG Resources Inc EOG appears poised for generating a healthy combination of production growth and free cash flow generation going forward — and could raise its pace of capital return to shareholders, according to Susquehanna.

The Analyst

Biju Perincheril upgraded EOG Resources from Neutral to Positive and raised the price target from $107 to $115.

The Thesis

EOG Resources delivered strong operational performance in the first quarter, Perincheril said in the Monday upgrade note. (See his track record here.) 

The use of proprietary completion and diversion technologies is allowing the company to recover more hydrocarbons from a unit without compromising on returns, the analyst said. 

The company’s oil volumes in the first quarter were about 1 percent higher than Susquehanna expected, while capex was around 5 percent below estimates.

Given the strong operational performance in the first quarter, EOG Resources could achieve oil growth close to the higher end of its guidance range of 14-16 percent and may project 15-percent growth in 2020, Perincheril said. 

Along with production growth, EOG could generate free cash flow of approximately $1.7-$1.8 billion in 2019 and 2020, the analyst said. The figure could handsomely exceed $2 billion in 2021, he said. 

EOG Resources announced a dividend hike of 31 percent in the first quarter, marking the third increase since early 2018.

The yield is still only about 1.3 percent, Perincheril said, adding that he expects the company to initiate a share buyback program once the next tranche of debt retirement is completed.

Price Action

EOG Resources shares were down 0.31 percent at $90.62 at the time of publication Monday. 

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