EOG Resources: A Buy Rating on Strong Growth, Capital Discipline, and Robust Cash Flow

Mizuho Securities analyst Nitin Kumar CFA has maintained their bullish stance on EOG stock, giving a Buy rating on March 22.

Nitin Kumar CFA has given his Buy rating due to a combination of factors including EOG Resources’s expected volume growth, disciplined capital expenditure, and strong free cash flow generation. Kumar notes that EOG anticipates approximately 3% growth in oil volumes and 7% in total volumes for the year 2024, all while maintaining a flat drilling and completion (D&C) capital expenditure plan of around $4.6 billion. He emphasizes the company’s target for a 6% free cash flow compound annual growth rate over the next three years, which is particularly attractive given the modest volume growth and disciplined spending. Kumar also highlights EOG’s net cash position at the end of 2023, giving the company the potential to exceed its 70% free cash flow payout ratio—a key factor underpinning his positive stance on the stock.
Additionally, Kumar appreciates EOG’s operating efficiencies, as evidenced by their plans to drill approximately 600 net wells in 2024 with fewer rigs and crews compared to 2023. In terms of valuation, EOG’s stock is trading at an attractive free cash flow to enterprise value ratio, and its enterprise value to EBITDA multiple is competitive when compared with peers. He also points out EOG’s substantial reserve life and stable production outlook, with proven developed reserves estimated to have a value of roughly $31.3 billion. All of these elements contribute to Kumar’s assessment that EOG Resources is well-positioned for growth and offers a compelling investment opportunity, warranting his Buy rating and a maintained price target of $138 per share.

In another report released on March 22, Stifel Nicolaus also maintained a Buy rating on the stock with a $153.00 price target.

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EOG Resources (EOG) Company Description:

Incorporated in 1985 and based in Texas, EOG Resources, Inc. is engaged in the exploration, development, production and marketing of crude oil and natural gas and natural gas liquids. It operates in the United States, Trinidad and Tobago, China and Canada.