EOG Resources' Eagle Soars to New Heights

There are those who have looked at -- or will look at -- results and prospects for EOG Resources (NYSE: EOG  ) , the third-largest U.S. independent producer, and become concerned about the company's caveat that drilling schedules, asset sales, and maintenance plans likely will cause 2012 to become a backend-loaded year.

My conclusion is different. I see increasing strength in the company and in companies such as Anadarko Petroleum (NYSE: APC  ) and Apache (NYSE: APA  ) , the first- and second-largest independents, along with some of the somewhat smaller players. Indeed, I become progressively more convinced that energy-investing Fools should be at least somewhat represented in this portion of the energy sector. That's especially the case when the companies have achieved optimum geographic representation, as is the case with EOG.

The company's most recent quarter was anything but shabby. Net income reached $120.7 million, or $0.45 per share. However, on an adjusted basis, the company posted EPS of $1.15, 32% above the $0.87 expectation of the nearly 30 analysts forecasting EOG's results.

From a production perspective, CEO Mark Papa noted that, "For the full year 2011, we achieved 52% total company crude oil growth, with a 61% increase in crude oil production. ... In 2011, 67% of our total company wellhead revenue came from liquids." Given the disparity in oil and natural gas prices, those percentages would warm nearly any CEO's heart.

EOG operates in the major liquids-rich plays in the United States, including the Eagle Ford in South Texas, the Bakken portion of the Williston Basin in the Dakotas and Montana, the Permian Basin of Southwest Texas, and the Niobrara formation of the Great Plains. Beyond the U.S., the company is working in Canada, Trinidad, and China.

The salient information to be gleaned from the company's earnings release and subsequent conference call was a huge hike in management's expectations for recoverable barrels of oil from the Eagle Ford play. Whereas the company had previously estimated a recovery of 900 million barrels, that figure has now been increased 78% to 1.6 billion barrels. For the year, its net production reached 66,000 barrels of oil equivalent per day, 88% of which was in liquids.

As Papa noted on his company's call relative to the significant boost:

Just this net increase of 700 million barrels of oil equivalent is larger, we believe, than any net domestic discovery by any company in recent history. And the total size of 1.6 billion recoverable barrels is the biggest U.S. discovery net to any one company since Prudhoe Bay in the late 1960s, in our opinion, including the deepwater Gulf of Mexico.

There are numerous other positives that could be noted concerning EOG, where total production is expected to increase 5.5% in 2012. But I trust you get the picture. I'd strongly suggest that Fools with a yen for energy (a tendency that, given today's world, should characterize all of our investing proclivities), would be well advised to add the company's name to personalized versions of My Watchlist.

Looking for spring stock ideas? Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Fool contributor David Lee Smith doesn't own shares in any of the companies named in this article. The Motley Fool has a disclosure policy.


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