Jim Cramer Is Right -- This Is the Best Oil Stock in America

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Some people love him; others loathe him. That divided opinion aside, Jim Cramer certainly does know a thing or two about stocks. While I might not personally agree with all of his calls, I will say this: He is absolutely right on his latest bullish call.

On a recent lightning round of his popular show Mad Money, Cramer called EOG Resources (NYSE: EOG  ) the "highest quality oil stock in America." It's a very bold call because there are a lot of terrific oil companies that are well positioned to profit from America's energy bonanza. However, it's a call that I couldn't agree with more, as EOG Resources is by far the best-positioned oil company in America. Let's take a closer look at why Cramer is dead on with this call.

Trifecta of top oil plays
America's energy boom has been led by three oil-rich shale plays, and EOG Resources is one of the few with a meaningful position in all three plays. EOG is the largest acreage holder, and a top producer in Texas' Eagle Ford Shale. It also has one of the best core positions in North Dakota's Bakken. Finally, EOG Resources has an emerging position in Texas' Permian Basin. Add it all up and EOG Resources is poised to become one of America's largest oil producers in just a few short years.

Most of EOG's peers are focused on one basin, or maybe two. For example, Continental Resources (NYSE: CLR  ) has a top position in the Bakken, but not much else. It's starting to shift some of its attention to an emerging oil play in Oklahoma, but at this point, that's a second-tier play. Further, while Chesapeake Energy (NYSE: CHK  ) has solid positions in the Utica, Marcellus, and Eagle Ford, its growth is more on the natural gas liquids side than higher-margin oil. Bottom line, EOG Resources has an oil resource position that is simply unmatched in America.

Its strong position in these three key basins has enabled the company to grow its oil production by an average of 43% over the past three years. This has the company simply printing money.

First mover in more than oil
Still, EOG Resources' strength is in more than just its oil position. The company was an innovator for crude-by-rail as it owns infrastructure, including loading facilities in the Bakken, Eagle Ford, and Permian, as well as unloading facilities in Oklahoma and Louisiana. That has provided it with market flexibility and access to premium-priced markets. Others, like Continental, have been forced to rely on middlemen to open up this access.

That's just the start for EOG Resources. The company also self-sources its frac sand as it owns the Cook County Sand Mine in Texas. This has kept its drilling and completion costs lower than its peers, leading to higher profits.

Getting better every day
It gets even better, because EOG Resources is getting even better. The company has continued to employ new frac technology to improve its returns. It is also becoming much more efficient. For example, the average lateral drilled in the Eagle Ford has grown from just shy of 4,000 feet to almost 5,800 feet over the past five years; yet, at the same time, average drilling days have dropped from 16.9 to just 9.6. These changes have increased its average initial production rate 20%, as well as its returns.

Peers like Chesapeake Energy are a step or two behind. For example, Chesapeake's current goal is to capture drilling efficiency gains of 15%-30% by moving to more pad drilling, and focusing on other ways to cut costs. It's also working to optimize its development and infrastructure. Meanwhile, because EOG Resources already has a lock on costs, it is now focusing on ways to improve its completions in an effort to unlock more oil from each well it drills.

Investor takeaway
EOG Resources is not only well positioned in the three best plays, but it has lower costs due to its vertical integration efforts, and is getting better every day at getting more oil out of the wells it drills. Add it all up and, as Cramer put it, EOG Resources is the highest-quality oil company in America.

Drill down deeper into EOG Resources
EOG Resources is fueling record oil and natural gas production that is revolutionizing the United States' energy position. That makes it a top stock, and one we think could pad your portfolio with cash. That's why it was one of three companies featured in our special free report, "3 Stocks for the American Energy Bonanza." You can get a copy of it if you click here -- it's absolutely free. 



Read/Post Comments (15) | Recommend This Article (41)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 01, 2013, at 3:22 PM, ChuckXX wrote:

    No argument from me but I do think that "CLR" is a much better value. Much lower PE and you still get a great growth story.

  • Report this Comment On December 01, 2013, at 7:20 PM, solonutiket wrote:

    Too bad Jim is all caught up in stocks, that just make the most money for brokers and hedge funds. Sooner or later everyone will understand that these guys are making the most money on the modest money they pay us!

  • Report this Comment On December 01, 2013, at 8:59 PM, peteysa wrote:

    Enron Oil and Gas

  • Report this Comment On December 02, 2013, at 5:04 PM, upchucked wrote:

    What about PXD? Up 74% this year, major player in all the oil shale fields, their new Wolfcamp D Intervale well is the highest producing well ...ever... in the fields.

    EOG is a good play, certainly, but PXD is the 1000 pound gorilla!

  • Report this Comment On December 02, 2013, at 5:59 PM, interdependent wrote:

    http://www.columbia.edu/~jeh1/mailings/2013/20131202_Popular...

    Read the report. Starting now, 6% declines in Greenhouse emissions each year until we're done or we wait until 2020 to get started when the planet will require 15% reductions each year. Does oil sound like growth stock to you?

    We can argue all day about policies and alternatives to our carbon bubble, and we do -- the USA certainly blocks any meaningful international action -- but you can no longer be OK personally saving for your retirement or kids' college on fossil fuels. Period.

    Whatever the future may bring in energy, fossil fuels can no longer be part of it if we care about life on earth, and we only have a few years to kick this addiction and still make a difference.

    If you are investing in fossil fuels, you are investing in the collapse of civilization and mass extinction. That's obvious.

    If you are investing in conservation and renewables, you are at least giving your kids a fair chance at a planet a little more like the one you grew up on. And the new economy will offer much more than just clean air and water.

    http://www.theguardian.com/environment/2013/nov/20/90-compan...

    90 companies have caused 2/3 of global warming emissions this century. Those companies don't want to pay the true cost of carbon, because now they pollute the air like it was a sewer all for free. Don't tell me it doesn't matter where you invest. And don't try to explain your fossil returns to your children when the air and water and land have been poisoned and exhausted, and ecosystems that we rely on for food and water collapse.

    You'd be better off trying to explain investment in a gas chamber company than the greenhouse gas chamber we're leaving behind for young people, future generations and nature.

    This is not an economic argument, though one can be made for avoiding stranded assets, for finding 21st century technologies that move us beyond the carbon age; no this is purely a moral appeal. Our economy " is more entangled in fossil fuels today than we were in slavery in the 1850's" but with more dire consequences to every single soul on earth if we don't individually and collectively do an about-face immediately.

    Our energy bonanza, renaissance, race to extract it all, is simply the last gasp of an old economic system that has reached a moment of truth where we now have to choose between profit and the failure to protect our young.

    We have choices.

    Countries, fund managers, even the World Bank are quickly getting the message and banning investments in coal, alternative drilling, and new fossil fuel infrastructure.

    Do you really need to leave your money back in the carbon age?

    http://gofossilfree.org/

  • Report this Comment On December 02, 2013, at 7:01 PM, NITTANYRAY wrote:

    Even if people with your political leaning have their way in this country, the idea that oil is a dying industry is ignoring some simple facts.

    China has 10 times more people and India has 7 times more people than the US. As their economies grow they will continue to need more oil. The US may become a net exporter of oil in the next decade.

    Wind and solar combined make up less that 10% of the electricity in this country. It will be hard to achieve the 20 % target for the next decade let alone replace 90% of our energy sources with renewable energy.

    You can dream all you want but that won't make it happen.

  • Report this Comment On December 02, 2013, at 7:35 PM, HKman wrote:

    This article totally misses the point. Is EOG resources the best Oil "Company" in America - quite possibly. They seem a very well managed company with some excellent assets. It is the best oil "stock" in America is a totally different matter as you need to take valuation into account. EOG resources do look very expensive. Chesapeake Energy whilst not such a good company may make a much better investment as it recovers from its dirt cheap valuation given the recent new management.

  • Report this Comment On December 02, 2013, at 8:14 PM, jbeigel wrote:

    What about PRD energy Canada and their interest in Germany?

  • Report this Comment On December 02, 2013, at 10:00 PM, TMFmd19 wrote:

    @HKman - EOG is a cheaper stock than many investors realize: http://www.fool.com/investing/general/2013/10/04/eog-resourc...

    @upchucked - PXD is a solid play. However, It's pretty concentrated in the Permian. While that's not a bad thing, I think EOG is a better all around package and a better core stock.

    @jbeigel - Never heard of it. But a quick look shows that PRD is a small micro cap with a sub $1 stock price. Beware.

    Matt

  • Report this Comment On December 02, 2013, at 10:05 PM, awallejr wrote:

    My concern about shale play companies is the depletion rate.

  • Report this Comment On December 03, 2013, at 11:07 AM, sevenheart wrote:

    EOG is an industry leader, working in the field I can say they have been more innovative than Chevron, Chesapeake and other majors combined.

    As for CO2- 400/1,000,000th of the atmosphere being CO2 is beneficial for plant life- ever read about photosynthesis? Grow up and realize global warming is a political scam (models don't reflect what actually occurred historically when the data is input and compared with reality, and shhhhh, the globe hasn't warmed for 15 years) Broaden your CO2 horizons, don't just regurgitate propaganda, please.

    Wind and solar account for less than 2% of our energy, further, neither provide the chemical feedstock that is produced by 60% on average of our oil and gas consumption. Oil and gas will be with us for a long time.

  • Report this Comment On December 03, 2013, at 11:08 AM, sevenheart wrote:

    I almost forgot- great article, I think you've nailed it.

  • Report this Comment On December 07, 2013, at 5:26 AM, rambotrader wrote:

    Interdependent: you are on the money. Sad that we have at least one climate change denier on board here (ChittanyRay) who uses some of the same old arguments to defray your correct view of the world. At least he did not dredge up discredited climate denier Lord Mockford.

    The problem with people is that they live in the 'now' and care little about the 'later'. Even when their own descendents are concerned. Making money and living the high life (for themselves) is what it is all about. Better known as greed.

  • Report this Comment On December 09, 2013, at 10:49 PM, Winston888 wrote:

    Sevenheart: I have been to see the Mendenhall Glacier in Alaska twice within about a 10-12 year period. The difference in view between the 2 times was an amazing amount of glacial recession that can only be caused by global warming rather than political scamming. The rangers there may even have temperature measurements recorded, but it is for real (the glacial melt). You can be mislead also with improper data, but you should take several trips up there and see for yourself as I did.

  • Report this Comment On December 13, 2013, at 1:35 AM, silenius wrote:

    Please keep the comments on target. There are plenty other forums for political histrionics. This is the Motley Fool.

    The primary goal of activist investing is not necessarily Foolish or foolish. The value of interdependent's post is to remind us of the popular sway on contentious or vice stocks. From there Fools can decide if this diversity is appropriate for their portfolio.

    Let's not turn this into a pointless political exchange where neither side changes the mind of the other, and each only grows increasingly angry with the opposition.

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