This Company Is The Best Oil Producer in America

EOG Resources clearly has chalked up more firsts than any other domestic producer. CEO Bill Thomas says that's unlikely to change anytime soon.

Jun 5, 2014 at 1:15PM

The surge in U.S. oil and gas production has made stars of several independent producers. In my rarely tentative opinion, the leaders of the group must include EOG Resources (NYSE:EOG) and Anadarko Petroleum (NYSE:APC).

These two companies are really quite different. While Anadarko is busy in several U.S. on- and offshore locations, it's also working feverishly in such faraway spots as Ghana and Mozambique. EOG, on the other hand, is the figurative leader of the pack in such major onshore domestic plays as the Eagle Ford and the Bakken and one of the first U.S. operators to turn decidedly toward away from natural gas to concentrate on oil.Entry Eog

Conference comments
Nevertheless, it was somewhat surprising to hear EOG CEO Bill Thomas respond in the negative when he was asked last week whether the company intends to head south of the border, with Mexico now on the verge of being opened up to foreign producers. After all, Eagle Ford geology effectively extends well into Mexico, so there'd be an immediate familiarity there for the operator. But Thomas, who was speaking at the Sanford Bernstein Strategic Decisions Conference, eschewed any notion that the company would be found operating beyond its homeland in the near term.

In reality, it doesn't need to stray. As Thomas was quick to point out, EOG has "big positions in all the major plays," meaning the abovementioned Eagle Ford and Bakken, along with the Permian and DJ basins. EOG Resources can also take credit  for becoming the industry leader in developing optimal well spacing and completion techniques, both there and in North Dakota.

On the grow
A direct result has been annual oil production growth of 40% for the past three years, which is likely to continue through the conclusion of this year and beyond. As such, the company sports an unusually solid set of financials, with returns on equity nudging 16%, free cash flow of more than $5 billion, and a balance sheet that's rock solid.

Expect substantial growth to be maintained, but, as Thomas made clear, as in the past, it'll continue to be organic. "We decided to do that years ago instead of growing the company the typical way, by acquisitions and mergers. We have historically chosen to (do it) through exploration," he said. Going the other way, however, there's no certainty that EOG wouldn't constitute a tasty treat for, say, Chevron.

More big ones?
Are there likely to be more major plays that measure up to the Eagle Ford and the Bakken, which together produce 75% of all horizontal oil in the U.S.? Thomas thinks not. He notes that even Permian rocks and technical qualities don't measure up to those found in the two other areas. But just in case, "We have a very decentralized company," he says. By that he means that EOG operates through nine separate divisions. It's therefore likely to be among the first to find any currently unknown plays of consequence.

For now, he is pleased to report that his company has come upon a pair of tight sandstone plays in the Powder River Basin of southeast Montana and northeast Wyoming. (That region currently produces about 40% of total U.S. coal output. So the locals are likely ecstatic about the area's new oil prospects.) Beyond that, EOG also is working a couple of new plays in the DJ basin, which lies primarily in Colorado but also extends into parts of Wyoming and Nebraska.

More immediately, in addition to tinkering with spacing and other techniques that cut drilling times and consequently expenses while raising production, EOG is now employing enhanced recovery approaches to raise its total hydrocarbons capture. Thomas says that It currently has a water injection pilot project in the Bakken and a gas injection pilot in the Eagle Ford.

Foolish takeaway
It's clearly a good idea for energy-investing Fools to keep a close eye on EOG Resources. The company is unlikely to surrender its U.S. oil and gas leadership anytime soon.

Warren Buffett just bought nearly 9 million shares of this company
Beyond EOG's leadership on the production side, there's an oil-field services company that's similarly compelling, including to such savvy investors as Warren Buffett. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click HERE to discover more about this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!

David Smith has no position in any stocks mentioned. The Motley Fool owns shares of EOG Resources. 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. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information