Shares of EOG Resources Inc. (NYSE:EOG) rose more than 12% last month -- adding almost $8 billion to its market value -- thanks to higher oil prices, a potential asset sale, and a bullish analyst report.
Oil continued its rebound last month as the U.S. oil benchmark, West Texas Intermediate (WTI), rose 5.6% to $68.50 a barrel, which was its best level in three years. Tightening industry fundamentals drove that move. That's after continued healthy demand growth met lower supply increases from shale drillers in the U.S. due to their decision to focus on generating cash instead of just boosting output. EOG Resources is among the many shale drillers holding back this year by sticking to its budget of investing within the cash flows it can generate at $50 oil.
Another catalyst driving EOG's stock higher last month was a bullish note by Goldman Sachs, which reiterated its buy rating on the shale driller. Fueling the bullishness is the fact that EOG Resources has "shale scale," which means it has the resources to drive meaningful growth in the coming years even after smaller rivals run out of high-return drilling locations. That greater scale should enable EOG to outperform those peers when production in the country plateaus.
Finally, EOG continued to shift its focus to its best U.S. shale assets, which led the company to put its oil and gas properties in the North Sea up for sale, according to a report by Reuters last month. The company could receive more than $300 million by jettisoning this position, which would give it cash to further strengthen an already top-tier balance sheet. Paying off debt remains one of the company's other focuses going forward, which is why it now expects to repay $3 billion of bonds over the next four years as they mature, in a move that would nearly cut its debt in half.
EOG Resources built its business to thrive at $50 oil, which has it on pace to produce a gusher of cash now that crude is around $70 a barrel. That'll give it the money to continue paying down debt and become an even stronger company. While investors do have to pay a premium price for this top-tier oil producer -- even more so after last month's rally -- EOG is one of the elite oil stocks and should create more value in the coming years as the oil market continues its recovery.