With the advent of horizontal drilling and hydraulic fracturing, shale formations have become viable sources of oil and natural gas. In fact, they're actually some of the hottest acreage positions onshore. There's been plenty of fuss about the shales in Texas, with the Eagle Ford, Haynesville, and Barnett boasting plenty of production from many companies.
One popular shale formation outside of Texas is the Bakken, located in North Dakota, Montana, and parts of Canada. This liquids-rich shale has attracted many companies looking to capitalize on high oil prices. Along with the Eagle Ford, the Bakken has emerged as one of the best onshore oil plays.
EOG Resources
How does EOG compare to others? Let's compare its cash flow multiple to that of its peers:
|
Company |
Trailing Cash Flow From Operations |
Market Cap on July 28, 2011 |
Price-to-Cash-Flow |
|---|---|---|---|
|
Brigham Exploration |
$185 |
$3,726 |
20.2 |
|
Continental Resources |
$658 |
$12,300 |
18.7 |
|
Denbury Resources |
$867 |
$7,767 |
9.0 |
| EOG Resources |
$3,046 |
$27,764 |
9.1 |
Source: Capital IQ, a division of Standard & Poor's. All dollar amounts in millions.
EOG Resources compares quite favorably to its peers, trading at a lower cash flow multiple than smaller players Brigham Exploration and Continental Resources, and trading about even with Denbury Resources. Considering that EOG also has strong positions in the Eagle Ford, the Barnett, and the Niobrara, EOG is a strong, diversified way to participate in U.S. shale formations.
It may be unfair to dismiss the smaller players for trading at higher multiples, since it is entirely possible that these smaller exploration and production companies have taken larger acreage positions relative to their size, which they've been unable to develop so far. However, there's something to be said about a larger company that's producing more and trading at a lower multiple of cash flow.
Interested in EOG Resources? Add it to your Foolish watchlist.
