In a surprising move, EOG Resources Inc. (NYSE:EOG) announced that it's stomping on the brakes of its oil-fueled growth plan. That announcement far outshadowed the company's fourth-quarter financial results, which weren't really that good, as the company missed analysts' estimates rather badly. Clearly, the crash in crude oil prices is forcing the company to rethink its plans, as it has decided to abandon production growth while it waits out the storm in the oil market.

Drilling down into the numbers
Before we look at the company's plan for 2015, it's important to review the fourth quarter to put everything into context. The bad news is that EOG Resources reported adjusted net income of $432 million, or $0.79 per share. That was $0.23 per share less than analysts expected to see and well under the $1.00 per share the company earned in the fourth quarter of last year. The plunging price of crude had an obvious impact, as the company realized nearly $24 less per barrel than it did in last year's Q4.  

But despite the poor financial results in the quarter, the company did have a strong 2014. Earnings increased 20% over 2013, and discretionary cash flow was up 14% on the year. Fueling those gains was the company's oil production, which was up 31% over 2013 and up 26% in the fourth quarter. If the price of oil hadn't crashed in the quarter, EOG Resources would have delivered much stronger financial results.

The outlook
With no signs that the price of crude will rebound to its previous levels anytime soon, EOG Resources is being forced to hit the brakes on its oil-fueled growth plan. The company had expected to deliver best-in-class crude oil growth through 2017, but that's being put on hold. Instead, the 2015 capital plan calls for the company to cut its spending by 40%, to a range of $4.9 billion to $5.1 billion. That's a much deeper cut than what other large U.S. independent oil companies are cutting. Devon Energy (NYSE:DVN), for example, cut its capital plan by only 20%.

The real surprise, however, is the amount of growth, or complete lack thereof, that EOG Resources expects to deliver next year. Under the company's plan, its oil production will be roughly flat in 2015, which is a far cry from the 20% oil production growth that Devon Energy will deliver next year. In fact, there are very few oil companies not expecting to grow production next year, so this is really a bold move. 

However, EOG Resources has decided that it sees no reason to grow its oil production in today's price environment. The oil isn't going anywhere, so it's simply not interested it continuing to grow when it can earn better returns by waiting for crude prices to improve in the future. Instead, the company is planning to drill, but not complete, a number of wells over the next year so that it can quickly resume production growth once the price of oil improves. Further, the company is going to be on the lookout for high-quality acreage positions that it can acquire from those who need to sell because of the low oil price environment. The goal in pursuing this plan, according to CEO Bill Thomas, is so that EOG can "exit this downturn in a better shape than we entered it."

Investor takeaway
Crude oil prices plunged this quarter because the oil market is oversupplied, as companies such as EOG Resources have unlocked more oil than anyone expected. Because of that dilemma, the company sees no reason to pump out any more oil that it already is, so it's going to keep its production flat next year. However, it stands ready to restart its oil-fueled growth engine as soon as the price of oil improves enough to justify that added investment.

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