EOG Resources Inc., the biggest oil producer in the continental U.S., said third-quarter profit more than doubled as surging output from its low-cost wells made up for a decline in crude prices.
Net income climbed to $1.1 billion, or $2.01 a share, from $462.5 million, or 85 cents, a year earlier, the Houston-based company said in a statement. Excluding one-time items such as a $469 million gain on hedging contracts, per-share profit was 1 cent higher than the $1.30 average of 34 analysts’ estimates compiled by Bloomberg.
Chairman and Chief Executive Officer William Thomas boosted EOG’s growth target for oil even in the face of a market slump, with U.S. crude reaching a three-year low today on lower Saudi Arabia export prices and booming North American output. The company produced the equivalent of 614,100 barrels of oil a day in the quarter, up from 526,400 a year earlier.
“Their track record is hard to argue with,” said Brian Youngberg, an analyst at Edward Jones in St. Louis who rates EOG a buy. “Production last quarter was up 19 percent. It’s hard to find a company anywhere near that, and EOG has an A-rated balance sheet.”
The shares jumped after the close of regular trading, gaining 5.3 percent to $95.02 at 6:07 p.m. in New York.
Results from wells drilled in the Permian basin in West Texas and New Mexico confirm that almost two thirds of EOG’s 140,000-acre land position in the area is promising and will provide a high rate of return, according to the statement. EOG plans to increase its drilling activity in that region.
Annual Growth
The company is among the lowest-cost producers extracting crude from shale formations and has boosted average output by more than 30 percent annually since 2010. EOG has used a variety of techniques including pumping extra sand into wells and spacing them closer together to boost crude output and keep costs low.
In Texas’s Eagle Ford formation, which boasts about the same daily output as Qatar, EOG can turn a profit at prices above $51 a barrel, according to an analysis by ITG Investment Research.
Even in an environment of lower prices, “EOG is positioned to realize ongoing excellent returns in our top plays and continue to be an industry leader in domestic organic production growth,” Thomas said in the statement.
Crude futures traded in New York averaged $97.25 a barrel in the third quarter, 8.1 percent lower than a year earlier. Gas futures averaged $3.949 per million British thermal units, an 11 percent increase.
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