Executive Summary

Company Highlights
EOGs portfolio of assets consists of large holdings in North Americas top unconventional resource plays: the Eagle Ford Shale, the Bakken/Three Forks Formation, the liquids-rich area of the Barnett Shale, and the Permian Basin. This has been the reason why EOG has been able to organically grow their total production at a 5-year CAGR of 9.71% compared to an industry average of 9.71%. Switching their focus from gas to liquids in 2007 has led their total liquids production (Oil + NGL) to grow at a 5-year CAGR of 37.63% while their gas production has decreased at a 3-year CAGR of -3.43%. Their high quality asset base and focus on highervalued liquids have allowed them to grow their revenues at a 5-year CAGR of 22.01%, which is considerably faster than the industry average of 15.46%. EOG has significant technical and logistical capabilities. EOGs technical team has added value through the optimization of their well completion techniques. This has resulted in a higher EUR per well and also lowering well spacing requirements (higher density of wells in a given area). Their logistics teams ability to think outside of the box has allowed them to reduce costs through innovative methods. Two examples of this are shipping crude by rail from North Dakota and mining their own fracking sand. Adding rail capacity allowed EOG save the $25/bbl cost of shipping by truck and also allowed them to sell their crude at a premium to WTI. Mining their own fracking sand has allowed them to save approximately $500,000 per well by not having to buy sand at inflated market prices. Concerns over EOGs fundamentals arise due to the impairments of natural gas assets and also their high capex requirements. The main impact of these charges is a reduction in EOGs net margin and ROE. I dont feel that investors should be worried about these because EOG has been divesting natural gas assets since 2008 in an effort to focus on the production of liquids. Their capex has outsized cash flow from operations for the last few years which has led to increased levels of debt in order to fund this spending. This should also pose little concern to investors due to EOGs strong CFO that can be used to cover the interest expense.

Valuation
To estimate EOGs intrinsic value I used their WACC to discount their projected FCFF. This resulted in EOG having an estimated value of $179.95 per share. This suggests that EOG might be slightly undervalued at their current share price of $169.12. EOGs was compared to its peers using a several multiples to see if they were relatively cheap or relatively expensive. The results of this analysis are mixed. EOG is more expensive than its peers based on comparisons of their P/E and EV/EBITDA ratios. EOG is cheaper than its peers when compared on both price per flowing barrel and price per flowing barrel of liquids. The results of an analysis of EOGs technicals are also mixed. Analyzing EOGs 50, 100, and 200day moving averages suggests slowing momentum. EOGs 50-day MA is fixing to cross their

100-day MA which is a bearish indicator. In contrast, EOGs RSI indicator is showing that EOGs momentum is increasing which is a bullish indicator.

Recommendation-HOLD Even though I feel EOG is a really great company, I dont feel like its that good of a stock right now. I dont think that the 6% discount of EOGs market price to intrinsic value is enough to warrant a buy recommendation. There is just too much variability surrounding EOGs estimate of intrinsic value. The contradicting technical indicators and the mixed results of my relative valuation support the hold recommendation. In order for me to change recommendation to a buy or sell I would need to see stronger evidence that EOG is actually mispriced. The difference between EOGs market price and intrinsic value would have to be upwards of 25-30%. The results of my relative valuation would also have to support my intrinsic valuation. Possible Future Catalysts Takeover Premium Rising natural gas prices