EOG Resources Inc (EOG): One Stock to Play the Eagle Ford Boom

Superior well designs = greater returns
One of the main reasons why EOG Resources Inc (NYSE:EOG) has been doing so well is because of its superior well designs. Unlike many others, the company doesn’t just rely on well pressure (frack pressure in scientific speak). Instead, with longer horizontal laterals, these wells exhibit flatter declining rates (rather than steeper declining rates) in production volumes. While this strategy isn’t always successful, the company’s designs and well-completion techniques are among the best in the industry. The net result is that EOG Resources Inc (NYSE:EOG)’s wells are among the most economical for a given production rate.

Moreover, natural gas prices are picking up. This eases a lot of pressure on management to make a faster transition to liquids production. Currently, EOG Resources Inc (NYSE:EOG) maintains a 60-40 ratio of liquids to natural gas production. The company also expects to turn free cash flow positive this year even with a base case crude oil pricing of $85/barrel. Additionally, management has hinted that the positive FCF could result in a meaningful dividend increase and a reduction in debt.

Foolish thoughts
All in all, EOG Resources Inc (NYSE:EOG) seems to be focused on the long term. The Eagle Ford’s oil window will likely continue to be the company’s most important revenue driver for the next three years. At the same time, investors should keep an eye on its natural gas production as prices for this commodity continue to move north. Under such a scenario, EOG Resources is extremely well positioned to be an industry leader among independent upstream companies.

The article 1 Stock to Play the Eagle Ford Boom originally appeared on Fool.com and is written by Isac Simon.

Fool contributor Isac Simon has no position in any stocks mentioned, and neither does The Motley Fool.

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