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How EOG Resources Turned Losses into Profits in 3Q17

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How EOG Resources Turned Losses into Profits in 3Q17 PART 1 OF 6

How EOG Resources Turned a Loss into a Profit

EOG’s 3Q17 adjusted net income

EOG Resources (EOG) announced its 3Q17 earnings on November 2, 2017, after the market closed. According to its earnings press release, EOG reported better-than-expected profits of ~$111 million in 3Q17. Wall Street analysts were expecting profits of ~$63 million.

On a YoY (year-over-year) basis, EOG turned profitable after its loss of ~$221 million in 3Q16. Excluding one-time items, EOG’s profits rose ~136% over its profits of ~$47 million in 2Q17.

How EOG Resources Turned a Loss into a Profit

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EOG Resources’ 3Q17 reported net income

EOG Resources’ 3Q17 adjusted net income excluding one-time benefits and charges totaled -$11 million, the majority of which were related to non-cash losses on derivatives and losses from asset dispositions. When we add back these one-time items, EOG’s reported net income on a GAAP (generally accepted accounting principles) basis came to ~$101 million, or $0.17 per share in 3Q17. EOG’s reported net income was about -$190 million or -$0.35 per share in 3Q16.

EOG’s net income turnaround from its loss in 3Q16 to a profit in 3Q17 can be attributed to the steep increase in revenues from its upstream operations and midstream segment. EOG’s midstream revenues rose ~47% in 3Q17 over 3Q16. EOG’s operating expenses rose only ~5%, which acted positively on the bottom line.

EOG’s quarterly net income trend

In 1Q17, EOG reported profits of ~$89 million, or ~2% higher than the Wall Street analyst consensus of ~$87 million. EOG reported a loss of ~$455 million in 1Q16, and excluding one-time items, EOG reported a higher profit in 1Q17, compared with its loss of ~$7 million in 4Q16.

In 2Q17, EOG reported worse-than-expected profits of ~$47 million in 2Q17. Wall Street analysts were expecting ~$85 million. On a YoY basis, EOG turned profitable after 2Q16’s loss of ~$210 million, but excluding one-time items, EOG’s profits fell ~47% from its ~$89 million in 1Q17.

Peers ConocoPhillips (COP) and Occidental Petroleum (OXY), which are also part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), reported adjusted net incomes of ~$198 million and ~$137 million, respectively, in 3Q17. Like EOG, COP and OXY also turned their losses one year ago into profits in 3Q17.

In the next part, we’ll take a closer look at EOG’s revenues.

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