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AQR Capital Nearly Halves its Holdings in EOG Resources

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Dec. 4 2020, Updated 10:53 a.m. ET

AQR Capital’s holdings in EOG Resources

AQR Capital lowered the number of shares held in EOG Resources (EOG) from 2,309,658 in 3Q14 to 1,167,729 in 4Q14. This represented a 49% decrease. EOG accounted for 0.22% of the fund’s 4Q14 portfolio.

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EOG in brief

EOG Resources is a prominent, non-integrated natural gas and crude oil company in the US. The company has proved reserves in the US, the UK, Trinidad, Canada, and China.

EOG is part of the iShares US Energy ETF (IYE) with an exposure of 3.06%.

2015 capital expenditure cuts

EOG announced that its chief goal for 2015 is to position the firm suitably for resuming growth over the long term following the crude oil price recovery. The company is uninterested in furthering production in an environment of low prices.

For 2015, EOG anticipates capital expenditure between $4.9 billion and $5.1 billion. This is a 40% reduction compared to 2014 figures. In order to improve the efficiency of deployed capital, EOG is planning to delay a large number of completions. Due to delayed completions and lowered capital spending, EOG expects to complete about 45% fewer wells in 2015 compared to 2014. Lowered capital expenditure could temporarily slow down 2015 revenue growth.

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Effects of commodity price volatility

According to a Forbes article dated January 13, 2015, oil and gas companies like EOG Resources are independent and lack downstream operations. This makes them more susceptible to crude oil price volatility than integrated players such as Exxon Mobil (XOM).

Unlike independent companies, integrated firms tend to have a steady cash flow stream originating from chemical production and refining operations. So, in commodity down cycles, independent companies such as EOG tend to witness steep falls in operating cash flows. This decreases their investment capacity for future growth in production. Hence, the capex plans of independent players rely more heavily on the short-term outlook for global crude oil prices.

4Q14 revenue and earnings

Net operating revenues for the fourth quarter were $2.05 billion, down from $2.17 billion for 4Q13. Net income was $445 million for 4Q14 compared to $580 million for the prior-year period. This translated to diluted earnings per share of $0.81, down from $1.06 for the prior-year period.

EOG shares offer a dividend yield of 0.6%, while peer ConocoPhillips (COP) has a dividend yield of 4.4%.

We will cover AQR Capital’s decreased stake in Facebook (FB) in the next part of this series.

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