EOG Resources’ 3Q15 earnings release and returns
EOG Resources (EOG) is scheduled to release its 3Q15 earnings on November 6. Its stock closed at $85.28 on October 13. Analyzing EOG Resources’ returns since January 1 this year, we can see that it returned a negative ~5%.
EOG Resources’ returns have consistently been negative since May 2015, as the graph above notes.
EOG Resources’ peer performance
EOG Resources outperformed the Energy Select Sector SPDR ETF (XLE). XLE has returned a negative ~11% YTD (year-to-date). EOG is 4.2% of XLE. Texas-based independent upstream Pioneer Natural Resources (PXD) has underperformed many of the upstream players in the industry, returning a negative ~9% since the beginning of the year. From January to mid-May, Pioneer outperformed EOG Resources. This was primarily due to Pioneer’s relatively better earnings performance in 1Q15 compared with EOG. However, EOG showcased a better earnings performance in 2Q15 as it turned to positive net income versus Pioneer’s net loss in 2Q15. This explains higher returns from EOG in the past four months over Pioneer.
Why upstream energy stock’s returns have been weak
Most energy stocks have tumbled since June 2014, when crude oil started to crash. This negatively affected oil producers’ revenues and margins. Many upstream energy companies cut expansion investment. The US oil rig count has slumped since September last year. Year-to-date, approximately 54% rigs have been idled. This also explains why industry ETF XLE’s returns have been poor. Investors seem to be cautious about EOG Resources’ performance, due to weakness in commodity prices. We’ll discuss this in more detail later in this series. Also, we’ll analyze EOG Resources’ performance versus analysts’ estimates.