Did EOG’s 3Q15 Adjusted Earnings Beat Estimates?

EOG Resources’ (EOG) 3Q15 revenues fell short of estimates. EOG’s posted 3Q15 adjusted revenue of $2.1 billion was 12% lower than the $2.4 billion consensus sell-side analysts’ revenue estimate.

On average, adjusted revenues have closely matched consensus revenues, falling short by just ~1% in the past 13 quarters. Between 3Q12 and 3Q15, EOG’s adjusted revenues have fallen 26%. Revenues decreased even more sharply, by 54%, from 3Q14 to 3Q15 as energy prices plummeted during this period.

EOG’s 3Q15 adjusted earnings beat estimates significantly. EOG’s 3Q15 adjusted EPS was $0.02 as opposed to the consensus sell-side analysts’ estimate of a negative $0.30. Adjusted earnings exclude various one-time charges including impairment charges and derivatives gains. Between 3Q12 and 3Q15, EOG’s adjusted EPS has decreased significantly by 98%. It decreased by a similar percentage from 3Q14 to 3Q15. The fall in crude oil prices has crushed earnings from upstream companies and affected EOG severely.

As noted in the graph above, EOG’s adjusted EPS exceeded estimates in many quarters in the past. On average, adjusted EPS has beat consensus EPS by ~19% in the past 13 quarters.

EOG’s operating cost management efforts resulted in lower lease and well costs, which led to better-than-expected 3Q15 earnings. In 3Q15, lease and well costs, and transportation costs fell 23% and 17%, respectively, compared to a year ago. During the same period, the company saved nearly $16 million on dry hole costs.

From 2Q15 to 3Q15, EOG’s net income of $5.3 million fell to a $4.1 billion loss. The huge impairment charge, as discussed above, caused EOG’s 3Q15 earnings to go deep into the red. In comparison, in 2Q15, EOG Resources recorded a $48 million net loss related to mark-to-market commodity derivative contracts.

EOG Resources released its financial information for 3Q15 on November 5, 2015. Its stock remained unchanged immediately following the earnings release. On that day, its share price closed at $86.47. Since the beginning of this year, its share price has gone down 6%.

In comparison, Continental Resources (CLR), the Oklahoma-based upstream energy company, has witnessed a 10% drop in share price since the beginning of the year. EOG Resources makes up 4% of the Energy Select Sector SPDR (XLE). XLE has gone down 12% during the same period.