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Analyzing EOG Resources’ Free Cash Flow Trends

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EOG’s revenues and operating cash flows

For 3Q15, EOG Resources’ (EOG) total operating revenue was ~$2.2 billion, or ~57% lower than 3Q14’s figure. This was the direct result of lower realized prices for crude oil and natural gas production.

In 3Q15, EOG reported an OCF (operating cash flow) of ~$1.1 billion, which was ~52% lower than its OCF of ~$2.3 billion in 3Q14. The drop was primarily due to the lower revenues reported in the same period.

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EOG Resources’ free cash flow trend

As seen in the above chart, EOG is reporting negative but improving free cash flows in 2015. In 3Q15, EOG reported free cash flow (or FCF) of approximately -$225 million. Due to the steep downward trend in energy prices, free cash flows of almost all S&P 500 (SPY) energy companies have declined in 3Q15. Bigger players Pioneer Natural Resources (PXD), Occidental Petroleum (OXY), and Noble Energy (NBL) reported -$194 million, -$64 million, and -$23 million, respectively, in free cash flows in 3Q15.

FCF helps a company to enhance shareholder value, and it can be used to pay dividends, buy back stock, or repay debt. FCF is calculated by subtracting capital expenditure (or capex) from OCF.

EOG’s capex

In 3Q15, EOG spent $1.4 billion in capex, or ~33% lower when compared with 3Q14. In the first nine months of 2015, EOG spent ~$4.2 billion in capex.

In 3Q15, EOG lowered its full year 2015 capex guidance to a range of $4.7 billion–$4.9 billion, a reduction of ~$200 million from its original estimates. EOG’s total capex in 2015 should be ~42% lower than its capex of ~$8.3 billion in 2014. For 2016, EOG currently projects that its capital spending program will be below 2015 levels.

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