EOG ResourcesENRON OIL & GASANDY

SOFT ANALYSIS WEIGHTAGE

TECHNICAL = 2/10

ORDER/DEPTH = 1/10

FUNDAMENTAL = 4/10

SPECULATION = 3/10

*in order of importance

Oil & Gas Industry Oil & Gas is highly sensitive to OPEC

decisions Extremely capital intensive Cyclical Industry High levels of asset depreciation

Recent advancement in fracking tech – reduced dependence on oil imports & OPEC antics

Reserves Replacement? Fastest Increase in Sales Vol?

SPECULATION US has become less

dependent on oil imports due to fracking tech

Saudi A. is losing market share

Saudi A. would rather cut profits than lose crude mkt share to US, to hurt local oil producers

Conspiracy? Russia is currently No.1

Crude Producer

52% of revenues is Oil & Gas

US & Saudi manipulates crude price to punish Russia for Ukrainian Invasion

Dec ‘14 Crude Futures High @ 102.9 (June)

Close @ 77.26 (current)

Prices dropped 25%

Price of EOG vs Dec ‘14 Crude Futures

SPECULATION To reach previous price levels =

Supply/Demand Equilibrium 2 ways –

Solid Emerging Market economic growth pushes prices up

Saudi. A may synergize with Venezuela to boost mkt share

Reduce US’s overall slice of oil pie

Q1 2015 forecasts GS: $85 JPM: $82

COMPANY OVERVIEW EOG produces Crude and Nat Gas in US, UK, Canada, Trinidad

94% of US reserves owned -> Eagle Ford, Texas

Eagle Ford = Est 9.6B barrels of crude (2012)

EOG in Eagle Ford = 2B barrels of crude (2013)

Business Catalysts

Largest Crude Producer in Eagle Ford

2,282 km2 of pure oil production

Trends (2011-2013)

Declining Well Costs = -10%

Improved Production = +25%

21%

79%

TOTAL PROVEN CRUDE RESERVES IN E.F (BILLION BBLS)

EOG 104 Cumulative Competitors

ECONOMIC MOAT

RECENT NEWS / EARNINGS SURPRISE Q3 Results 2014

29% increase in U.S. Crude Oil and Condensate Production (YoY) 17% Increase in Total Company Production (YoY) Expanding Ops into Delaware Basin; Confirms 364km2 of proven crude

reserves

Plans to continue/increase production amidst slumped crude prices due to low costs of well operations

MANAGEMENT / INSIDER TRADING

ORDER/DEPTH Options Chain Put/Call Ratio:

bearishness/bullish P/C ratio < ~0.5 = Bullish

P/C ratio > ~0.7 = Bearish

Calls above Strike vs Puts below Strike

P/C Ratio503/1649= 0.305

Herd thinking - Jan ’15 expiration, stock price < $115

FUNDAMENTALS Important considerations: –

Oil Reserve Replacement & Growth

Cash Flow

Interest Coverage (ability to pay interest on outstanding debt)

2011 2012 2013Interest

Coverage Ratio

10.08 7 15.6

Operating Cash flow (USD $M)

4,578 5,237 7,329

Operating Margin % 20.9 12.7 25.4

Total Proven Reserves currently under EOG: 2.12B barrels of oil

Current Production/Extraction:~103.66M barrels / year

Assuming no change in Production= 20.45 Yrs in business

FUNDAMENTALS

0

100

200

300

400

500

600

2009 2010 2011 2012 2013 2014

% Daily Sales Growth compared to '09

Year Thousands of Barrels/Day2009 54.82010 73.72011 1132012 1592013 2202014 284

FUNDAMENTALS Intrinsic Value:

Analyst’s Average Price Est: [$105 + $123 + $135 / 3] = $121.67

EPS: $ of profit / Total outstanding shares

0

2

4

6

2009 2010 2011 2012 2013 2014

EPS(Yr) GrowthYearly

TECHNICAL (Trend/S.R) Current Downtrend:

20SMA < 50SMA < 150SMA

Recent appreciation:positive earnings surprise

2nd resistance @ 105.85, TP level

TECHNICAL (Elliot. W/Convergence)

Rising Prices + Rising Vol + Rising MACD

Positive ST price change

Elliot Wave 1 complete cycle

New cycle forming (wave 3 forming)

TECHNICAL (Elliot. W)

Est. resistance $105 Possible

extrapolation of future prices based on past levels

TECHNICAL (Fibo Retracement)

Moderately positive correlation with Fibo R.

Fake breakdown @ 90.78?

RECOMMENDATION Personal recommendation:

Strong fundamentals 80% of stock value from Crude Sensitive to OPEC

Not the right time Something to consider when crude

and geo-political matters settle

Short term: Underperform

Long Term: Overweight