3Q22 results a slight miss on bottomline
- 3Q22 adjusted EPS came in at US$3.71, slightly below consensus estimate of US$3.73
- Utica acreage to improve portfolio diversity going forward
- Management increased FY23F capital guidance amid persistent inflationary pressures
EOG announced mixed 3Q22 results; “double premium” strategy yielding higher returns and cash flow. EOG reported 3Q22 revenue of US$7.6bn (beating consensus by US$610m). The company announced adjusted earnings of US$2.2bn or US$3.71 per share (below consensus expectations of US$3.73 EPS ); while generating Free Cash Flow (FCF) of US$2.3bn. The company ended 3Q22 with gross cash of US$5.3bn against US$5.1bn of debt. It reported total crude oil production of 465.1mboepd (above midpoint of guidance range). EOG increased its regular dividend payment by 10% to US$3.30 per share (backed by improvement in cost structure, efficiencies, and technology; lower cost of supply; and lower break-even oil price) and declared special dividend of US$1.50 per share. By end of 2022, the company will return US$8.80 per share (special and regular dividends of US$5.80 per share and US$3.00 per share respectively) or US$5.1bn to shareholders, which will bring returns to shareholders at c.67% of FCF (exceeding minimum 60% of FCF commitment).
Management lowered FY22F capital guidance; Utica to further improve EOG returns. EOG guided FY22F crude oil equivalent volumes of 903.3-915.1 mboepd. The company anticipates both crude oil and natural gas prices to remain strong in 4Q22. Meanwhile, EOG lowered FY22F capital guidance to US$4.5bn (from US$4.7bn) but is expecting higher capex in 2023, assuming persistent inflationary pressures to continue, advancement of development timeline of some assets, acceleration of some infrastructure projects, and expansion of Carbon Capture and Storage (CCS) projects. The infrastructure spending combined with the environmental projects, typically represent c.15-20% of company’s capex budget. EOG announced the company has accumulated 395k acres in Ohio’s Utica shale. The company expects Utica Combo plan would be able to contribute to double premium returns in 2023.