EOG Resources: A Strong Force in the Upstream Energy Industry

(Continued from Prior Part)

EOG Resources’ (EOG) net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) has been volatile. However, it had been falling until 4Q14. During 1Q15, EOG’s net debt-to-EBITDA multiple was 0.7x. This is ~52% greater than in 4Q14.

Net debt-to-EBITDA reflects how easily a company can repay its debts from its operational earnings and available cash. EOG Resources’ Canadian peers’ Cenovus Energy (CVE) and Suncor Energy’s (SU) net debt-to-EBITDA multiples were ~1.95x and ~1x at the end of 1Q15, respectively.

EOG Resources’ net debt-to-EBITDA had been falling since 4Q12 as its earnings grew, while its net debt remained volatile. The ratio reached a low of 0.45x in 4Q14. Since then, the company’s net debt rose 12%, while its EBITDA fell 71% due to lower energy prices. With cash and marketable securities remaining around the same level, this pushed up EOG’s net debt-to-EBITDA ratio in 1Q15.

EOG Resources’ long-term debt was $6.39 billion at the end of 1Q15—compared to $5.90 billion in 1Q14. This was a rise of ~8%. In March 2015, EOG Resources raised a total of $1 billion in debt—to be spent on “general corporate purposes.” Currently, EOG Resources has $2 billion senior unsecured loans that will mature in October 2016 with a possible extension of up to two years.

In comparison to EOG Resources’ 8% long-term debt rise in 1Q15 over 1Q14, Concho Resources’ (CXO) long-term debt fell 8%, while Gulfport Energy’s (GPOR) long-term borrowings rose 161%. EOG accounts for 0.26% of the SPDR S&P 500 ETF Trust (SPY). It also accounts for 2.97% of the iShares U.S. Energy ETF (IYE).

Next, we’ll discuss EOG Resources’ capital expenditures.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Why EOG Resources Is among the Best Upstream Stocks
• Part 2 - EOG Resources: Growing Revenue Is Battered by the Crude Oil Slump
• Part 3 - EOG Resources’ Production Volumes and Sales Prices Diverge