Saturday, May 7, 2016

EOG Resources low cost oil producer. High returns at low oil prices


EOG Resources Inc has the ability to post strong returns with oil prices around $40 a barrel, and would post triple-digit returns should prices spike to $60, Chairman and Chief Executive Bill Thomas told investors on Friday.

Houston-based EOG, considered one of the most efficient U.S. drillers, has a $15-$20 per barrel cost advantage over the rest of the industry, which needs a "sustained $60-$65 oil price and 12 months of lead time" to deliver modest growth, Thomas said on a call to discuss first quarter results.

As I expect oil prices to be heading higher over the next year this is good news. When there is a washout like what has happened in the shale oil companies a contrarian mindset must be adopted. Once you have decided that the bottom is near than one must buy the highest quality companies as they will perform the best when the ensuing recovery takes place. 

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