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3 Things From EOG Resources Inc's 2Q Results You Won't Want to Miss

EOG Resources (NYSE: EOG) recently reported second-quarter results that came in a bit below expectations. While analysts anticipated that the company would earn $0.11 per share, the oil giant only reported $0.08 per share in profits. That miss was somewhat surprising, considering that production came in above its targets and most costs were below expectations.

That said, investors shouldn't get too caught up in the earnings miss because that might cause them to overlook three even more important things in the company's second-quarter results. 

Image source: Getty Images.

No. 1: The company drilled gushers all across the country

EOG Resources noted that its oil production was up 25% versus last year to 334,700 barrels per day, which is a company record for oil output. That was well ahead of the forecast that it would produce between 322,000 to 332,000 barrels of oil per day. Meanwhile, total company production was 603,900 barrels of oil equivalent per day (BOE/d), which was also ahead of its guidance range of 562,200 to 592,700 BOE/d, thanks not only to the robust oil output but also higher-than-expected natural gas and natural gas liquids (NGL) production.

Fueling that expectation-beating output were the highly productive wells the company drilled across the country. For example, in the red-hot Delaware Basin, the company completed 25 wells in the Wolfcamp formation during the quarter, which achieved initial 30-day rates of 3,010 BOE/d, while the 19 wells it brought online in the Bone Spring formation averaged initial 30-day rates of 2,130 BOE/d. That said, the company also completed robust wells with average 30-day rates of more than 1,500 BOE/d in the Eagle Ford, Bakken, and Powder River Basin. That's worth noting because while many rivals are cutting back to just one or two core regions, EOG Resources has four oil growth drivers, each of which is delivering excellent results.

No. 2: The company expects to deliver more oil for less money this year

Because EOG Resources completed so many exceptional wells during the quarter, it's on pace to grow faster than anticipated this year. In fact, the company now expects oil output to be 20% higher than last year, which is an increase from its previous outlook that crude production would be up 18%. What's impressive about this guidance increase is that EOG Resources can achieve it while maintaining its current plan to spend $3.7 billion to $4.1 billion on completing 430 wells.

That ability to produce more oil for the same amount of money is coming at a time when many rivals are tapping on the brakes. In the Permian Basin, for example, Pioneer Natural Resources (NYSE: PXD) cut its full-year production growth outlook because of some drilling problems. Overall, the company will spend $100 million less this year and complete 30 fewer wells, resulting in 15% to 16% production growth instead of its initial forecast that output would increase 15% to 18%. Furthermore, Pioneer noted that its wells are producing more gas than expected, which caused it to reduce its oil growth outlook. 

Meanwhile, Bakken Shale rival Whiting Petroleum (NYSE: WLL) and Eagle Ford competitor Sanchez Energy (NYSE: SN) are also pulling back on their spending and growth projections. In Whiting's case, it's cutting $150 million in spending this year, which will only enable it to increase production 14% by the end of this year, versus an initial outlook that it could increase output 23% by year-end. Meanwhile, Sanchez will drop three rigs by the end of September and defer several wells into 2018, while also planning to reduce its drilling budget by $75 million to $100 million next year.

Image source: Getty Images.

No. 3: It hinted that a new discovery might be coming down the pipeline

While EOG's rivals are pulling back on drilling, EOG is keeping its foot on the gas. The company noted in its earnings release that "in addition to delivering strong growth, EOG is actively engaged in a robust exploration program to lease and test multiple new prospects."

While EOG is usually tight-lipped about where it's hunting for oil, the company did ink a $400 million deal with a private equity group to develop oil and gas resources in Oklahoma. Rivals have already uncovered several high-return plays in the state in recent years. Marathon Oil (NYSE: MRO), for example, can earn 90%+ internal rates of return on some of its STACK wells at $55 oil, while Marathon's SCOOP wells are generating more than 50% returns. That said, EOG isn't exploring in the core of those two plays, so it will be interesting to see what, if anything, it discovers in the state, as well as in the other areas it's exploring.

The best just keeps getting better

EOG's second-quarter results are another confirmation that the company can thrive at lower oil prices. Driving that ability is its drilling prowess and capital efficiency. Not only are those two factors generating impressive results across several shale plays, but the company is also delivering more oil for less money. That formula should create value for investors in the coming years, giving it a leg up on rivals if oil remains low. 

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Matt DiLallo has no position in any stocks mentioned. The Motley Fool owns shares of EOG Resources. The Motley Fool has a disclosure policy.