The Best-Of-Breed Shale Oil Driller

But I’m sure Pioneer’s CEO will still be saying he can outrun the decline.

Stop the Madness

Despite this bout of CEOs gone wild, oil does offer long-term value.

If an investor still wants to invest in the industry, I urge them to look at one company.

It is EOG Resources (NYSE:EOG). And yes, I know it was also on David Einhorn’s hit list.

But its strategy is in sharp contrast to most of the industry. It actually looks sane. No doubt that’s thanks to the fact that EOG has little debt.

For the first time in eight years, the company’s oil output is on the decline. Chairman and CEO Bill Thomas says that returns will be better if EOG waits for higher prices – even if it has to wait for two years.

When prices do rebound, EOG will be ready. It has 320 wells that it has drilled, but not brought into production. This is a procedure called fracklog. The oil sits there, still stored in the ground. Obviously, it can be pumped out of the ground quickly to take advantage of higher prices.

EOG Relatively Cheap

EOG will reward patient investors.

Investor psychology in the sector is still as if the shale boom were in its infancy. When companies announce they’re raising output, their stocks go up in price. And when EOG announced its sane strategy, the stock fell.

That’s fine. Currently, EOG’s price-earnings ratio is about 30. That is well below its long-term average of 45, and well off its peak P/E of 188.

It’s a relative bargain. And at least I know EOG doesn’t have to worry about keeping its lights on.

This article is brought to you courtesy of Tony Daltorio from Wyatt Investment Research.

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