For the uninitiated, EOG has been one of the leaders of the U.S. shale revolution over the past decade. The company was worth around $10 billion 10 years ago, vs. around $55 billion in market cap today. A large portion of that growth is due to significant production in the Eagle Ford, Bakken, and Permian Basin shale areas (EOG gets about 85% of its revenues from crude oil, mostly domestically). EOG is one of the few energy companies that is trading well above its 2008 peak, when oil prices reached all-time highs:
That strength has been justified by the stellar sales and earnings growth as EOG has ramped up production in the various shale deposits over the past few years. Annual EPS for 2014 is expected to be $5.60, or 40% higher than the $4.00 registered in 2008, thanks to increased production even though oil prices are lower. EOG has doubled in the past 2 years, and its EPS has doubled in that period has well. In short, the stock’s progress has generally been in lockstep with its fundamental business results.
With oil trading near 18 month lows, EOG investors have become more concerned about the viability of EPS growth over the next couple of years. The stock is testing its 200 day ma, which has generally held over the consistent uptrend of the past 2 years:
As a long-time energy sector leader, EOG’s ability or inability to hold the 200 day ma on the most recent bout of selling could be a barometer for the willingness of investors to hold energy stocks as a whole. XLE is also testing its rising 200 day ma today:
XLE is still up 4% year-to-date, and EOG is still up 20% year-to-date, but energy stocks are at an important inflection point in the context of the strong uptrend of the last 2 years.