EOG ResourcesEOG

The company earned $5.07 per share this past quarter, coming in ahead of the $4.97 that analysts were looking for. Revenue reached $8.62 billion, also topping expectations, as the company continues to benefit from its focus on high-return drilling locations that remain profitable even when energy prices are low.

These results show the company is successfully managing its costs while growing its output. For long-term owners, the focus remains on the company's ability to generate cash and return it to shareholders through dividends, a strategy supported by this quarter's solid financial performance.

See the full quarter, and how our tracked metrics did

Source: 8-K filing

Key highlights

• Production continues climbing: Total production volume grew to 1,410.4 thousand barrels of oil equivalent per day, a 2% increase from the previous quarter, as the company expanded its output in the United States and Trinidad. This growth helps the company generate more cash even when energy prices shift.
• Profit margins expanding: The composite average revenue from sales rose to $50.52 per barrel of oil equivalent compared to $42.24 in the first quarter, mostly because of higher oil prices. This increase in realized price led to a higher margin of $25.51 per barrel, strengthening the earnings from every unit sold.
• Efficiency targets met: Lease and well expenses, which are the costs to operate wells and keep them running, were $3.64 per barrel of oil equivalent for the quarter. This is down from $4.10 per barrel in the previous quarter and stays well below the company goal of $4.50, which helps protect profits.
• Cash generation accelerating: Free cash flow, the money left after paying for all business operations and equipment, rose to $2.799 billion for the quarter from $1.493 billion in the first quarter. This nearly doubling of cash gives the company more room to pay back shareholders through dividends and buybacks.
• Capital spending holding steady: The company spent $1.587 billion on capital expenditures, which is the money used to drill new wells and buy equipment, compared to $1.636 billion in the first quarter. Management is keeping a tight lid on spending even as they increase production levels.
• Cash returned to shareholders: EOG spent $1.299 billion to buy back its own stock this quarter, a significant jump from the $418 million spent in the first quarter. This increased spending on buybacks reduces the total number of shares and increases the ownership stake for long term investors.

Our take: A very strong quarter for EOG. The combination of 2% production growth and a sharp drop in operating costs allowed the company to nearly double its free cash flow to $2.799 billion. These results reinforce the long term case that EOG can generate massive amounts of cash while staying disciplined with its spending.