EOG Resources

Methodology

EOG Resources' oil and gas production earnings fluctuate dramatically with commodity prices, requiring mid-cycle assumptions for meaningful fair value calculations. The company's premium drilling inventory provides above-average returns but doesn't eliminate commodity exposure. Fair value works best using normalized oil and gas prices ($65-75 WTI, $3.50-4.50 gas) rather than current spot prices.

Methodology

EOG typically trades at very low PEG ratios (0.3-0.8x) during commodity upswings, reflecting market skepticism about earnings sustainability at elevated prices. The company's operational excellence and low-cost production support premium valuations within E&P. PEG misleads because earnings volatility reflects commodity price swings rather than EOG's superior execution and asset quality.

Methodology

EOG pays a base dividend yielding 2-3% plus special dividends during strong commodity environments, making PEGY more attractive than PEG alone. The company balances shareholder returns with maintaining financial flexibility through cycles. Total shareholder yield can reach 5-8% including specials, making yield-adjusted valuations more relevant during strong commodity periods.