Enron Oil and Gas EOG Message Board

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Gold/Mining/Energy : Enron Oil and Gas EOG

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To: Dennis Roth who wrote (13)	2/29/2008 6:02:50 AM
From: Dennis Roth	of 15

EOG Resources Inc. (EOG): Extensions of horizontal expertise to specific new plays not in stock - Goldman Sachs - February 28, 2008 News EOG announced that at today's analyst meeting it plans to discuss: (1) two new horizontal oil plays (Barnett Shale in Fort Worth area and North Park Basin in Colorado) that could total 235-540 MMBOE of net recoverable resource; (2) natural gas exploration success in British Columbia with multi-Tcfe potential; and (3) extensions to unbooked resource potential in the Barnett Shale and Uinta Basin. Management increased 2009 and 2010 production growth forecasts to 13%-15% from 10%. We have assumed 15% growth in 2009 and 8% growth in 2010. Analysis The highlight announcement is the Barnett Shale oil success, which we do not believe had received Street focus (including from ourselves). The size of the potential (225-460 MMBOE) to EOG as well as the extension of the play into northern counties that have not received much focus are also quite positive. We do not believe there was much if any credit for Barnett oil potential in EOG shares. The key question for the analyst meeting is how rates of return stack up at various oil prices. Implications We rate EOG Buy relative to an Attractive coverage view. We continue to argue that EOG's exploration portfolio is undervalued, based on EOG's now only slight premium EV/debt-adjusted cash flow multiple versus peers. Specific exploration announcements have tended to give the Street greater confidence in the sustainability of EOG's above-average growth and rates of return. As a result, we believe these specifics, especially the Barnett and Colorado oil plays, will be perceived positively despite the strong run EOG shares have made ahead of the meeting. We believe EOG should trade at a premium multiple as we see greater sustainability of growth and returns than is currently implied. Our price target is under review.

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