EOG Resources used to be known as a leader in natural gas exploration and production.
But low natural gas prices led to declining profits. In fact, the company lost $70.9 million in 2010's third quarter.
So it embraced a major production and technology change. EOG perfected horizontal drilling techniques to access shale rock formations trapping large reserves of oil - instead of reserves of gas, as many competitors were doing.
Now EOG has transformed from a leading gas drilling company to a major oil producer, increasing its liquid production last year by 49%.
With this new production model, EOG's profits are driven by high oil prices instead of depressed natural gas prices. The company just reported its third-quarter earnings and the results are astonishing - it turned a loss from the same quarter last year into a blowout earnings surprise this year. Net income hit $541 million.
The bottom-line growth helped the company's share price rally 20% since earnings were released Nov. 2.
By changing its focus to profitable oil production, EOG Resources is now a low-risk, high-reward energy stock, making it a "Buy" for investors looking to cash in on rising oil prices. (**)
EOG Resources Inc.: Unlocking Profits from Shale OilEOG Resources is one of the largest independent (non-integrated) U.S. oil and natural gas companies, with proven reserves in the United States, Canada, Trinidad, the United Kingdom, and China.
It's the largest oil producer in North Dakota's Bakken Shale, and the largest producer in the Eagle Ford Shale in South Texas. These two shale oil fields have played a key role in ramping up U.S. oil production over the past few years, with each having an estimated 4 billion barrels of recoverable reserves.
EOG's extensive operations in these fields have pushed its total liquid production to 130,000 barrels per day, and Chief Executive Officer Mark G. Papa said he expects to reach 200,000 barrels per day in 2012. That could make the company the second or third largest oil producer in the United States.