EOG Resources Inc. (NYSE: EOG) shares jumped Friday, lifting energy sector-related exchange traded funds after the oil and gas company beat earnings expectations.
On Friday, the iShares U.S. Oil & Gas Exploration & Production ETF (IEO) increased 3.4% and the Energy Select Sector SPDR (XLE) rose 2.6%.
Meanwhile, EOG Resources shares gained 7.5%. EOG makes up 8.6% of IEO’s underlying portfolio and 4.2% of XLE.
EOG Resources reported earnings of $2.74 per share, or 58% higher year-over-year, and $7.4 billion in revenue, or an 80% jump for the same quarter year-over-year.
“Our performance this year proves that we have emerged from the downturn better than ever. The company is positioned to deliver significant value to shareholders with our low-cost structure and increased exposure to oil and natural gas prices with the recent reductions in our hedge position. This is supported by an industry-leading balance sheet and a regular dividend that allow EOG to deliver significant value through the cycle,” Ezra Yacob, CEO, said in a note.
“We are well positioned to carry this momentum into 2023. We have offset a significant portion of inflation this year and are working on plans to identify further cost savings next year,” Yacob added.
In an environment of heightened inflationary pressures and greater costs, energy companies have had to improve their efficiency to get the most bang for their buck. EOG has also warned that inflation could remain elevated, further adding to costs in the environment ahead.
“Oilfield service capacity remains extremely tight and is further constrained by the limited availability of materials and experienced labor,” COO Billy Helms told investors, according to a Reuters report.
EOG is also expected to spend more to expand its operations, with Yacob adding that “as we begin to plan for 2023 we remain focused on disciplined capital allocation.”
“Good to see a reiteration of Capex, given industry inflationary pressures,” analysts for Tudor, Pickering, Holt & Co said in a note.
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