Insiders have access to real-time information on their companies and often also have a wealth of experience and knowledge that can help them evaluate their firms’ investment potential. If they are buying company stock, it’s generally worth taking a closer look.
In this report, we are going to highlight some interesting insider buying at EOG Resources Inc (EOG:US). EOG is one of the largest crude oil and natural gas exploration and production companies in the US. The company, which uses advanced technology such as 3D seismic technology to develop petro-physical models, has proven reserves in the US, Trinidad, and China. It is listed on the New York Stock Exchange and currently has a market capitalization of $51.7 billion.
EOG Resources Inc: Insider Buying
Our insider transaction data shows that on November 26, board member Michael Kerr bought 50,000 EOG shares at a price of $86.00 per share. This trade cost the insider $4.3 million and increased his holding to 157,570 shares.
Mr. Kerr has a background in investment management. Previously, he spent 35 years at Capital Group, where he managed multiple funds as an equity portfolio manager and covered global oil and gas companies as an equity investment analyst. During his time at Capital Group, he acquired extensive knowledge of the oil and gas exploration and production industry. Prior to joining Capital Group, Mr. Kerr was an exploration geophysicist with Cities Service Company. This background means he is likely to have a good understanding of EOG’s intrinsic value.
What stands out about this trade from Mr. Kerr is its size. Not only is it large in nominal terms but it is also large in relative terms as it has increased the size of his holding by 46%. This suggests he is very confident the stock is undervalued.
Benefiting From High Oil Prices
EOG’s recent third-quarter results showed that the company is benefiting from higher energy prices.
For the period, revenue amounted to $4.8 billion, up from $2.2 billion a year earlier. Meanwhile, adjusted net income came in at $1.3 billion, compared to $252 million in Q3 2020. Free cash flow was $1.4 billion, up from $762 million a year earlier.
The group noted that oil and NGL production for the period were above the high end of guidance ranges.
As a result of this strong performance, EOG increased its regular dividend by 82% and declared a special dividend of $2.00 per share. It also paid down debt significantly, ending the period with net debt of $824 million, versus $2.7 billion a year earlier.
“EOG delivered exceptionally strong earnings and free cash flow in the third quarter driven by our double premium investment program. We extended our track record of reliable execution with better-than-expected production, capital expenditures, operating costs and product prices,” said CEO Ezra Yacob.
“EOG has never been in better shape. We are well positioned to be one of the lowest cost and lowest emissions producers and generate superior cash returns, free cash flow growth and long-term shareholder value,” he added.
In light of these strong results and the confident tone from management, we see the insider buying here as a bullish indicator.