Kurt Wulff (McDep Associates) submits:
Buy-recommended EOG Resources (EOG) is priced close to a McDep Ratio of 1.0 where stock price would equal Net Present Value (NPV) of $92 a share. Fourth quarter results released late February 9 matched our expectations from three months ago for total unlevered cash flow (Ebitda). Cash flow and reserve life support NPV in an industry context. NPV takes account of a 24% increase in year-end reserves, but not volume growth in 2010 beyond the lower bound of management’s guidance.
All of the increase and more in proven reserves was in the undeveloped category as a result of new guidelines from the U.S. Securities and Exchange Commission. The new rules allowed EOG to book large amounts of proven undeveloped reserves in shale gas formations including the Barnett in Texas, Haynesville in Louisiana, Marcellus in Pennsylvania and Horn River in British Columbia.