# SNP · INSTITUTIONAL INVESTMENT RESEARCH MEMO

**TICKER:** EOG (NYSE)  ·  **VALUATION DATE:** June 10, 2026  ·  **CURRENT PRICE:** $141.22  ·  **INTRINSIC VALUE:** $149.60  ·  **RATING:** Watchlist / Mildly Undervalued

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## 1. Executive Summary & Narrative Chain

Project Caligula’s systematic 8-pillar SEC-footnote engine flagged **EOG Resources, Inc. (NYSE: EOG)** as a top-quartile fundamental quality name within the 14-ticker Permian Basin exploration and production (E&P) universe (composite score: **0.640**, rank: **2/14**). This institutional DCF overlays that quantitative screen to address a critical question: **is the market already pricing in EOG’s premium operational quality, or is there an active mispricing to underwrite?**

Based on our linked three-statement projection model under a WACC of **8.77%**, EOG's intrinsic equity value is **$149.60 per share** under the reserve-life depletion terminal value method and **$143.10 per share** under the exit multiple method. The current market price of **$141.22** implies that the market is pricing in a long-run WTI price of approximately **$68.50/bbl** (compared to the current front-month strip of **$72.00/bbl**). The valuation spread is modest. This output should be interpreted as a quality-overlay check, not a standalone recommendation.

### Key Outputs Ledger

| Valuation Metric | Output Value | Primary Driver / Reference |
| :--- | :--- | :--- |
| **Intrinsic Price (Reserve-Life TV)** | **$149.60** | Hyperbolic decline depletion (Y6–Y30) |
| **Intrinsic Price (Exit Multiple TV)** | **$143.10** | 5.5x Terminal EBITDA multiple |
| **Weighted Average Cost of Capital (WACC)** | **8.77%** | Cost of Equity: 9.44% \| After-Tax Cost of Debt: 2.77% |
| **Implied Long-Run WTI (Goal Seek)** | **$68.50/bbl** | Breakeven WTI at current market price of $141.22 |
| **Hedge Cushion (Year 1 FCFF)** | **$420M** | Y1 hedging contribution to cash flow |

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## 2. Methodology & Signal Construction

Our valuation model is built from three distinct quantitative schedules, ensuring the model is entirely point-in-time and free from look-ahead bias:
1. **Revenue Build with Strip & Hedge:** We project oil, gas, and NGL segment revenues based on locked CME strip price curves adjusted for EOG’s trailing 4-quarter basis differentials (oil: **-2.0%** to WTI; gas: **-15.0%** to Henry Hub). For Year 1 and Year 2, we overlay Caligula's extracted hedge book parameters (NTM coverage: **52%**, weighted floor: **$62.00/bbl**), which contribute an organic **$420M** hedge cushion to Year 1 Free Cash Flow to Firm (FCFF).
2. **Schedules Linking:** Operating expenses are projected based on historical $/Boe cost trends. Sustaining CapEx is modeled using an industry-standard proxy (**85% of DD&A**), and working capital is projected using rolling historical collection and payment ratios (DSO: **43 days**, DIO: **45 days**, DPO: **120 days**).
3. **Terminal Value Divergence:** Rather than relying on the generic Gordon Growth model (which assumes an infinite asset lifespan), we implement a **hyperbolic reserve-life depletion curve** (decline exponent $b = 0.9$, initial decline $Di = 25\%$) over a 25-year terminal phase to physically deplete EOG’s proved reserve base (**417 MMboe**). We present the spread against the traditional exit EBITDA multiple method (5.5x) to frame the intrinsic price range.

### 2-Way Price Sensitivity Heatmap (WACC vs. Long-run WTI)

| WACC \ WTI | $55.00 | $60.00 | $65.00 (Base) | $70.00 | $75.00 | $80.00 | $85.00 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| **7.5%** | $152.40 | $158.20 | $164.50 | $171.20 | $178.50 | $186.20 | $194.50 |
| **8.0%** | $145.20 | $150.80 | $156.80 | $163.20 | $170.10 | $177.50 | $185.30 |
| **8.5%** | $138.60 | $143.90 | **$149.60** | $155.80 | $162.40 | $169.40 | $176.90 |
| **9.0%** | $132.50 | $137.60 | $143.10 | $148.90 | $155.20 | $161.90 | $169.00 |
| **9.5%** | $126.90 | $131.80 | $137.00 | $142.60 | $148.60 | $155.00 | $161.80 |
| **10.0%** | $121.70 | $126.40 | $131.40 | $136.80 | $142.50 | $148.60 | $155.20 |

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## 3. Material Risk Factors

1. **Commodity Price Volatility:** EOG is highly sensitive to the global oil price cycle. A sustained shift in the long-run WTI price to **$60.00/bbl** drops the reserve-life intrinsic price to **$143.90 per share** (under an 8.5% WACC), compressing the upside.
2. **Reserve Replacement Efficiency:** Hyperbolic depletion TV assumes EOG continues replacing its reserves efficiently. If F&D costs per Boe rise above **$15.50/Boe** or reserve replacement falls below **100%**, EOG's inventory life will compress, dragging down long-run cash flows.
3. **Capital Allocation Execution:** EOG generates significant Free Cash Flow. If management over-invests in lower-tier acreage or executes share buybacks at elevated valuations instead of paying dividends, the cash return yield to shareholders will suffer.

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## 4. Conclusion

The DCF overlay supports a **Watchlist / Mildly Undervalued** conclusion. The valuation spread is modest and sensitive to commodity assumptions, WACC, and terminal-value method selection. The output should be interpreted as a quality-overlay check, not a standalone long recommendation.