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Eagle Ford driller EOG's stock tumbles despite earnings win as budget expands

EOG Resources Inc. easily beat earnings expectations for the fourth quarter of 2017 thanks largely to the new tax reform legislation, but plans to hike the capital expenditures budget sent shares spinning downward Feb. 28.

EOG reported net income of $4.2 billion for the fourth quarter, including one-time deductions and other accounting changes allowed by the new tax law. The company's adjusted net income of $401 million, or 69 cents per share, topped the S&P Global Market Intelligence consensus estimate for a profit of 55 cents per share.

The improvements and quarterly profit did not do enough to impress investors, and the oil and gas producer's stock was down 4.6% at $102.03 in late afternoon trading Feb. 28 on the NYSE.

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While company officials mentioned a commitment to "capital discipline" during their earnings call Feb. 28, EOG is planning to increase its capital budget by a considerable amount from the $4.1 billion spent in 2017.

"In 2018, we expect to deliver 18% oil growth, 16% total equivalent growth, with a $5.6 billion capital program," COO Lloyd Helms Jr. said. "Our 2018 capital plan includes tests of several new plays [and] an expansion of our more recently announced emerging plays."

EOG's primary focus will be on the Eagle Ford Shale, where the company said about 99% of its 582,000-net-acre position is held by production. The majority of its oil production increase will come from the play, officials said.

"Well cost in the Eagle Ford continued to decrease, averaging just $4.5 million for a 5,300-foot lateral. Lower-cost wells on the laterals and precision targeting are driving increased well productivity and led to the addition of 500 net premium locations, more than two times the number completed in 2017," Executive Vice President Ezra Yacob said. "We expect to make additional operational improvements in 2018 and plan to complete 260 net wells, targeting a record well cost of $4.3 million per well."