By Sarfaraz A. Khan
NEW YORK (TheStreet) -- Several analysts believe EOG Resources (EOG) , one of the biggest U.S. shale oil producers, could post the largest production growth in its peer group next year, even as shale production slows because of deteriorating crude prices.
In a recent report, Goldman Sachs said it has a "neutral coverage view" on most of the exploration and production stocks -- except for EOG Resources.
Why? The Houston company said in a November presentation it would increase its oil production by 31% in the current year and would continue to deliver double-digit growth through 2017, despite low crude oil prices. EOG shares are actually up for the year to date -- at around $90, by nearly 8%.
Goldman analyst Brian Singer thinks EOG Resources could grow its U.S. oil production by more than 40,000 barrels of oil a day in the final quarter of 2015 from the corresponding period in 2014, more than other oil and gas producers Goldman covers including Pioneer Natural Resources (PXD) , Anadarko Petroleum (APC) and Continental Resources (CLR) .
Singer is not alone. Leo Mariani, analyst at RBC Capital Markets, wrote in a recent report that EOG Resources can continue growing its oil production at an annual rate of 15% to 20% even beyond 2015.
What does the company think? K Leonard, EOG Resources' spokeswoman, told TheStreet CEO Bill Thomas was not available to comment.
However, during EOG's third-quarter conference call last month, Thomas said if oil prices get to $80 a barrel the company will be able to post "double-digit oil growth through 2017 and beyond" while generating sufficient cash flows to fully fund its drilling programs at Texas's Eagle Ford, North Dakota's Bakken and Texas/New Mexico's Delaware Basin that underpin its future growth.
The three plays would generate a minimum 100% after-tax rate of return if WTI were to stay around $80 a barrel, he said. Even if oil falls to $40 a barrel, EOG Resources can still achieve a 10% after-tax rate of return from these regions, Thomas predicted.
Last week, the WTI crude price fell to its lowest levels in five years after OPEC failed to agree on production cuts at its last meeting. Goldman's Singer thinks WTI crude could average in the range of $70 to $75 a barrel in 2015 as U.S. shale producers and OPEC nations adjust their output. The current price is around $68 a barrel, much below the $90 a barrel in the first nine months of this year.
So why are the analysts optimistic? They see EOG's business model as resilient to lower commodity prices. The company has a strong balance sheet with low debt, as seen its debt-to-equity ratio, $1.48 billion in cash reserves and nearly $2 billion in undrawn credit facility. The company also generates more cash from its oil and gas operations than it spends as capital expenditure, which further strengthens its financial health.
EOG is on Goldman's conviction buy list and has a price target of $117, while RBC Capital Markets gave the company an outperform rating and a price target of $105.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.