EOG Resources Inc. (NYSE:EOG)

The financial data reveals notable fluctuations and trends over the five-year period in key operational efficiency metrics.

Inventory Turnover

The inventory turnover ratio shows a peak in 2016 at 5.18, indicating a faster turnover of inventory compared to other years. It generally declines after that, reaching its lowest at 2.87 in 2018 before slightly increasing to 3.39 in 2019, signaling a slower inventory movement in the latter years.

Receivables Turnover

The receivables turnover ratio experienced a decline from 9.41 in 2015 to its lowest point of 6.29 in 2016, suggesting a slower collection of receivables. However, it improved somewhat in the following years, peaking at 9.02 in 2018 before a minor decrease to 8.68 in 2019, implying better efficiency in collecting receivables over most of the period.

Payables Turnover

The payables turnover ratio steadily declined from 1.48 in 2015 to about 1.05 in 2017 and remained relatively stable after that, indicating that the company took longer to pay its suppliers over time.

Working Capital Turnover

The working capital turnover demonstrates significant variability, with a sharp decline in 2016 to 5.01, followed by a surge in 2017 to 20.25, a dip to 13 in 2018, and a subsequent increase to 22.1 in 2019. This volatility could reflect changes in the efficiency of using working capital to generate sales.

Average Inventory Processing Period

This metric decreased significantly in 2016 to 70 days but rose sharply to 127 days in 2018 before slightly declining to 108 days in 2019. The fluctuating processing periods reflect inconsistency in inventory management efficiency over the years.

Average Receivable Collection Period

There was an increase in the collection period from 39 days in 2015 to 58 days in 2016, followed by a gradual decrease to 40 days in 2018 and a slight increase to 42 days in 2019. This pattern indicates initial delays in collecting receivables, followed by improved collection efforts.

Operating Cycle

The operating cycle remained relatively long throughout the period, spanning from 128 to 167 days. It peaked in 2018 at 167 days, suggesting that the overall time to convert resources into cash lengthened during that year before shortening slightly in 2019.

Average Payables Payment Period

This period lengthened significantly from 247 days in 2015 to 349 days in 2017 and remained above 330 days afterward, indicating that the company extended its payment terms or delayed payments to suppliers increasingly over the years.

Cash Conversion Cycle

The cash conversion cycle is consistently negative across all years, ranging from -108 days in 2015 to a low of -206 days in 2017 before slightly rising to -190 days in 2019. A negative cash conversion cycle suggests that the company collects cash from sales before it needs to pay its suppliers, demonstrating strong liquidity management despite the fluctuations.

Cost of Operating Revenues

The cost of operating revenues experienced a decline from 2015 to 2016, falling from approximately 2,177,757 thousand USD to 1,814,459 thousand USD. However, from 2016 onward, this figure demonstrated an overall upward trend, increasing to 1,933,974 thousand USD in 2017, 2,466,527 thousand USD in 2018, and reaching 2,604,395 thousand USD by 2019. This trajectory indicates growing operational expenses over the latter part of the period, with a notable rebound after 2016.

Inventories

Inventories showed significant fluctuations during the period. Initially, there was a marked decrease from 598,935 thousand USD in 2015 to 350,017 thousand USD in 2016. Subsequent years saw an increase, with inventories rising to 483,865 thousand USD in 2017, peaking at 859,359 thousand USD in 2018, before declining again to 767,297 thousand USD in 2019. These variations suggest changes in stock management or supply chain dynamics, with a particularly large buildup in 2018.

Inventory Turnover Ratio

The inventory turnover ratio follows an inverse trend relative to inventory levels. Starting at 3.64 in 2015, the ratio increased significantly to 5.18 in 2016, indicating more efficient inventory liquidation during that year. Subsequently, the ratio declined over the next three years to 4 in 2017, 2.87 in 2018, and 3.39 in 2019. The decline after 2016 corresponds with the substantial inventory buildup, suggesting a slower movement or increased holding period of inventory.

Operating Revenues and Other

The operating revenues and other income show a fluctuating but overall positive trend over the period from 2015 to 2019.

Initially, there is a decline from approximately 8.76 billion in 2015 to around 7.65 billion in 2016. Following this drop, a significant increase occurs, with revenues rising sharply to over 11.2 billion in 2017, continuing upward to about 17.3 billion in 2018 and slightly increasing further to nearly 17.4 billion in 2019. This pattern indicates recovery and growth after the initial decline in 2016.

Accounts Receivable, Net

Accounts receivable, net, have steadily increased throughout the examined years.

The balances rise consistently from 930.6 million in 2015 to 1.22 billion in 2016, then to almost 1.6 billion in 2017, about 1.92 billion in 2018, and finally reaching around 2 billion in 2019. This steady growth suggests an expanding volume of credit sales or longer collection periods over time.

Receivables Turnover Ratio

The receivables turnover ratio shows variability over the period, reflecting changes in the efficiency of collecting receivables.

The ratio drops from 9.41 in 2015 to a low of 6.29 in 2016, suggesting a significant slowdown in collection efficiency that year. A modest recovery occurs in 2017 with the ratio increasing to 7.02.

In 2018, the ratio improves substantially to 9.02, indicating a return towards more efficient receivable management. However, it slightly decreases again to 8.68 in 2019, though remaining at a relatively high level compared to earlier years.

Cost of Operating Revenues

The cost of operating revenues showed a declining trend from 2015 to 2016, decreasing from approximately $2.18 billion to $1.81 billion. However, in the subsequent years, the costs increased consistently, reaching about $2.6 billion by the end of 2019. This pattern suggests an initial effort in cost reduction followed by a steady rise, possibly linked to increased operational activities or higher input costs.

Accounts Payable

Accounts payable rose steadily throughout the period under review, starting at around $1.47 billion in 2015 and reaching nearly $2.43 billion by 2019. This continuous increase indicates that the company expanded its liabilities towards suppliers or creditors over these years, which may reflect growing operations or changes in payment terms.

Payables Turnover Ratio

The payables turnover ratio declined markedly from 1.48 in 2015 to 1.05 in 2017, signaling a lengthening in the average payment period to suppliers or a slower payment process. After 2017, the ratio showed slight fluctuations but remained close to 1.1, implying a relatively stable but slower payment cycle compared to the initial year.

Working Capital

The working capital exhibited significant fluctuations throughout the periods under review. It more than doubled from approximately $773 million at the end of 2015 to around $1.53 billion at the end of 2016. However, it sharply declined to about $554 million in 2017, before recovering to nearly $1.33 billion in 2018, and then falling again to approximately $786 million in 2019. This volatility indicates varying levels of short-term liquidity management and operational funding requirements over the years.

Operating Revenues and Other

Operating revenues demonstrated an overall upward trend, rising from about $8.76 billion in 2015 to $17.38 billion by 2019. There was a notable dip in 2016 where revenues decreased to approximately $7.65 billion. Subsequent years saw substantial increases, particularly from 2017 onwards, with revenues more than doubling to $11.21 billion in 2017 and then nearly reaching $17.38 billion by 2019. This growth suggests improved business performance and possibly favorable market conditions or expansion strategies during these periods.

Working Capital Turnover Ratio

The working capital turnover ratio, which measures the efficiency of using working capital to generate revenues, reflected considerable variability. It decreased from 11.33 in 2015 to 5.01 in 2016, coinciding with the increase in working capital and decline in revenues that year. In 2017, there was a sharp increase to 20.25, indicating more efficient utilization of working capital corresponding with a rise in revenues despite a reduction in working capital. The ratio then dropped to 13.00 in 2018 before rising again to 22.10 in 2019, reinforcing the trend of fluctuating efficiency but generally maintaining high levels by the end of the period.

Summary of Trends

The data reveals a pattern of volatility in working capital levels juxtaposed with a generally strong upward trajectory in operating revenues. The working capital turnover ratio fluctuated accordingly, highlighting periods of both efficiency and relative inefficiency in the management of working capital relative to revenue generation. These movements suggest the company experienced varying business and operational conditions, potentially adjusting strategies to optimize resource use and revenue growth during these years.

Inventory Turnover

The inventory turnover ratio experienced fluctuations over the five-year period. Starting at 3.64 in 2015, it increased significantly to 5.18 in 2016, indicating an improvement in inventory management or sales efficiency that year. However, in subsequent years, the ratio declined, falling to 4.00 in 2017, then further dropping to 2.87 in 2018, the lowest point in the observed period. In 2019, the ratio showed a moderate recovery to 3.39, although it remained below the levels seen in 2015 and 2016. Overall, the trend reveals volatility with an initial improvement followed by a decline and a modest rebound.

Average Inventory Processing Period

This metric exhibits an inverse relationship with inventory turnover, as expected. It decreased from 100 days in 2015 to 70 days in 2016, aligning with the peak in inventory turnover that year. From 2017 onward, the average inventory processing period increased, reaching 91 days in 2017 and peaking at 127 days in 2018. This rise corresponds to the period of declining turnover ratios. In 2019, it decreased slightly to 108 days but remained well above the levels seen in 2015 and 2016. The overall pattern suggests lengthening inventory holding times after 2016, which may point to slower inventory movement or lower sales efficiency during those years.

The receivables turnover ratio exhibited fluctuations over the five-year period. Initially, the ratio was relatively high at 9.41 in 2015, indicating efficient management of receivables and strong collection processes. This ratio declined notably to 6.29 in 2016, which suggests a slowdown in the company's ability to collect receivables promptly. Following this dip, it showed a recovery trend, rising to 7.02 in 2017 and further improving to 9.02 in 2018, before slightly declining to 8.68 in 2019.

Correspondingly, the average receivable collection period, expressed in days, displayed an inverse pattern to the receivables turnover ratio, which is a typical relationship. The collection period increased from 39 days in 2015 to a peak of 58 days in 2016, aligning with the decline in turnover ratio that year, signaling slower collections. From 2017 onwards, the collection period shortened to 52 days, then sharply to 40 days in 2018, and slightly increased again to 42 days in 2019, reflecting improved collection efficiency in the latter years compared to the mid-period.

Overall, the changes indicate a period of reduced collection efficiency in 2016, followed by a recovery to levels close to or slightly below those observed at the beginning of the period. The trends suggest a return to stronger receivables management performance in the last two years covered, which may positively impact cash flow and working capital management.

Average Inventory Processing Period

The average inventory processing period exhibits variability over the observed years. It decreases notably from 100 days in 2015 to 70 days in 2016, indicating improved efficiency in inventory turnover. However, this period increases again in the following years, reaching a peak of 127 days in 2018 before slightly declining to 108 days in 2019. Overall, the trend suggests fluctuation in inventory management efficiency, with a general increase after 2016.

Average Receivable Collection Period

The average receivable collection period shows an increase from 39 days in 2015 to 58 days in 2016, indicating customers took longer to settle their accounts in that year. Thereafter, the collection period declines to 52 days in 2017 and further improves to 40 days in 2018. In 2019, a modest increase to 42 days occurs. This pattern suggests an initial lengthening of receivables followed by efforts to enhance collection efficiency that largely stabilize by 2019.

Operating Cycle

The operating cycle, which represents the total time taken from inventory processing to receivables collection, reflects the combined effect of the inventory and receivables periods. The cycle declines from 139 days in 2015 to 128 days in 2016, aligning with the shorter inventory processing period in 2016. However, it then increases sharply to 143 days in 2017 and peaks at 167 days in 2018, mirroring the extended inventory period in these years despite receivables improving. In 2019, the operating cycle decreases to 150 days but remains significantly higher than in 2015 and 2016, indicating an overall elongation of the operating cycle in recent years.

General Insights

Overall, the data indicate that the company experienced fluctuations in operational efficiency over the five-year period. While inventory was managed more efficiently in 2016, subsequent years saw longer holding periods. Receivables collection also varied, with a peak delay in 2016 but improvement afterward. The operating cycle lengthened notably after 2016, suggesting that working capital was tied up for longer periods, which could impact liquidity and operational responsiveness.

Payables Turnover

The payables turnover ratio exhibits a declining trend from 1.48 in 2015 to 1.07 in 2019. This decrease indicates that the company is paying off its payables less frequently over the years, suggesting a slower turnover of liabilities with suppliers and creditors.

Average Payables Payment Period

The average payables payment period, measured in number of days, increases from 247 days in 2015 to 340 days in 2019. This rising trend corroborates the payables turnover data, indicating the company is taking longer to settle its payables over time.

Overall Analysis

There is a clear inverse relationship between the payables turnover ratio and the average payment period, as expected. The lengthening payment period and the reduced turnover ratio together suggest that the company is extending its payment cycles, which may impact supplier relationships and cash flow management. This pattern may reflect a strategic shift or changing financial conditions influencing payables management.

Average inventory processing period

The average inventory processing period exhibits variability over the years analyzed. It decreased significantly from 100 days in 2015 to 70 days in 2016, indicating a faster inventory turnover in that year. However, it then increased to 91 days in 2017, followed by a notable rise to 127 days in 2018. In 2019, it decreased moderately to 108 days. Overall, the trend suggests fluctuations with a peak inventory processing duration in 2018, possibly reflecting changes in inventory management or product demand during this period.

Average receivable collection period

The average receivable collection period experienced an increase from 39 days in 2015 to 58 days in 2016, suggesting a longer time to collect receivables. It then declined to 52 days in 2017 and further decreased to 40 days in 2018. In 2019, the period slightly increased to 42 days. This pattern indicates some improvement in receivables collection efficiency after 2016, although the collection period remains somewhat higher than the initial 2015 level.

Average payables payment period

The average payables payment period shows a consistent upward trend across the period analyzed. It increased from 247 days in 2015 to 304 days in 2016, continuing upward to 349 days in 2017. It experienced a slight decline to 331 days in 2018 but rose again to 340 days in 2019. This indicates a general tendency to extend payment terms to suppliers, potentially as a cash management strategy or due to changes in supplier agreements.

Cash conversion cycle

The cash conversion cycle remains negative throughout the entire period, indicating that the company receives cash from sales before it needs to pay its suppliers. The cycle decreased from -108 days in 2015 to -176 days in 2016 and further to -206 days in 2017, signifying improved cash flow efficiency. Although it narrowed to -164 days in 2018, it contracted again to -190 days in 2019. Despite some fluctuations, the negative cash conversion cycle suggests effective management of working capital, with the company maintaining a strong liquidity position by effectively leveraging its payable period relative to inventory and receivable durations.