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EOG Resources Is How You Play the U.S. Energy Recovery

Stocks in this article: EOG APA

NEW YORK (TheStreet) -- There may be environmental safety concerns regarding the Keystone XL pipeline project but not  all energy-related companies are risky assets.

Take EOG Resources (EOG). It is far from a bargain at a P/E of 25 but this oil producer is making tons of money while steadily growing its production. Even more impressive is the management, which has established a strong track record of solid decision-making and shareholder returns.

At around $107, EOG stock is up 27% for the year to date, almost tripling the energy sector's 11% gain. Investors have done well. But it's not yet time to cash in.

Read More: Here Is Where Kinder Morgan's Capital Would Do the Most Good

Even with its P/E of 25 -- though higher than the industry average of 19 -- EOG is growing revenue at almost than two times the industry rate.

All told, EOG remains one of the best-kept secrets on the market -- with a management team that deserves more recognition. With the stock trading at just 16 times 2015 estimates of $6.44, these shares can still make investors money. On the basis of growing cash flow and oil production, EOG should reach $120 in the next 12 months.

In the most recent quarter, revenue jumped 9% year over year, while earnings advanced roughly 5%. From some context, Apache (APA), which is always presumed as better managed, just posted a 18% year-over-year revenue decline (consolidated).

The company's success can be linked back to management's focus on becoming a pure-play oil producer. Requests made for additional details to EOG representatives were not immediately returned.

Still, this decision was a solid move since EOG will have more growth opportunities than if it remained committed solely to natural gas. There are already too many players in that arena, and the margins on natural gas are not as impressive.

Read More: How Will Schlumberger (SLB) Stock React To Economic Sanctions Against Russia?

What's more, there's EOG has extensive exposure in key Bakken and Eagle Ford shale areas. Management's commitment to production can only increase higher profitability. The only concern is the extent to which shale production will remain at robust levels.

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