HOUSTON, May 30, 2025
EOG Resources, Inc. (EOG) today announced a definitive agreement with Canada Pension Plan Investment Board (CPP) and Encino Energy under which EOG will acquire Encino Acquisition Partners (EAP or Encino) for $5.6 billion, inclusive of EAP's net debt. EOG currently expects to fund the acquisition through $3.5 billion of debt and $2.1 billion of cash on hand.
"This acquisition combines large, premier acreage positions in the Utica, creating a third foundational play for EOG alongside our Delaware Basin and Eagle Ford assets," said Ezra Y. Yacob, Chairman and Chief Executive Officer of EOG. "Encino's acreage improves the quality and depth of our Utica position, expanding EOG's multi-basin portfolio to more than 12 billion barrels of oil equivalent net resource.
"We are excited to execute on this unique opportunity that is immediately accretive to our per-share metrics and meets our strict criteria for acquisitions - high quality acreage with exploration upside, competitive with our current inventory, gained at an attractive price," continued Yacob. "Our ability to execute on the Encino acquisition without diluting our shareholders will be a textbook example of how EOG utilizes its industry leading balance sheet to take advantage of counter cyclical opportunities to enhance the returns of our business and create long-term value for our shareholders."
Transaction Highlights
• Transforms EOG into a leading Utica E&P – The acquisition of Encino's 675,000 net core acres significantly increases EOG's Utica position to a combined 1,100,000 net acres, representing more than two billion barrels oil equivalent of undeveloped net resource. Pro forma production totals 275,000 barrels of oil equivalent per day creating a leading producer in the Utica shale play.
• Accretive financial metrics – The transaction is immediately accretive to EOG's net asset value as well as all per-share financial metrics. Specifically, the acquisition is accretive on an annualized basis to 2025 EBITDA by 10%, and cash flow from operations and free cash flow by 9%.
• Immediate returns-enhancing benefits: significantly expands EOG's contiguous liquids-rich acreage, adds premium-priced gas exposure, and increases working interest – The acquisition expands EOG's core acreage in the volatile oil window, which averages 65% liquids production, by 235,000 net acres for a combined contiguous position of 485,000 net acres. In the natural gas window, the acquisition adds 330,000 net acres along with existing natural gas production with firm transportation exposed to premium end markets. In the northern acreage, where the company has delivered outstanding well results, EOG increases its existing average working interest by more than 20%.
• Operational expertise and increased scale drive meaningful synergies – EOG expects to generate more than $150 million of synergies in the first year driven by lower capital, operating, and debt financing costs.
• Supports return of capital to shareholders with 5% dividend increase, while maintaining industry leading balance sheet – The acquisition's accretion to free cash flow contributes to EOG's commitment to return cash to shareholders. The Board of Directors today declared a dividend of $1.02 per share on EOG's common stock. The dividend will be payable October 31, 2025, to stockholders of record as of October 17, 2025. The indicated annual rate is $4.08. EOG remains committed to a strong balance sheet and expects the acquisition will have no material impact on its long-term target of less than one times total debt-to-EBITDA ratio at bottom cycle prices of $45 WTI oil.
Details regarding the acquisition's impact to EOG's 2025 capital and volume guidance will be provided after closing, which is expected to occur in the second half of 2025. The acquisition is subject to clearance under the Hart-Scott-Rodino Act and other customary closing conditions.
Conference Call Webcast and Acquisition Presentation
EOG will host a conference call to discuss the acquisition via live audio webcast at 8 a.m. Central time (9 a.m. Eastern time) on Friday, May 30, 2025. Please visit the Investors/Events & Presentations page on the EOG website to access a live webcast of the conference call and related presentation materials. A replay of the webcast will be available on EOG's website for one year.
Advisors
Goldman Sachs & Co. LLC is serving as EOG's exclusive financial advisor, and its affiliate, Goldman Sachs Bank USA, is the sole provider of fully committed financing. Wachtell, Lipton, Rosen & Katz is serving as EOG's lead legal advisor. Akin Gump Strauss Hauer & Feld LLP is also serving as legal counsel to EOG.
EOG Resources to Acquire Encino Acquisition Partners for $ 5.6 B
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Petroleum economist
- Posts: 375
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Petroleum economist
- Posts: 375
- Joined: Wed Aug 23, 2023 7:01 am
- Location: The Netherlands
Re: EOG Resources to Acquire Encino Acquisition Partners for $ 5.6 B
EOG is acquiring in H2 2025 Encino Acquisition Partners with 675,000 acres and 235 K BoE/d in the Utica for $ 5.6 B. The acquisition is to close in H2.
Summary
The acquisition is enhancing the EOG capability to export more gas at a time that gas prices are likely to go up. The costs of the acquisition look reasonable. Reserves and production will increase with 18-20%. The health of balance sheet is not seriously affected. The eps will go up. Shareholder returns should stay at decent levels.
In my 84-company oil and gas ranking, EOG sits in the top 25 at a high 11th position.
Price paid for Encino
The $ 5.6 B for 235 K BoE/d of production equates to 5600/235 = $ 23.8 M/1,000 BoE/d. This is below the normal range of $ 30-50 M/1,000 BoE/d from other acquisitions. It should be remembered that Encino is gas prone and that the less valuable gas will drive down the acquisition price. As such the price paid seems reasonable.
Reserves
• EOG had late 2024 proven reserves of 4,748 M BoE. The proven reserves of Encino are unknown. EOG shared that Encino undeveloped resources could be 1,000 M BoE, but stated that this is not equivalent to proven reserves.
• Assuming that Encino reserves are equivalent to 10 years of 2025 production, proven reserves could be 850 M BoE.
• Combined proven reserves therefor could be up 18% to 5,600-5,750 M BoE, equivalent to a good 11-12 years of production.
• The Encino reserves are located in the eastern, gas prone side of the Utica and thus are gas dominated. Fluids are 50% gas, 30% NGL and 20% oil. (See adjacent sketch).
• The EOG reserves in the Utica are located on the western side and are more liquid prone with 40% oil, 35% NGL and 30% gas.
• The impact of the Encino acquisition on EOG overall is the most substantial on the EOG gas reserves (+28%). NGL reserves will grow with +18% and oil reserves with only +9%.
• EOG has seen a good reserves replacement in the past Encino also looks to have a good reserves replacement potential. The reserves and the RRR combined allow a growth of production.
Production
• EOG is only producing 40 K BoE/d in the Utica. Encino with 235 K BoE/d is thus making the Uitica production an order of magnitude larger.
• EOG overall is producing in Q2 at a rate of 1,090-1,130 K BoE/d. Encino will be adding 235 K BoE/d (=20%) to this for a combined production of 1,325-1,365 K BoE/d. EOG has not yet provided an overall production guidance for the combination.
• With the ample reserves and a high RRR production can increase to 1.510-1.590 K BoE/d in 2029.
• The biggest increase in production from Encino will be in the gas - gas production can increase with 28% from 250-315 b scfe/d.
• The increase in oil production is limited to 8% from 515 K bbl/d to 560 K bbl/d.
• The gas share in the overall fluids increase from 32% to 36%. The oil share will fall from 40% to 35%.
Balance sheet
• EOG had a solid balance sheet In Q1 2025. Cash and cash equivalents were $ 6.6 B and long-term debt was $ 4.5 B.
• EOG will pay for Encino with $ 5.6 B cash. The $ 5.6 B cash originates for $ 2.1 B from cash at hand and for $ 3.5 B from new loans.
• EOG repaid in April $ 500 M of the debt.
• Cash thus will reduce to $ 3.7 B and the long-term debt will increase to $ 7.7 B.
• Despite the increased debt the balance sheet remains healthy.
• The equity ratio (=equity/balance sheet total) will fall from 62.8% to a still good 54.4%.
• The debt/EBITDA ratio will increase a bit but towards late 2025 still should be a good 0.48-0.53.
• After the acquisition the balance sheet is still healthy and allows generous shareholder returns.
Profitability
• EOG is a very profitable company and the Encino acquisition will not change this.
• EOG targets $ 150 M in synergies, both in capex (well cost) and opex, as well as in well productivity.
• With WTI = $ 62.50/bbl, I expect that after the closure of the acquisition the EOG 2025 eps to increase with $ 0.35 from $ 11,27 to $ 11,62. The PE (10.7) is medium.
Shareholder returns
• EOG announced an increase in the quarterly dividend from $ 0.975 to $ 1.02.
• EOG bought back shares in Q1 for $ 778 M. With less cash at hand, more loans and lower oil prices I expect this to fall back to $ 300 M/quarter,
• Total 2025 returns can be a good 6.2%, to increase in the years thereafter.
Conclusions
The acquisition of Encino looks like a good deal.
The acquisition is enhancing the EOG capability to export more gas at a time that gas prices are likely to go up. The costs of the acquisition look reasonable. Reserves and production will increase with 18-20%. The health of balance sheet is not seriously affected. The eps will go up. Shareholder returns should stay at decent levels.
In my 84-company oil and gas ranking, EOG sits in the top 25 at a high 11th position.
Summary
The acquisition is enhancing the EOG capability to export more gas at a time that gas prices are likely to go up. The costs of the acquisition look reasonable. Reserves and production will increase with 18-20%. The health of balance sheet is not seriously affected. The eps will go up. Shareholder returns should stay at decent levels.
In my 84-company oil and gas ranking, EOG sits in the top 25 at a high 11th position.
Price paid for Encino
The $ 5.6 B for 235 K BoE/d of production equates to 5600/235 = $ 23.8 M/1,000 BoE/d. This is below the normal range of $ 30-50 M/1,000 BoE/d from other acquisitions. It should be remembered that Encino is gas prone and that the less valuable gas will drive down the acquisition price. As such the price paid seems reasonable.
Reserves
• EOG had late 2024 proven reserves of 4,748 M BoE. The proven reserves of Encino are unknown. EOG shared that Encino undeveloped resources could be 1,000 M BoE, but stated that this is not equivalent to proven reserves.
• Assuming that Encino reserves are equivalent to 10 years of 2025 production, proven reserves could be 850 M BoE.
• Combined proven reserves therefor could be up 18% to 5,600-5,750 M BoE, equivalent to a good 11-12 years of production.
• The Encino reserves are located in the eastern, gas prone side of the Utica and thus are gas dominated. Fluids are 50% gas, 30% NGL and 20% oil. (See adjacent sketch).
• The EOG reserves in the Utica are located on the western side and are more liquid prone with 40% oil, 35% NGL and 30% gas.
• The impact of the Encino acquisition on EOG overall is the most substantial on the EOG gas reserves (+28%). NGL reserves will grow with +18% and oil reserves with only +9%.
• EOG has seen a good reserves replacement in the past Encino also looks to have a good reserves replacement potential. The reserves and the RRR combined allow a growth of production.
- EOG - Encino - Unita map.jpg (76.5 KiB) Viewed 150 times
• EOG is only producing 40 K BoE/d in the Utica. Encino with 235 K BoE/d is thus making the Uitica production an order of magnitude larger.
• EOG overall is producing in Q2 at a rate of 1,090-1,130 K BoE/d. Encino will be adding 235 K BoE/d (=20%) to this for a combined production of 1,325-1,365 K BoE/d. EOG has not yet provided an overall production guidance for the combination.
• With the ample reserves and a high RRR production can increase to 1.510-1.590 K BoE/d in 2029.
• The biggest increase in production from Encino will be in the gas - gas production can increase with 28% from 250-315 b scfe/d.
• The increase in oil production is limited to 8% from 515 K bbl/d to 560 K bbl/d.
• The gas share in the overall fluids increase from 32% to 36%. The oil share will fall from 40% to 35%.
Balance sheet
• EOG had a solid balance sheet In Q1 2025. Cash and cash equivalents were $ 6.6 B and long-term debt was $ 4.5 B.
• EOG will pay for Encino with $ 5.6 B cash. The $ 5.6 B cash originates for $ 2.1 B from cash at hand and for $ 3.5 B from new loans.
• EOG repaid in April $ 500 M of the debt.
• Cash thus will reduce to $ 3.7 B and the long-term debt will increase to $ 7.7 B.
• Despite the increased debt the balance sheet remains healthy.
• The equity ratio (=equity/balance sheet total) will fall from 62.8% to a still good 54.4%.
• The debt/EBITDA ratio will increase a bit but towards late 2025 still should be a good 0.48-0.53.
• After the acquisition the balance sheet is still healthy and allows generous shareholder returns.
Profitability
• EOG is a very profitable company and the Encino acquisition will not change this.
• EOG targets $ 150 M in synergies, both in capex (well cost) and opex, as well as in well productivity.
• With WTI = $ 62.50/bbl, I expect that after the closure of the acquisition the EOG 2025 eps to increase with $ 0.35 from $ 11,27 to $ 11,62. The PE (10.7) is medium.
Shareholder returns
• EOG announced an increase in the quarterly dividend from $ 0.975 to $ 1.02.
• EOG bought back shares in Q1 for $ 778 M. With less cash at hand, more loans and lower oil prices I expect this to fall back to $ 300 M/quarter,
• Total 2025 returns can be a good 6.2%, to increase in the years thereafter.
Conclusions
The acquisition of Encino looks like a good deal.
The acquisition is enhancing the EOG capability to export more gas at a time that gas prices are likely to go up. The costs of the acquisition look reasonable. Reserves and production will increase with 18-20%. The health of balance sheet is not seriously affected. The eps will go up. Shareholder returns should stay at decent levels.
In my 84-company oil and gas ranking, EOG sits in the top 25 at a high 11th position.
Last edited by Petroleum economist on Sat May 31, 2025 12:21 pm, edited 1 time in total.
Harry
Re: EOG Resources to Acquire Encino Acquisition Partners for $ 5.6 B
I like the acquisition because it increases EOG's exposure to rising natural gas and NGL prices.
TipRanks on 5-31-2025: "In the last 3 months, 24 ranked analysts set 12-month price targets for EOG. The average price target among the analysts is $138.05."
EOG closed at $108.57 on May 30.
5 of the analysts updated their price targets on May 30 with an average of $138.40 ($152 to $123).
My valuation prior to this accretive acquisition was $147.
I will be taking a few days off (June 1-3) and I will update my forecast/valuation model for EOG after I get back.
TipRanks on 5-31-2025: "In the last 3 months, 24 ranked analysts set 12-month price targets for EOG. The average price target among the analysts is $138.05."
EOG closed at $108.57 on May 30.
5 of the analysts updated their price targets on May 30 with an average of $138.40 ($152 to $123).
My valuation prior to this accretive acquisition was $147.
I will be taking a few days off (June 1-3) and I will update my forecast/valuation model for EOG after I get back.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group