EOG Resources (EOG) Valuation Update - June 7

[dan_s]

I have updated my forecast/valuation model for EOG for the impact of the Encino Partners Acquisition that was announced on May 30th.

EOG closed on June 6 at $114.05.

Since the date the acquisition was announced, 15 energy sector analysts have submitted update price targets to TipRanks that range from $123 to $158. Nine of them rate EOG a BUY and six of them rate it a HOLD. TipRanks' consensus price target is now $138.76.

My current valuation of EOG increases by $3 to $150/share.

EOG did not provide an estimated closing date, so I am assuming that it closes mid-Q3. Post-Closing EOG's production mix will be a bit more "gassy" to 43% crude oil, 33% natural gas and 24% NGLs.

The acquisition will be immediately accretive to operating cash flow, so EOG has raised their quarterly dividend from $0.975 per share to $1.02 per share starting with the October 30th dividend.

Bottomline: EOG does not make bad deals. This acquisition makes EOG's Utica Shale play a more significant core area of operations for them and gives them more exposure to rising natural gas prices. EOG's Q4 natural gas production will be over 2.6 Bcf per day and their NGL production should be over 315,000 bpd. EOG's 2025 production exit rate should be 1,375,000 to 1,400,000 Boepd (~25% YOY growth from Q4 2024 to Q4 2025).