EOG Resources EOG has entered into a definitive agreement to acquire Encino Acquisition Partners ("EAP") from CPP Investments and Encino Energy for $5.6 billion, including net debt. The acquisition significantly scales EOG’s presence in the Utica shale, creating what CEO Ezra Y. Yacob calls the company’s “third foundational play,” alongside the Delaware Basin and Eagle Ford.
The transaction will be funded through $3.5 billion in new debt and $2.1 billion of existing cash. Post-deal, EOG’s total Utica position will expand to 1.1 million net acres, with more than 2 billion barrels of oil equivalent in undeveloped net resources. Pro forma production will reach 275,000 barrels of oil equivalent per day, positioning EOG as a leading producer in the Utica play.
EOG Enhances Scale and Returns in Liquid-Rich Acreage
Encino brings 675,000 net core acres to the table, notably including 235,000 net acres in the liquid-rich volatile oil window, averaging 65% liquid production. The acquisition also boosts EOG’s exposure to premium-priced natural gas markets and increases the company’s average working interest in its most productive northern acreage by more than 20%.
EOG expects more than $150 million in first-year synergies driven by capital efficiencies, lower operating costs and favorable debt financing. Management highlighted the transaction's compatibility with EOG's existing high-quality inventory and exploration upside.
Acquisition Immediately Accretive to EOG’s Financials
The deal is immediately accretive to EOG’s net asset value and all per-share metrics. It is projected to boost 2025 EBITDA by 10%, and both cash flow from operations and free cash flow by 9%. Yacob emphasized the accretive nature of the deal and praised EOG’s ability to execute the acquisition without shareholder dilution, calling it a “textbook example” of countercyclical capital deployment.
The transaction is expected to close in the second half of 2025, pending regulatory approval and customary closing conditions. EOG will update its 2025 capital and volume guidance following the closing.
EOG’s Zacks Rank & Key Picks
EOG currently carries a Zack Rank #4 (Sell).
Investors interested in the energy sector may look at some better-ranked stocks like Subsea 7 S.A. SUBCY, Energy Transfer LP ET and RPC Inc. RES. Subsea 7 presently sports a Zacks Rank #1 (Strong Buy), while Energy Transfer and RPC carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Subsea 7 helps build underwater oil and gas fields. It is a top player in the Oil and Gas Equipment and Services market, which is expected to grow as oil and gas production moves further offshore.
The Zacks Consensus Estimate for SUBCY’s 2025 EPS is pegged at $1.31. The company has a Value Score of A.
Energy Transfer is poised to benefit from long-term fee-based commitments. It is also focused on expanding operations through organic and inorganic initiatives. The firm is looking for solutions to meet growing energy demands from additional demand centers through its pipeline network. Energy Transfer’s systematic investments should boost its total fractionation capacity at Mont Belvieu and raise its top line.
The Zacks Consensus Estimate for ET’s 2025 EPS is pegged at $1.44. The company has a Value Score of A.
RPC generates strong and stable revenues through a diverse range of oilfield services, including pressure pumping, coiled tubing and rental tools. The company is strongly committed to returning value to shareholders through consistent dividends and share buybacks. RPC’s current dividend yield is higher than that of the composite stocks in the industry. Its new Tier IV dual-fuel fleet has boosted profits, with plans to further expand high-efficiency equipment to enhance operational capabilities.
The Zacks Consensus Estimate for RES’ 2025 EPS is pegged at 38 cents. The company has a Value Score of A.
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EOG Resources, Inc. (EOG): Free Stock Analysis Report Energy Transfer LP (ET): Free Stock Analysis Report RPC, Inc. (RES): Free Stock Analysis Report Subsea 7 SA (SUBCY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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