EOG's Utica Deal Reflects Solid Gas Demand: EQT, AR Stocks to Gain?

Deal-making in the U.S. shale patches is once again drawing attention in the oil and gas sector — this time in the Utica Shale play, where EOG Resources EOG has made headlines by agreeing to expand its footprint. Now, the billion-dollar question is: Does Utica’s stealing the spotlight signal a robust outlook for North American gas demand? And can EQT Corporation EQT and Antero Resources Corporation AR capitalize on the mounting interest in natural gas?

EOG to Boost Footprint in Gas-Rich Utica

To bolster its position in the natural gas-rich Utica shale play, EOG Resources has agreed to acquire U.S. oil and gas firm Encino Acquisition Partners for $5.6 billion. From only 40 thousand barrels of oil equivalent per day (MBoE/D) in Utica, EOG will be boosting its production to 275 MBoE/D once the acquisition closes, likely in the second half of 2025. The production will become more gas-heavy – natural gas will comprise 45% of the post-acquisition production, which aligns with the mounting demand for natural gas. In other words, it can be said that EOG Resources is foreseeing a robust environment for natural gas demand. For more details, read our article: EOG Resources to Acquire Encino for $5.6B & Expand in Utica Shale.

Natural Gas Price to Jump This Year

In its latest short-term energy outlook, the U.S. Energy Information Administration (“EIA”) forecasted this year's natural gas spot price at $4.10 per million BTU, significantly higher than $2.20 in the past year. Rising exports of LNG from the United States primarily contributed to the commodity prices. The electric power sector also requires more natural gas, aiding the pricing environment.

Gas Explorers to Gain? EQT, AR

The strong North American gas demand, highlighted by EOG’s recent $5.6 billion acquisition deal and supported by a rising commodity price environment, signals a favorable backdrop for natural gas explorers and producers. Investors should keep an eye on two upstream energy majors: EQT Corporation and Antero Resources. Both stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Deep Inventory & Rising Prices Position EQT for Growth

EQT Corporation is among the leading natural gas producers in the United States, having a strong footprint in the prolific Appalachian Basin. In its first quarter transcript, EQT mentioned that it has sufficient premium sites in the Marcellus shale play that will enable it to keep drilling profitably for at least a decade. In addition, the upstream energy player owns key locations in the Utica shale that could support seven more years of drilling. The favorable natural gas prices are thus highly favorable for EQT.

Limited Hedging Preserves AR’s Upside in Bullish Gas Market

Antero Resources is among the top five producers of natural gas and natural gas liquids in the United States. Notably, AR has sufficient proven key drilling locations that will help it to keep producing for at least two decades. AR, having a strong balance sheet, is thus well-positioned to capitalize on the favorable natural gas prices. Notably, AR is limiting its downside risk slightly while keeping most of its production unhedged to profit from the promising gas prices.

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This article originally published on Zacks Investment Research (zacks.com).

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