Current EOG Stock Info

A Look at Valuations

EOG Resources (ticker: EOG) announced yesterday the divestiture of all its assets in Manitoba and certain assets in Alberta in two separate transactions to unidentified buyers that closed November 28 and December 1, 2014, respectively.

The company announced that the net proceeds for the deals totaled $410 million, and that the deal will release $150 million of restricted cash related to future abandonment liabilities on the acreage.

Current production forecast production from the 1.3 million gross acres (1.1 millio...

Analyst Commentary

Barclays Research:

Stock Rating/Industry View: Overweight/Neutral
Price Target: USD 122.00
Price (08-Dec-2014): USD 88.19
Potential Upside/Downside: 38%
Tickers: EOG

EOG announces sale of majority of its Canadian acreage
Last night, EOG revealed it has closed on two separate transactions to sell assets across its Manitoba and Alberta portfolios. The combined transactions involved 1.1 million net acres and approximately 21.6 mmboe of proved reserves (60% of which are natural gas). Current production on the assets is ~7.1 mbpd of oil, 0.6 mbpd of NGLs and 43.5 mmcfpd of natural gas. We estimate 2015 cash flow on the divested assets is ~$150 million. Proceeds from the divestiture will be used for corporate purposes.

$560 million transaction value
EOG will receive roughly $410 million in proceeds from the deal. The sale also frees up approximately $150 million in cash previously earmarked for AROs on the Canadian assets. We expect little to no tax leakage on the proceeds, which are expected to be received during 4Q. The $560 million transaction value represents a ~3.7x 2015E PICF multiple, which compares to EOG’s current multiple of ~5.8x as of the Dec 8 closing share price.

Remains our top Pick
EOG shares have outperformed the U.S. large cap peers by a wide margin since the start of 4Q (down only 14% vs. a 34% decline for the U.S. large cap peers). We expect the strong relative performance will continue as the oil markets seek equilibrium amid the current commodity price volatility. EOG has one of the soundest balance sheets in our coverage with Debt/Cash Flow of less than 0.7x (vs. a peer average of 2.0x). The company also has the most attractive set of drilling opportunities in the U.S. with strong well economics at oil prices ranging as low as $50/bbl WTI. We expect the company to remain active on the drilling front despite the muted outlook for oil prices in the near term; CAPEX will likely remain within cash flow which, assuming $70/bbl WTI in 2015, will decline roughly 10% next year.  

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