EOG to expand in Utica with $5.6bn Encino acquisition

EOG Resources announced on May 30 that it had struck a deal to acquire Encino Acquisition Partners from the Canada Pension Plan Investment Board (CPP Investments) and Encino Energy for $5.6bn. The acquisition, which is inclusive of Encino’s net debt, will be funded through $3.5bn of debt and $2.1bn of cash on hand.

Encino operates in Ohio’s Utica shale across 675,000 core net acres (2,732 square km), where its 2025 production is estimated at 235,000 barrels of oil equivalent per day. The company has a total undeveloped net resource estimated at over 1bn boe.

EOG said the acquisition would increase its Utica position to 1.1mn net acres (4,452 square km), more than 2bn boe of undeveloped net resource and output of 275,000 boepd, turning it into a “leading” producer in the play. Specifically, the acquisition adds 235,000 net acres (951 square km) to EOG's core acreage in the volatile oil window, which averages 65% liquids production, for a combined contiguous position of 485,000 net acres (1,963 square km). In the natural gas window, the acquisition adds 330,000 net acres (1,335.5 square km) and existing gas production with firm transportation capacity. In the northern acreage, EOG will see its existing average working interest increase by more than 20%.

"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," stated EOG’s chairman and CEO, Ezra Yacob. "Encino's acreage improves the quality and depth of our Utica position, expanding EOG's multi-basin portfolio to more than 12bn 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," Yacob continued. "Our ability to execute on the Encino acquisition without diluting our shareholders will be a textbook example of how EOG utilises 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."

Encino is one of the largest privately owned oil and gas companies in the US. Data analytics firm Enverus’ principal analyst, Andrew Dittmar, was quoted by Reuters as saying the acquisition looked like a “beneficial move for EOG after nearly a decade without any major acquisition”, offering a lower-cost entry into undeveloped areas compared to the Permian Basin.

Dittmar added that while other shale players had pursued major acquisitions, EOG had focused on organic growth, which he described as a risky strategy as high-quality undrilled inventory became scarce amid industry consolidation.