EOG Resources, Inc. (EOG) today announced the signing of a purchase and sale agreement with Newfield Exploration Company (NFX) for approximately 50,000 net acres in Bradford County, Pennsylvania. The transaction, valued at $405 million, is expected to close by year-end 2010.
Representing less than one-half of one percent of EOG's total North American production, this Marcellus Shale acreage in northeastern Pennsylvania includes five producing natural gas wells with 7 million cubic feet per day of gross production. Following the close of the divestiture, EOG retains approximately 170,000 net acres in the Marcellus Shale in northwestern Pennsylvania.
"The sale of this Marcellus acreage is a part of EOG's previously announced tactical plan to sell certain producing and non-producing natural gas assets in North America. These sales will add liquidity to partially fund EOG's liquids weighted capital expenditure program," said Mark G. Papa, Chairman and Chief Executive Officer.
This follows the company's announced plan to become more liquids (oil/NGL) focused. From a recent presentation:
There are many willing buyers of shale property out there (as evidenced by Chevron's purchase of Atlas earlier this month), but given where nat gas is pricing, it's not the best market to be a seller. I have to think that these wells are slowing (or near the "mature" phase of the shale life) in that EOG continues to pursue Haynesville acerage (I was in East Texas a couple months back and their name was everywhere).
Ultimately, I see the company's action as following the strategy they have outlined. They are intent on becoming a liquids focused company (horizontally focused) and will continue to use asset sales to help "plug the hole" between capex and cash flow.As the company is very conservatively levered at this jucture, would expect them to continue to add debt as more acreage is mapped and drilled.
EOG 4.40% '20 at 90/80 is somewhat fully valued here. Maybe a couple left on the upside. With this in mind, I am inclined to hold the name (if it is already owned) but not add.
Disclosure: No positions
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