EOG Resources Inc. ( EOG ) announced the divestiture of all its assets in Manitoba and certain assets in Alberta in two separate transactions that closed on Nov 28 and Dec 1, respectively.
Per company estimates, approximate proceeds from the divestiture of these Canadian assets were $410 million. As a result of these transactions, about $150 million of restricted cash related to future abandonment liabilities was released. The proceeds and cash will be utilized for general corporate purposes.
The company noted that the current daily production estimate from the divested assets is about 7,050 barrels of crude oil, 580 barrels of natural gas liquids (NGLs) and 43.5 million cubic feet of natural gas. Net proved reserves divested are estimated at 7.7 million barrels of oil, 0.8 million barrels of NGLs and 78.7 billion cubic feet of natural gas. EOG divested 1.3 million gross acres (1.1 million net), 97% of which were in Alberta. Of the approximate 5,800 producing wells sold, 5,255 were natural gas. EOG has retained about 382,200 gross acres (282,100 net) in Alberta, British Columbia and Saskatchewan. The company will continue to maintain an operations' office in Alberta.
One of the major U.S. independent oil and gas exploration and production companies, EOG is proactive in its liquids ventures. The company's increasing interest in oil is appreciable in a favorable price environment. It will be augmented over the long term by its deep focus on major oil and liquids rich plays, along with core natural gas holding and Combo acreage in the Barnett, Leonard and Wolfcamp plays.
However, EOG's results are particularly exposed to fluctuations in the U.S. natural gas markets, since this commodity accounts for almost half of the company's reserves. Infrastructure risk remains as EOG generates production in the high-growth sections of the U.S. In addition, as is the case with all exploration & production companies, EOG's results are vulnerable to historically volatile prices in world energy markets.
EOG Resources currently carries a short-term Zacks Rank #3 (Hold). Investors interested in the oil and gas sector could consider better-ranked stocks like Sandridge Mississippian Trust II ( SDR ), Atlas Pipeline Partners, L.P. ( APL ) and Murphy USA Inc. ( MUSA ). All of these carry a Zacks Rank #1 (Strong Buy).
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