Tuesday, May 10, 2011

EOG Resources sells $647 million worth assets in US. Another $400 million worth assets up for sale. Where could it sell?

EOG Chief Executive Officer Mark Papa disclosed that EOG had sold $647 million worth assets in its goal of divesting $1 billion worth of assets this year. He added saying, “In the first quarter, we received $260 million from asset sales. Since March 31, we've received an additional $387 million of proceeds and we're actively working on an incremental $400 million of sales.”

The sale that was subsequent to the first quarter included all mature gas-producing properties in South Texas and New Mexico. The major portion of that was some Cotton Valley production, Cotton Valley/Travis Peak production in the East Texas area.

The M&A activity of EOG in 2011 is captured as follows-

Where could the other $400 million sale be focused??

The operations map of EOG is as follows 

  • Mark Papa, CEO of EOG resources, in 2010 Earnings Results Conference Call disclosed that the company is considering to sell Niobrara acreage depending on what price is offered. With the oil prices increasing gradually, this would be the best time to reap the benefit by selling Niobrara acreage.

  • EOG is growing as an oil focused company by shifting their focus to oil. EOG’s revenue mix in 2008 was 29% to oil and 71% to gas, whereas the forecasted production mix for 2011 is vice versa- 29% to gas and 71% to oil. The recently clinched $647 million sale of gas weighted assets is also in line with EOG’s transition from gas to oil. Therefore, EOG might end up divesting certain non-core gas assets in US and Canada (contribute 90% of EOG’s gas reserves) to stick with its new strategic plan.

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