EOG Resources Inc. (NYSE: EOG) is slimming down again, marketing about 65,000 acres of Denver-Julesburg (D-J) Basin and East Texas leaseholds while holding onto its base of power in the Eagle Ford and Permian.

The divestment follows EOG’s September announcement that the company was marketing about 130,000 acres in Wyoming, Colorado and Utah. A spokeswoman said then that EOG was simply selling noncore acreage.

In relative terms, the acreage the company has marketed is equivalent to about one-seventh of EOG’s significant holdings—or about 195,275 net acres—and has minimal impact to its inventory of drilling locations. Most of the company’s high-quality assets, about 1.4 million acres, are in the Eagle Ford, Bakken and Delaware and Midland basins.

In the D-J Basin, EOG is offering a consolidated land position in Weld County, Colo., with the potential for as many as 24 Niobrara and 8 Codell horizontal locations per section.

EOG is also offering a broad land position and development opportunities in the East Texas Salt Basin, which is one of the three interior basins of the greater Gulf Coast Basin.

Meagher Energy Advisors has been retained by the Houston-based company to handle the transactions.

Solid Footing

EOG is a stock pick darling among most analysts.

EOG Resources, assets, reserve, potential, acreage

Wells Fargo Securities has said that EOG is among its top picks at $50 and $70 per barrel WTI in 2016.

Pearce Hammond, an analyst with Simmons & Co. International, said EOG is a core, long-term stock for investors because of its impeccable balance sheet.

“EOG remains one of the best-in-class companies in our E&P coverage group and the technical leader in unconventional resource recovery,” Hammond said.

At the end of the second quarter of 2015, EOG had about $3.4 billion in available liquidity, including $2 billion in cash. The company faces few capital commitments in 2016 and a backlog of more than 300 drilled-but-uncompleted (DUC) wells that should help reverse production declines.

EOG is projected to be outside of its 2016 discretionary cash flow by $500 million due primarily to $365 million in dividend payments, Hammond said.

One challenge for EOG is that its valuation is not as enticing—its net asset value (NAV) upside is 27% compared to peers with an upside NAV of 61%, he said. The company could spark some life into its stock with a few potential catalysts.

Additional well results and play delineation, a potential bolt-on acquisition and tactical transactions could change how the company progresses. Simmons has also noted the company would make an attractive acquisition candidate for an international oil company.

D-J Basin

EOG is offering acreage offsets the Hereford Field where the company launched the horizontal Niobrara play with its Jake 2-01H well, according to Meagher.

Highlights:

  • 11,420 net acres located in northern Weld County;
  • Average 83.7% net revenue interest;
  • Most expirations do not occur until 2018 or later;
  • Numerous nearby wells exceeding 30-day initial production rates greater than 750 barrels of oil equivalent per day; and
  • Active offsetting operators include Anadarko Petroleum Corp. (APC), Extraction Oil & Gas LLC, Bill Barrett Corp. (BBG) and Whiting Petroleum Corp. (WLL).

Development opportunities include:

  • Extensive Codell and Niobrara horizontal drilling potential;
  • Contiguous acreage blocks simplify development and operations; and
  • Reduced drilling and completion costs improve basin economics.

Bids are due Oct. 22. The sale is expected to close Dec. 3, with an effective date of Oct. 1. For information contact Nick Asher, vice president of business development with Meagher, at 303-721-6354 extension 260.

East Texas

EOG is selling its East Texas leasehold in Anderson, Cherokee and Freestone counties, Texas.

Highlights:

  • About 53,855 net acres;
  • Lease royalties range from 16.67-25%; and
  • Majority of leases are three-year primary term with two-year extension options.

Development opportunities include:

  • Numerous oil and gas producing formations consisting of conventional, unconventional and tight sand reservoirs; and
  • Primary targets are Kiamichi, Goodland, Bexar and Pine Island formations.

EOG Resources has also drilled two vertical test wells, EOG Mathis #1 and EOG Autry #1 on the acreage included in the package and has accumulated an extensive core and openhole log dataset.

More than 1,029 feet of conventional core was obtained in the two vertical tests and is the basis of EOG’s extensive geochemical database.

Bids are due Nov. 4. The sale is expected to close Dec. 4, with an effective date of Nov. 1. For information contact Teri Williams, Meagher COO, at 918-481-5900 extension 224.

Emily Moser can be reached at emoser@hartenergy.com, and Darren Barbee can be reached at dbarbee@hartenergy.com.