EOG to acquire Utica Shale operator Encino Acquisition Partners for $5.6 billion

US upstream shale maven EOG Resources agreed May 30 to acquire Encino Acquisition Partners from Encino Energy and the Canada Pension Plan Investment Board for $5.6 billion, expanding EOG's existing Utica Shale Basin footprint and adding a sizable wedge of oil, gas and liquids-rich production.

The pending transaction, by an acquirer well-known for shunning large acquisitions, attracted EOG because it met the company's "strict criteria for acquisitions: high-quality acreage with exploration upside, competitive with current inventory, and an attractive price," EOG CEO Ezra Yacob said during a webcast to outline the deal.

The Encino deal "significantly" expands EOG's contiguous liquids-rich acreage, while also adding premium-priced gas exposure, and increases working interest of its properties in the play, Yacob said in a statement. It also expands the company's core acreage in the volatile oil window, which averages 65% liquids production, by 235,000 net acres for a combined contiguous position of 485,000 net acres.

The acquisition also boosts EOG's scale in the Utica, where for the past few years, it has worked to turn the Utica into one of EOG's core operations.

Deal seen as 'transformative event'

"It's not often that a transformative event like this comes along for a company," Yacob said during the webcast.

Post-close, which is slated for second-half 2025, "we will have increased production by over 200,000 [b/d of oil equivalent], doubled the acreage position in [our] Utica's volatile oil window, added a tremendous option on low-cost gas with exposure to new markets, increased our regular dividend 5%, realized immediate accretion across financial metrics, and executed the transaction without using any equity while maintaining a pristine balance sheet," he said.

The Encino acquisition combines two large, premier acreage positions in the Utica, creating a third foundational play for EOG alongside the company's Delaware Basin and Eagle Ford assets, he added.

"Encino's acreage improves the quality and depth of our Utica position, expanding EOG's multi-basin portfolio to more than 12 billion barrels of oil equivalent net resource," he said.

The acquisition adds Encino's 675,000 net core Utica acres to EOG's portfolio, bringing its Utica position to a combined 1.1 million net acres in the play and representing more than 2 billion barrels of oil equivalent net resource. Encino also adds 235,000 boe/d of production to EOG's existing 1.09 million b/d of equivalent oil output during the first quarter.

In the volatile oil window, which averages 65% liquids production, Encino will add 235,000 net acres, while in the natural gas window, Encino brings 330,000 net acres along with existing natural gas production with firm transportation that's exposed to premium end-markets, EOG said.

Output is largely gas-weighted

Encino's Utica production of 235,000 boe/d will be added to EOG's existing 40,000 boe/d in the play, for pro forma 2025 production of 275,000 boe/d, consisting of 25% oil, 30% NGLs and 45% natural gas.

"The exciting thing about the Utica [is that it] has the cost structure of the Midland Basin (eastern Permian Basin) with the well productivity of the Delaware basin" or western Permian, Yacob said. "In the liquids-rich window, the volatile oil window, the returns are driven by liquids up front -- and you get a significant amount of NGLs and gas with it."

On the gas side, "we see a strong gas play ... today, but with a lot of upside, exposure to some new and diverse markets for us in an area where we foresee growing demand," he added. "We do see near-term volatility in oil markets, but that's balanced by stronger momentum on the North American gas demand story."

Yacob also said he sees many upside opportunities to enhance the value of Encino's and the entire EOG Utica asset, not the least of which is driving down total well costs per foot from Encino's $750 to EOG"s $650, a savings of nearly 15%.

Gas marketing, growth

Encino President and CEO Hardy Murchison, in a March 2024 interview with Platts, boasted that the company's dry gas production breaks even at a price of "pretty close to zero."

Murchison also described Encino's evolution from being a gas-focused operator to one more focused on the basin's oilier areas. In 2020, the company's production mix was about 80% gas and by 2024, gas was on track to account for about half of production.

Through the acquisition, EOG picks up additional exposure to the Gulf Coast gas markets and the upside associated with rising LNG exports. Encino maintains more than 800 MMcf/d of firm gas transportation, with capacity on Texas Eastern and Tennessee Gas Pipeline, and some 600 MMcf of that daily volume is delivered into premium Gulf markets, Yacob said May 30 during a conference call with analysts.

Over the last six months, the Platts-assessed Louisiana/Southeast regional average spot gas price, which includes Henry Hub and trading locations on both Tennessee and Texas Eastern, was $3.61/MMBtu. Regional cash prices were about 7% higher than at Dawn, Ontario, in Eastern Canada, where Encino has historically sold much of the rest of its gas volumes, Platts data showed.

"Within the basin, we're forecasting growth of in-basin demand to be potentially pretty strong in the next decade -- somewhere between 3, 4, maybe as much as 5 Bcf/d demand growth by 2032," he said.

Even prior to the Encino announcement, EOG's upstream plan for 2025 prioritized the Utica alongside the Delaware and Eagle Ford basins with 375 net completions planned for the year, including 30 in the Utica, according to a May 2025 S&P Global Commodity Insights report released by SPGI Associate Director Thomas Wilson.