EOG’s Utica Bet: Natural Gas Takes Center Stage
Merger …. Friday!!
In 2020, EOG Resources was at a crossroads. I wrote a series about what I saw as their best bet acquisitions because the writing was the wall. Its core oil plays—Eagle Ford and Bakken—were tapped out, and the Permian Basin, with dwindling Tier 1 acreage and competitive private equity allocations, offered few acquisition opportunities. As I wrote in 2020, the ideal strategy in my view for EOG was to conserve cash and wait for a prime Appalachian gas play. 5 years early… as usual.
Today, its $5.6 billion acquisition of Encino Energy’s Utica Shale assets, alongside the recent UAE deal, shows EOG adapting to a new reality: natural gas is the smartest, most efficient, and cleanest accessible fuel source, poised to dominate the energy mix.
EOG Goes Abroad, and So Does American Power
It’s not #MergerMonday but it is news I’ve been advocating and waiting for for a long time: EOG just announced a 900,000-acre exploration concession in the United Arab Emirates. It’s a headline, sure. But it’s also a signal that the large U.S. E&P’s get it (and EOG in particular).
Why Utica? Recognizing the Fuel of the Future Strategic Shift
EOG’s acquisition of 675,000 Utica acres in Ohio, Pennsylvania, and West Virginia diversifies its oil-heavy portfolio. Key advantages:
• Flexibility: The Utica yields dry gas, natural gas liquids (NGLs), and condensate, letting EOG pivot based on market prices.
• Economics: Breakevens below $1.25/mcf, boosted by NGLs, offer strong returns for a cost-conscious operator.
• Global Reach: Unlike Permian oil, tied to volatile cycles, Utica gas taps the booming global LNG market.
Northeast Gas: Unlocking Potential
The Utica and Marcellus shales, among the world’s largest gas fields, have been constrained by pipeline bottlenecks and climate change fairy dust. New York’s bans and New England’s reliance on LNG imports limited their reach and political retardation met an all time high in the last administration. But change is afoot: the deal between Governor Hochul and President Trump signal a forced openness to pipelines. Projects like Williams’ Northeast Supply Enhancement are reviving, linking gas to urban and export markets. And reduced (or eliminated) credits for renewables make natural gas the only choice.
Natural Gas: The Cornerstone Fuel
Even from a neutral lens, it’s obvious: natural gas is America’s most strategic energy asset—cleaner than coal, more reliable than renewables, and abundant. The U.S. already leads global LNG exports, and with Europe and Asia signing long-term contracts, Appalachian gas in particular, excels. The Utica’s NGLs complement the Marcellus’s dry gas, serving petrochemicals and LNG while sharing infrastructure.
So, EOG’s $5.6 billion Utica bet reflects a broader truth: natural gas is the cornerstone of our energy mix—efficient, clean, and accessible. EOG signals what we all have known which is the industry must shift to emphasize gas’s dominance. When paired with pragmatic policy changes in the Northeast, it certainly suggests a return to intellectual pragmatism. Maybe the 2012 gas bulls (myself included) will finally have their day. Only 13 years early …
EOG has been well managed for a long time. These recent major announcements set EOG for a busy and productive decade or two. Now let’s watch as EOG sets a performance standard for others to follow.
Great take, as usual, DRW!