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EOG Resources will buy Encino Acquisition Partners from Canada Pension Plan Investment Board (CPP) and Encino Energy, a top producer in Ohio Utica Shale, for $5.6 billion.
EOG said the transaction, which will be purchased with $3.5 billion in debt and $2.1 billion cash, will create a leading producer in the Utica.
"This acquisition combines large, premier acreage positions in the Utica, creating a third foundational play for EOG alongside our Delaware Basin and Eagle Ford assets," said EOG chairman and CEO Ezra Y. Yacob during a May 30 conference call with investors.
"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 675,000 net core acres to EOG's Utica position for a combined 1.1 million net acres, representing more than 2 Bboe of undeveloped net resource. Pro forma production is estimated at 275,000 boe/d.
EOG said the deal will be immediately accretive with more than $150 million in synergies in the first year driven by lower capital, operating and debt financing costs.
The deal is also accretive to free cash flow and supports a return of capital to shareholders, including a 5% dividend increase, while maintaining industry leading balance sheet, according to EOG’s news release.