EOG, Yates to merge in $2.5-billion deal

Sept. 19, 2016

Matt Zborowski
Assistant Editor

EOG Resources Inc., Houston, has agreed to combine with Yates Petroleum Corp., Abo Petroleum Corp., MYCO Industries Inc., and certain other entities.

Under the terms of the deal, EOG will issue 26.06 million shares of common stock valued at $2.3 billion and pay $37 million in cash. EOG also will assume and repay at closing $245 million of Yates debt offset by $131 million of anticipated cash from Yates.

Yates is a privately held, independent crude oil and natural gas company with 1.6 million net acres across the western US, with production of 29,600 boe/d net, of which 48% is crude oil, and proved developed reserves of 44 million boe net.

Yates has 186,000 net acres in the Delaware basin in New Mexico, 138,000 net acres in the Northwest Shelf in New Mexico, 200,000 net acres in the Powder River basin, and an additional 1.1 million net acres in New Mexico, Wyoming, Colorado, Montana, North Dakota, and Utah.

EOG says the deal adds an estimated 1,740 net premium drilling locations in the Delaware and Powder River basins, representing a 40% increase. The firm defines a premium drilling location as a direct aftertax rate of return of at least 30% assuming a $40/bbl flat crude-oil price. EOG plans to commence drilling on the Yates acreage in late 2016 with additional rigs added in 2017.

The Delaware basin acreage, which EOG says is highly prospective for the Wolfcamp, Bone Spring, and Leonard shale formations, brings the combined company's total Delaware position to 424,000 net acres, a 78% increase.

The Northwest Shelf acreage is prospective for the Yeso, Abo, Wolfcamp, and Cisco formations, which EOG says have the potential to contribute additional amounts of premium inventory with application of the firm's completion and precision targeting technologies and low cost structure.

The deal also adds 81,000 net acres from Yates in the core development area of the Powder River basin that is prospective for the Turner oil play. In total, Yates contributes 200,000 net acres in the Powder River, doubling EOG's total position in the basin. EOG says the position has exploration potential for multiple stacked-pay formations.