EOG Resources’ Strategic Acquisition and Valuation Concerns: Analyst Maintains Hold Rating

Analyst Devin McDermott from Morgan Stanley maintained a Hold rating on EOG Resources (EOG – Research Report) and increased the price target to $135.00 from $132.00.

Devin McDermott has given his Hold rating due to a combination of factors surrounding EOG Resources’ recent strategic moves. The acquisition of Encino for approximately $5.6 billion, which includes debt, significantly expands EOG’s presence in the Utica region, adding over 1 billion barrels of oil equivalent in undeveloped resources. This acquisition is expected to enhance EOG’s free cash flow per share by an average of 8% from 2025 to 2027, particularly if gas prices rise.
Despite these positive developments, McDermott maintains a Hold rating as EOG’s stock is already trading at a premium. Additionally, there is a need for further execution to demonstrate that the Utica can become a foundational play comparable to EOG’s existing assets in the Eagle Ford and Delaware basins. The increased debt from the acquisition is also a consideration, though it remains within EOG’s target leverage ratio. Therefore, while the acquisition has potential, the current valuation and execution risks warrant a cautious approach.

In another report released yesterday, Barclays also maintained a Hold rating on the stock with a $140.00 price target.