EOG Resources Plans Increased Shareholder Returns

By Sourasis Bose

(Reuters) – EOG Resources (NYSE:EOG) has announced that its short-term debt levels will enable the oil and gas producer to allocate more than 100% of free cash flow for shareholder returns.

Shares rose 4.8% to $132.54 during afternoon trading.

The company plans to increase its debt to between $5 billion and $6 billion over the next 12 to 18 months, allowing more cash for investor payouts.

CEO Ezra Yacob stated, "In the near term, that does imply that we will definitely be in a position to exceed the 70% (returns) commitment and quite frankly … at times more than 100% of return of free cash flow to the shareholders."

This statement followed the company’s announcement of a $5 billion boost to its share buyback plan and a dividend increase after surpassing third-quarter profit expectations.

EOG will continue to explore market opportunities for share repurchases for the remainder of the year.

Despite a decline in oil and gas prices from 2022 peaks, energy companies have persisted in enhancing payouts to reassure investors of their commitment amid an uncertain fossil fuel outlook.

EOG aims to maintain its balance sheet such that its total debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio remains below one, even if West Texas Intermediate crude prices fall to $45 per barrel.

As of Friday afternoon, U.S. crude was trading at $70.16 per barrel.

A lower debt to EBITDA ratio indicates stronger financial health for a company and enhances its debt repayment capability.

As of September 30, the company's long-term debt stood at $3.78 billion, alongside approximately $6.12 billion in cash or equivalents.