EOG Resources, Carlyle To Form $400 Billion Joint Venture

EOG Resources Inc. ( (NYSE:EOG) ) and global private equity firm The Carlyle Group L.P. (NASDAQ:CG) recently inked an agreement to form a joint venture (“JV”). Carlyle will invest about $400 million to assist EOG Resources develop its oil and natural gas assets in Oklahoma.

Carlyle said that as part of the JV, over the next four years its Carlyle Energy Mezzanine Opportunities Fund II LP, will finance a development program in Ellis County, which is prospective to the Cleveland and Tonkawa formations in the Anadarko Basin. The energy mezzanine fund is believed to hold assets worth $4 billion. Notably, after the drilling program overcomes some “performance hurdles”, Carlyle’s working interests in the Ellis County assets will “largely revert” to EOG Resources.

EOG Resources did not reveal any detail with respect to the transaction and no further disclosures were made by Carlyle.

Per data from the Oklahoma Corporation Commission (OCC), which regulates oil and gas activities in the state, natural gas production in Ellis County totaled about 48 billion cubic feet (Bcf) in 2012. This is the latest year in which figures were available. Meanwhile, crude oil and condensate production totaled more than 4.7 million barrel.

The OCC's most recent ‘Intent to Drill’ file, which lists activity over the past seven days, confirms three operators intend to drill a total of seven wells targeting the Cleveland and Tonkawa formations. Other players planning to drill in the region include Nichols Operating LLC, Mid-Con Energy Operating LLC and Fourpoint Energy LLC, proposing to drill one Cleveland well, two Cleveland wells and four in the Tonkawa, respectively.

Earlier this month, EOG Resources reported that four wells in the Permian Basin achieved record-breaking production levels. This facilitated the company surpass its production guidance and return to profitability.

Investor confidence on the EOG Resources stock is reflected in its price chart. Shares of the company have lost 5.5% in the last three months, while the Zacks categorized Oil & Gas-U.S Exploration & Production industry registered a decrease of 10.1%.

EOG Resources currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the same space include SunCoke Energy, Inc. (NYSE:SXC) and Canadian Natural Resources Limited Ltd. (TO:CNQ) . Both these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SunCoke Energy posted a positive earnings surprise of 120.0% in the preceding quarter. The company beat estimates in two of the four trailing quarters with average negative earnings surprise of 35.78%.

Canadian Natural Resources posted a positive earnings surprise of 30.77% in the preceding quarter. It surpassed estimates in two of the four trailing quarters with average negative earnings surprise of 275.46%.

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