Simmons Raises Price Target on EOG Resources (EOG) Following Yates Acquisition
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Simmons reiterated an Overweight rating on EOG Resources (NYSE: EOG), and raised the price target to $109.00 (from $103.00), following the company's Acquisition of Yates.
Analyst Pearce Hammond commented, "EOG shares are up 6% since announcing the $2.5B Yates acquisition yesterday. We think this is a smart transaction for several reasons: 1) terrific valuation as EOG was able to increase their premium location count by 40% with just a 5% increase in their share count,;2) does not strain the balance sheet since it is primarily funded with equity; 3) high grades the company's Permian position; and 4) most importantly in our view, completes the pivot to the Permian and away from the Eagle Ford (there are now more Permian than Eagle Ford premium locations in EOG's inventory). We continue to advocate EOG as a core holding for long term energy investors. While valuation is not overly compelling (16% upside potential to our revised $109 PT/NAV and trading at 11.2x '17E EV/EBITDAX), the trade off for the higher valuation is a company that provides tremendous visibility on long term production growth."
Shares of EOG Resources closed at $94.32 yesterday.
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