Bloomberg


Sept. 3 (Bloomberg) -- EOG Resources Inc., the second-best performer in the Standard & Poor’s 500 index of energy explorers and producers in the past year, retained BMO Capital Markets Ltd. to sell all of its Gulf of Mexico assets as the company shifts spending to oil projects and away from natural gas.

The properties, which consist mostly of gas assets, are in 22 blocks primarily in the shallow waters of the Gulf, according to an announcement on BMO’s website. EOG’s Gulf assets produce the equivalent of 26.9 million cubic feet of gas per day and $34 million of net annualized cash flow, according to the announcement.

Asset sales of as much as $1.5 billion will help fund increased drilling, the company said in a statement released before an analyst meeting April 7. Capital spending will be $5.6 billion this year, compared with a 2009 budget of $3.3 billion.

“Our game plan, because we focus on low debt, is that although we’ll clearly be outspending our cash flow this year, we’re going to balance that by selling some North American producing gas assets,” Chief Executive Officer Mark Papa told analysts at the meeting in Houston, where the company is based.

EOG rose 84 cents to $90.33 as of 4 p.m. in composite trading on the New York Stock Exchange.

Production from the Gulf assets represents less than 1 percent of EOG’s total output, Elizabeth Ivers, a spokeswoman for EOG, said today in an e-mail.

Papa told investors Aug. 6 the company wants to sell two onshore asset packages. They include Canadian shallow-gas production and 180,000 acres of horizontal shale-gas properties in the Marcellus, Haynesville and Eagle Ford formations. EOG is also trying to sell as much as 30,000 acres in the Niobrara formation of Colorado, he said.

The company’s preference is to sell the Gulf properties together, according to the BMO announcement. EOG also would consider individual field sales.

--Editors: Kim Jordan, Tony Cox.

To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net.

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net.

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