EOG Resources to boost shareholder returns
EOG Resources announced on Friday that its debt levels would allow the oil and natural gas producer to use more than 100% free cash flow for shareholder returns.
In afternoon trading, shares of the company rose by 4.8% to $132.54.
The company announced that it would increase its debt to between $5 and $6 billion over the next 12-18 months. This would allow for additional cash to be available to pay out to investors.
"In the short term, this does mean that we will be in a place to surpass the 70% (returns commitment) and quite frankly... at times... more than 100% return of free-cash flow to shareholders," said CEO Ezra Yacob. The comments were made a day after the company increased its share-buyback plan by $5 billion, and raised its dividend following a third-quarter profit estimate that was exceeded.
EOG said it would continue to monitor the markets for opportunities to buy back shares throughout the rest of the year.
Energy firms continue to increase payouts despite the fact that oil and gas prices are down from their peaks in 2022. This is to assure investors that they will remain disciplined despite an uncertain future for fossil fuels.
The company stated that it will maintain its balance sheet so that the total debt divided by earnings before interest taxes, depreciation, and amortization (EBITDA), is less than 1. This goal would be achieved even if West Texas Intermediate crude oil prices reached $45 per barrel.
On Friday afternoon, the benchmark contract for U.S. Crude was trading at $70.16 a barrel.
A company's debt repayment ability is positively impacted by a lower ratio of debt to EBITDA, an industry-wide metric used to measure the financial health of companies.
As of September 30, the company's long-term debt was $3.78 billion, while its cash and equivalents were about $6.12billion. (Reporting by Sourasis Bose in Bengaluru; editing by Alan Barona)
(source: Reuters)
