Moody's: EOG down to negative

Moody's Investors Service said it affirmed EOG Resources, Inc.'s A3 long-term debt and Prime-2 commercial paper ratings and changed the outlook to negative from stable.

"The change in outlook reflects EOG's shift in financial policy and the challenges stemming from its aggressive growth into oil and natural gas liquids plays," commented Gretchen French, Moody's vice president-senior analyst.

"EOG has a long track record of strong organic operating performance and conservative financial leverage. However, its efforts to transform from a primarily natural gas based company into a company with a more balanced profile between natural gas and liquids production is highly capital intensive and has pressured EOG's financial leverage metrics."

Moody's noted that it recognizes the strategic benefits of EOG's production diversification strategy given the higher value of liquids relative to natural gas. Nevertheless, this diversification strategy is capital intensive and entails execution risk.

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