S&P affirms EOG Resources

S&P said it affirmed all its ratings, including the BBB+ long-term and A-2 short-term corporate credit rating, on EOG Resources Inc. and affirmed the BBB+ issue-level ratings on the company's senior secured and unsecured debt, the BBB- rating on its preferred stock, and the A-2 rating on its commercial paper program.

The outlook is stable.

“The ratings affirmation reflects our assessment that EOG's financial leverage will improve from weak levels in 2016 because of higher oil production, better realized prices, and improved operating efficiency,” S&P said in a news release.

The agency expects the company's oil production in 2017 to increase nearly 20% to 338,000 barrels per day with unhedged oil price realizations up 16% compared with 2016. At the same time, the agency projects EOG's per-unit cash operating costs to increase just 6% year over year.

“As a result, we have increased our projections for EBITDA and operating cash flows to levels more in line with our expectations for the rating, resulting in FFO to debt improving to around 55% this year from 36% in 2016,” S&P said.

The agency said the stable outlook reflects its view that EOG will maintain FFO/debt above 45% and debt/EBITDA below 2x over the next three years, while continuing to grow oil production and reserves.

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