EOG Resources drills for oil and natural gas, then sells what it pulls out of the ground. That is the whole business. The company operates mostly in the United States, with large drilling programs in the Delaware Basin in West Texas and New Mexico, the Eagle Ford play in South Texas, and now the Utica play in Ohio after buying Encino Acquisition Partners in August 2025 for $5.7 billion. It also has smaller operations offshore Trinidad and new exploration agreements in Bahrain and the United Arab Emirates. EOG gets paid by selling crude oil, natural gas liquids like propane and butane, and natural gas to refiners and other buyers at whatever the market price happens to be that day. No single product is manufactured, no subscription is sold, no software is licensed. Revenue rises when energy prices rise and falls when they fall. The diagram below traces where the money goes.

Five years of financial data tell a clear story about what kind of business this is. Revenue swung from $19.7 billion in 2021 to a peak of $29.5 billion in 2022, then settled back near $22 to $23 billion for the following three years. That peak happened because oil and gas prices spiked after Russia invaded Ukraine and global energy supplies tightened. When prices cooled, revenue came back down even though EOG was actually pumping more oil and gas each year. Production in crude oil equivalent terms grew from 2023 through 2025, yet revenue barely moved. That is what it means to be a price-taker in a commodity business.

Operating cash flow held up remarkably well through the price swings, staying above $8 billion every year from 2021 through 2024 and reaching $12.1 billion at its peak in 2024. Free cash flow tracked a similar path, ranging from $5.2 billion to $6.8 billion across those four years. Then 2025 arrived and both numbers dropped sharply. Operating cash fell to $10.0 billion and free cash flow fell to $3.9 billion, the lowest reading in the five-year window.

The 2025 free cash flow drop has two causes. First, crude oil prices fell. The average U.S. price EOG received for crude oil dropped from $77.42 per barrel in 2024 to $65.65 per barrel in 2025, a 15% decline. Second, the Encino acquisition required EOG to raise over $4.4 billion in new debt, which pushed net debt from negative $2.3 billion at the end of 2024 to positive $4.5 billion at the end of 2025. For four straight years, EOG had more cash than debt. That cushion is now gone.

What did EOG get for that debt? It got 675,000 core net acres in the Utica play in the Appalachian Basin, a large natural gas region in Ohio. Natural gas volumes jumped 30% in 2025, and natural gas revenue rose 80% as prices also recovered. EOG is deliberately shifting toward more natural gas production at a time when U.S. natural gas demand is growing, partly because of new facilities that turn gas into a liquid for export overseas.

Now for the risks. The biggest one is the same for every oil and gas company: prices can fall fast and stay down for a long time. EOG has no control over the price of a barrel of oil or a unit of natural gas. When prices dropped from 2022 to 2025, revenue fell even though production grew. A further sustained drop in oil prices would cut cash flow, shrink the dividend capacity, and force hard choices about the drilling budget.

A second risk is geological. Oil and gas wells naturally produce less over time. EOG must keep drilling new wells just to stay flat, and must drill even more to grow. If it cannot find enough new reserves to replace what it pumps out, production falls and so does revenue. The company lists this as a high-severity risk in its own filings. The Encino deal added substantial new reserves, but reserves are only estimates, and those estimates can be revised downward if the wells do not perform as expected.

A third risk is legal. In January 2024, a group of gasoline buyers filed a lawsuit against EOG and seven other oil companies, claiming they worked together to limit shale oil production and keep gasoline prices artificially high. This lawsuit is ongoing. If it succeeds, it could result in large financial penalties. EOG has not been found liable for anything, and the case is unresolved.

A fourth risk is regulatory. Governments are passing more rules about greenhouse gas emissions and climate change. New rules could raise EOG's operating costs, restrict drilling on federal lands, or reduce long-term demand for oil and gas. At the same time, some rules that were tightening in recent years have been rolled back or delayed, including the methane emissions charge under the Inflation Reduction Act, which was postponed to 2034. The regulatory direction is genuinely uncertain in both directions.

EOG has committed to returning at least 70% of annual operating cash flow, after capital spending, to stockholders through dividends and share repurchases. In 2025 the company paid $2.2 billion in dividends and spent $2.6 billion buying back its own shares. The quarterly dividend was raised from $0.975 to $1.02 per share during 2025. That commitment now sits on top of a balance sheet carrying $4.5 billion in net debt, which means the cash generation from the Encino wells has to be substantial enough to service the new debt and still fund the return program.