Upper Eocene Enping Formation mudstones in the Pearl River Mouth Basin, South China Sea, which formed during a lake-flooding event, are one of the most important sets of cap rocks in the basin. However, the generation potential (GP) of Enping Formation mudstones remains poorly understood and controversial. Despite a lack of documentation, these mudstones are presumed to have the potential to generate hydrocarbons. In this study, new organic geochemical data for these mudstones are provided based on several new wells drilled into Eocene strata in the Huilu area, northern Pearl River Mouth Basin, which illustrate their hydrocarbon GP. Total organic carbon content ranges from 0.55 to 3.3 wt. % (mean, 1.31 wt. %) with kerogens dominated by type III organic matter (OM) derived from terrigenous plant material. The Zhuqiong II movement, a rifting episode that occurred during the late Eocene (ca. 38 Ma), was associated with the introduction of a large quantity of terrigeneous higher plants by rivers that led to type III OM accumulation and preservation of Enping Formation mudstones. Rapid transverse facies changes led to the geochemical heterogeneity of the source rocks. The OM in these rocks reached an early–midmature stage in uplifted areas (vitrinite reflectance [Ro] = 0.5%–1.0%) and a late–mature stage in sags (Ro = 1.0%–1.3%), stages wherein hydrocarbons can be generated. Therefore, the Enping Formation mudstones may have had the potential to generate hydrocarbons, especially gas, and hence deserve attention in future exploration.