Exploration

Marathon’s $3.6 Billion Deal: Swaps Oil Sands For Delaware Acreage

Marathon Oil Corp.(NYSE: MRO) has agreed to sell off its Canadian oil sands business for $2.5 billion, and buy 70,000 net acres in the Permian Basin, the company said March 9.

“Historically, our interest in the Canadian oil sands has represented about a third of our company’s other operating and production expenses, yet only about 12 percent of our production volumes,” Marathon President and CEO Lee Tillman said in a written statement.

Separately, the Houston driller also agreed to acquire 70,000 net acres in the Permian Basin in West Texas for $1.1 billion in cash. The transaction with private company BC Operating includes 51,500 acres in the Northern Delaware basin in New Mexico.

BC is the operating company for and owned equally by Crump Energy Partners II, LLC (Crump) and Crown Oil Partners V, LP (Crown), both based in Midland. Crump is supported by an equity commitment from Quantum Energy Partners; Crown is financially partnered with Post Oak Energy Capital and Wells Fargo Energy Capital.

In all, the Texas and New Mexico land has about 5,000 feet of “oil-rich stacked pay,” Tillman said, referring to the multiple subterranean layers of oil-soaked rock that have attracted drillers to the region despite high land prices. That deal is expected to close in the second quarter. The transaction puts the value of the Permian Basin land at $13,900 per acre.

Marathon highlighted that the acquired acreage competes at the top of its organic portfolio with attractive Wolfcamp and Bone Spring economics of 90% before-tax internal rate of returns at $55 WTI, Guy Baber, an analyst at Piper Jaffray & Co. said.

The acreage is located in Lea and Eddy counties, N.M., and Marathon estimates up to 1,700 potential gross locations with up to 900 MMboe total resource potential.

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Compiled and Published by GIB KNIGHT

Gib Knight is a private oil and gas investor and consultant, providing clients advanced analytics and building innovative visual business intelligence solutions to visualize the results, across a broad spectrum of regulatory filings and production data in Oklahoma and Texas. He is the founder of OklahomaMinerals.com, an online resource designed for mineral owners in Oklahoma. ☞Email:g.knight@oklahomaminerals.com

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