Marathon Oil to Make $3.5 Billion Eagle Ford Shale Acquisition

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Researched by Industrial Info Resources (Sugar Land, Texas)--Marathon Oil Company (NYSE:MRO) (Houston, Texas) announced yesterday that it will invest approximately $3.5 billion in the purchase of assets in the Eagle Ford Shale play in Texas. Marathon will purchase approximately 141,000 net acres from Hilcorp Resources Holdings LP. The area currently has 36 wells that produce approximately 7,000 barrels of oil equivalent (boe) per day, 80% of which is liquids. Another 10 wells are drilled and waiting completion, and the area is expected to produce 12,000 boe per day by the end of this year. This is expected to rise to 80,000 boe per day by the end of 2016, which will boost Marathon's Eagle Ford production to about 100,000 boe per day at that time.

In a conference call about the acquisition, Marathon President and CEO Clarence P. Cazalot Jr. said, "This acquisition is consistent with the overall strategic direction that we have indicated to you in the past, which is that you are seeing from Marathon a shift from a few large projects, which we have successfully developed in the past, to now lower-risk, scalable resource plays." Cazalot said that Marathon maintains a "very clear, unambiguous focus on liquids."

Eagle Ford's high percentage of liquids, in the form of crude oil and condensates, has added significant value to the shale play, compared to other shale formations with primarily dry gas content. For additional information, view the June 1, 2011, "Navigating the Currents of Change" webcast on the Oil & Gas Production and Terminals industries. The high liquid content of the Eagle Ford Shale and the Bakken Shale in North Dakota are pushing up the prices of acquisitions in these areas.

According to media reports, Marathon's payment of about $24,800 per net acre represents one of the highest transactions for an acquisition in the Eagle Ford Shale. While at current prices and a resource potential of between 400 million and 500 million boe per day, the company will almost certainly profit. However, investors seemed nonplussed, and the company's stock price was down more than 2.5% at closing yesterday.

Industrial Info is tracking 225 North American Oil & Gas Production projects with a total investment value (TIV) of $23 billion that are scheduled to kick off in 2011 and more than $5.3 billion in active Marathon projects. Information on these can be found in Industrial Info's North American Project Database.

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