Marathon Oil's Eagle Ford Acquisition Includes 4,800 Acres - $97 Million

Marathon Oil Eagle Ford Acreage Map & Improving Well Performance

Marathon Oil announced three significant items on September 10th. The company plans to repurchase $1 billion in common stock, sell an interest in Angola for $590 million, and complete an acquisition of 4,800 acres in the Eagle Ford for $97 million.

The company didn't release much in regard to the acquisition, but it's safe to assume the acreage will complement the company's current position. Marathon is paying $74 million upfront and $23 million in the form of carried interests.

“We continue to evaluate our portfolio for high-grading opportunities and expect that process to remain evergreen and integral to our forward business plans.”

— Lee M. Tillman, CEO

On an undiscounted basis, the company is paying a little more than $20,000/acre. The deal brings Marathon's core Eagle Ford position up to approximately 205,000 net acres.

When Marathon first entered the Eagle Ford, the company estimated development on 80 to 160-acre spacing. So far in 2013, approximately 80% of the company's development drilling has occurred on 40 to 60-acre spacing.

Read the full press release at marathonoil.com

Magnum Hunter Resources Completes Sale To PVA - Still Targeting Eagle Ford & Pearsall

Magnum Hunter Resources Acreage Map

Magnum Hunter Resources (MHR) completed the sale of 19,000 net acres in the Eagle Ford to Penn Virginia for approximately $400 million in the second quarter. The deal was for the majority of the company's Eagle Ford holdings.

Magnum Hunter retained approximately 7,000 net acres prospective for the Eagle Ford and Pearsall Shale formations in Atascosa, Fayette, and Lee counties. Two wells were completed and the company plans to explore and develop its acreage further.

MHR drilled one operated Eagle Ford well and participated in one non-operated Pearsall well during the quarter:

• Peeler Ranch #4H - is operated by MHR and was drilled to a total measured depth of 15,206 feet (horizontal lateral length of 5,714 feet) and is currently waiting to be completed. Magnum Hunter owns a 98.4% working interest in the well and is the operator.
• McCarty Unit A 1H is operated by Marathon Oil and was drilled to a measured depth of 17,438 feet (horizontal lateral length of 6,368 feet), fraced with 17 stages in the Pearsall Shale. The well produced 584 boepd on an 18/64th adjustable choke with 2,185 psi FTP. Magnum Hunter owns a 31% working interest in the well.

H.C. "Kip" Ferguson, President, commented, "This combo Pearsall/Eagle Ford area has always been of interest to our team. The right depth, gas-to-oil ratio, and completion style will be required to optimize the potential for these formations. The Pearsall Shale is different in composition to the Eagle Ford Shale. It is composed of more silica with interbedded organic shale and limestone. We believe that our Pearsall Shale acreage is located within the wet gas to rich condensate window of the play, which is ideally located between the Charlotte fault trend eight miles to the north and the Karnes fault trend to the south. Our internal technical analysis, core samples, our McCarty Unit A 1H well, and recent third-party well results in the area, indicate potential for both Eagle Ford Shale and Pearsall Shale productivity on this Atascosa County acreage.

Marathon Oil Writes Down Eagle Ford Acreage, But Grows Production 22%

Marathon Oil Core Eagle Ford Acreage

Marathon Oil is writing down $340 million in unproven acreage in Bee, DeWitt, Lavaca, and Wilson counties.

The acreage isn't necessarily bad, but it either doesn't compete with the rest of Marathon's acreage or lease expirations are simply coming quicker than the company can deploy rigs (capital).

After making several acquisitions over the past few years, it really comes as no surprise.

Not everything was being written down. Marathon's production grew 22% over the fourth quarter of 2012 to reach an average of 72,000 boe/d (64% oil).

“Our strong operational performance was a result of high levels of reliability in our base business along with continued growth in our Eagle Ford and Bakken shale plays.”

— Clarence P. Cazalot, Jr., CEO

arathon hit total depth on 76 gross wells and brought 68 gross wells to production in the quarter. Spud to spud drilling time improved to an average of 18 days on the quarter. That's down from 28 days one year ago. Pad drilling should drive drilling times down further.

“The company is also testing the potential of the Austin Chalk and Pearsall Shale formations. ”

 Approximately 65% of the company's production is moving by pipeline and that number is expected to grow to 75% by the end of May. Gathering pipelines and central gathering & treating facilities were installed to put Marathon well on its way to having its midstream infrastructure in place.

Downspacing tests have been positive and the company expects to develop its acreage on a maximum of 80-acre spacing. Expect more definitive results from 40-60 acre spacing tests in the second half of the year.

Read the full press release at marathonoil.com

Typical Eagle Ford Well Start to Finish Video - Marathon Oil

This is a great time lapse video of a typical Eagle Ford well captured from start to finish by Marathon Oil. The video was shot over a period of a few months.

Thank you to Lee Warren from Marathon who forwarded the video our way.

Marathon Oil's Capital Budget Favors the Eagle Ford in 2013

Marathon Oil Core Eagle Ford Acreage

Marathon Oil's Eagle Ford assets will be the beneficiary of $1.9 billion in spending in 2013. Marathon released plans to spend $5.2 billion in 2013, with almost 40% of the total earmarked for South Texas.

Approximately 65% of the company's budget is allocated to "Growth" assets and you guessed it. The Eagle Ford is a "Growth" asset for the company. That's why $1.9 billion is allocated toward the Eagle Ford. Current plans call for the drilling of 275-320 gross (215-250 net) operated wells in 2013.

Ten percent of the budget, $190 million, will be spent on midstream infrastructure: central batteries and pipelines.

“About one-third of our overall budget, or $1.9 billion, is allocated to the Eagle Ford shale play in South Texas.”

— Clarence P. Cazalot Jr., CEO

The company has also increased its production guidance in the Eagle Ford to 85,000 boe/d in 2013. Marathon has mentioned multiple times that economics in the play make it very attractive and the shear size of the company's operations make it ripe for operational improvements over time.