June 20--Marathon Oil Corp. expanded its holdings Monday in Oklahoma's emerging STACK play with an $888 million acquisition of privately held PayRock Energy Holdings LLC.
PayRock has about 61,000 net surface acres in the oil window of the STACK play, with current production of 9,000 net barrels of oil equivalent per day. Most of the acquired PayRock acres are in Kingfisher and Canadian counties.
The transaction is expected to close in the third quarter. Marathon Oil is funding it with cash on hand. Oklahoma City-based PayRock is a portfolio company of EnCap Investments.
"Acquiring PayRock's STACK position will meaningfully expand the quality and scale of Marathon Oil's existing portfolio in one of the best unconventional oil plays in the U.S.," said Lee Tillman, Marathon Oil's president and CEO. "They've built a material position in the high-margin oil window of the STACK, and have consistently delivered industry-leading well results."
Marathon already has 142,000 net surface acres in the STACK. With the PayRock acquisition, it will have more than 200,000 net surface acres.
Tillman said Marathon Oil's recent spate of noncore asset sales has allowed it to be opportunistic on acquisitions. The company recently announced or closed sales totaling $1.3 billion for East Texas and Louisiana natural gas properties, mature Gulf of Mexico production and assets in Wyoming.
"We expect the 2016 capital program on the acquired acreage will be covered within our current $1.4 billion budget," Tillman said. "As we look into 2017, we would anticipate a minimum four-rig drilling program in our pro forma STACK position, which will achieve leasehold drilling requirements while accelerating delineation work."
Houston-based Marathon Oil said it expects completed well costs in the acquisition area to be between $4 million and $4.5 million. It estimates proved and probable reserves from the transaction at 330 million barrels of oil equivalent, with 490 gross company-operated locations.
Marathon Oil shares were up $1.20, or 9 percent, to $14.36 in Monday morning trading on the New York Stock Exchange.
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Source: Equities.com News
(June 20, 2016 - 9:50 AM EDT)
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