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Marathon Oil to buy Eagle Ford assets from Houston co. for $3B Houston Business Journal Energy Marathon Oil to buy Eagle Ford assets from Houston co. for $3BHouston-based oil and gas exploration and production company Marathon Oil Corp. (NYSE: MRO) has struck a $3 billion deal to acquire the Eagle Ford assets of Ensign Natural Resources, also based in Houston. The cash deal is expected to close by the end of the year, the companies announced Nov. 2. Marathon Oil plans to use a combination of cash on hand, borrowings on the company's revolving credit facility, and new prepayable debt to fund the deal. The assets include 130,000 net acres, with 97% working interest, across the condensate, wet gas and dry gas phase windows of the Eagle Ford, Marathon Oil said. The acreage spans Live Oak, Bee, Karnes and Dewitt counties and is adjacent to Marathon Oil's existing Eagle Ford position, bringing it to 290,000 net acres in the basin. For the fourth quarter, the acquired assets are expected to produce 67,000 net barrels of oil equivalent per day. Marathon Oil estimates the acquisition includes more than 600 undrilled locations, representing an inventory life greater than 15 years. Marathon Oil expects the deal to drive a 17% increase to 2023 operating cash flow and a 15% increase to free cash flow, the company said. Thus, the company expects the transaction to increase 2023 shareholder distribution capacity by approximately 17%, and the company's quarterly base dividend is expected to increase 11% to 10 cents per share after the transaction closes. Marathon Oil's return of capital framework calls for at least 40% of annual operating cash flow to be returned to equity holders when West Texas Intermediate oil prices are at least $60 per barrel. For full year 2022, Marathon Oil expects to return at least 50% of adjusted operating cash flow to shareholders. "This acquisition in the core of the Eagle Ford satisfies every element of our exacting acquisition criteria, uniquely striking the right balance between immediate cash flow accretion and future development opportunity," said Lee Tillman, Marathon Oil's chairman, president, and CEO. Ensign was formed in late 2017 in partnership with Warburg Pincus and later secured an equity commitment from the Kayne Private Energy Income Funds, the energy private equity platform of Kayne Anderson Capital Advisors LP. In May 2019, Ensign purchased the entire Eagle Ford portfolio of Irving, Texas-based Pioneer Natural Resources USA Inc. in a $475 million deal, its first acquisition. Then Ensign bought Newpek LLC’s share of many of the same assets in 2020, increasing Ensign's ownership share before bringing it to 100% with a 2021 acquisition from a Houston-based subsidiary of India-based Reliance Industries Ltd. "Over the past four years, Ensign has become one of the largest producers in the Eagle Ford basin, operating more high-quality drilling inventory than nearly all other private operations in the basin, with strong drilling results," said Brett Pennington, president and CEO of Ensign. "I am proud of what we have built at Ensign and for the dedication and hard work of our employees." Morgan Stanley is serving as lead financial adviser to Marathon Oil and is providing committed financing to Marathon Oil with respect to a portion of the purchase price. White & Case LLP is serving as outside legal counsel for Marathon Oil. Evercore and J.P. Morgan Securities LLC are serving as financial advisers to Ensign Natural Resources. Sidley Austin LLP is serving as principal legal adviser to Ensign Natural Resources.Q3 earnings reportAlso on Nov. 2, Marathon Oil reported third-quarter results. The company's total revenue and other income was nearly $2.25 billion, down 2.4% from revenue in the second quarter but up 54.6% from Q3 2021 revenue. The latest revenue figures beat analysts' expectations of $2.02 billion, according to Yahoo Finance. Net income in Q3 was $817 million, down 15% from the prior quarter but up a whopping 344% from $184 million in Q3 2021. When excluding special items, adjusted net income was $832 million in the most recent quarter. Per diluted share, net income was $1.22, and adjusted net income was $1.24. Both figures beat analysts' estimates of $1.19 per share. Marathon Oil's stock closed down 3.78% at $29.76 per share on Nov. 2, before the acquisition and earnings were announced, but the stock ticked up in after-hours trading nearly 0.5% to $29.90 per share as of 5 p.m. Central Time. |
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