Thursday, June 2, 2011

Eagle Ford acreage metrics skyrocketing.. Marathon acquires Eagle Ford acreage at ~$18,000/acre while most of the analysts report at $25,000/acre.. Read this to know how..

Marathon Oil reached a definitive agreement with Hilcorp Resources Holdings LP to purchase its assets in the core of the Eagle Ford shale formation for $3.5 billion. Hilcorp Resources Holdings is a partnership between affiliates of Hilcorp Energy Company and Kohlberg Kravis Roberts & Co. LP.

Hilcorp acreage acquisition highlights:
  • ~141,000 net acres (217,000 gross acres) primarily in Atascosa, Karnes, Gonzales and DeWitt counties in Texas
  • Resource potential of 400 – 500 mmboe, ie., 473 mmboe
  • Potential to book up to 100 mmboe of proved reserves by the end of 2011
  • Potential additional 14,000 acres from tag-along and other leasing
  • Approximately 90% operated with a 65% average working interest
  • Current net production 7,000 boepd, 2011 exit ~ 12,000 boepd (80% liquids)
  • ~ 80,000 net boepd by 2016.

$/acre is ~$18,000. Know how...
Value of Reserves or Production
Assuming the proved reserves and the production would reach 100 mmboe and 12,000 boepd by the end of 2011, the reserves are valued at $1,000 million (@$10/boe) which leaves the production metrics at $83,333/boe/d.

Value of Undeveloped Acreage or Resources
The remaining value of $2,500 million is assigned to undeveloped acreage of 141,000 or the resource potential of 373 mmboe (after deducting for proved reserves of 100 mmboe). This $2,500 million puts the $/acre at $17,730 (approximately equal to the company reported average price of $15,000/acre) and leaves the resources at $6.7/boe.

Eagle Ford acreage metric is skyrocketing
This is the biggest deal in Eagle Ford Shale, in terms of deal value. Recently, KNOC clinched $1.55 billion Eagle Ford JV with Anadarko early this year. The acreage metrics of Marathon deal is at a 27% premium compared to the KNOC-Anadarko deal which was at a 27% premium compared to the 2010 acreage metrics in Eagle Ford.

The following data source from Derrick Petroleum Services shows the acreage metrics of the 2010 Eagle Ford transactions.

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