Wednesday, April 6, 2011

Asian companies creating traffic towards Niobrara Shale!! Marubeni acquires Niobrara Shale acreage from Marathon Oil for $270 million.

Marathon Oil signed an agreement with Marubeni Corp under which Marathon will assign a portion of its interest in the Niobrara shale play within the DJ Basin. Under the terms of the agreement, Marubeni will receive a 30% undivided working interest in Marathon's approximately 180,000 net acres in the DJ Basin for a total consideration of $270 million, or $5,000 per acre. Marathon began leasing acreage in the DJ Basin in 2010. The company is currently acquiring 2-D and 3-D seismic data and expects to participate in eight to 12 gross exploration wells by the end of the year. Marathon will be operator of the jointly owned leasehsold. Marubeni’s overall investment in the project, including future development costs, is about $1-$1.5 billion.
Niobrara Shale- The tasty pie for Asians!!
Recently, Niobrara Shale has gained interests from all the companies. The overall investments in the state lease sale awards increased from an average of $3.2 million in 2008-2009 rounds to an average of $37.5 million in 2010 lease rounds. In Wyoming, as per Wyoming Oil and Gas Commission, 202 horizontal well permits targeting Niobrara formation had been issued in the state as of November 24, 2010. In Colorado, during 2009-September 2010, there were 208 approved permits for Niobrara shale formation.
Last October, the Japanese company ITOCHU stepped into Niobrara Shale with an estimated investment of $390 million. Then, in Jan 2011, the Chinese (CNOOC) entered into a $1.3 billion Niobrara JV with Chesapeake. Now again the Japanese- Marubeni Corp!! The Asians are busy striking the unconventional deals in the US. Very soon Koreans may also enter the Niobrara Shale who had recently clinched a $1.6 billion Eagle Ford JV with Anadarko.
A look at the metrics of liquids rich resource plays: 

What is interesting in Marathon-Marubeni deal??
In January 2011, Chesapeake sold the Niobara acreage to CNOOC for $4,686/acre. In the three months period since then, the Niobara acreage metrics have increased by ~$300/acre. This is evident from Marathon reported metrics of $5,000/acre. Yes! Marathon is selling Niobrara acreage at a premium price.


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