Newfield, Marathon, Challenger Minerals, Gulfsands Offers GoM Assets

Derrick has recorded over $1 billion worth packages put up for sale in Gulf of Mexico by Newfield Exploration, Marathon, Challenger Minerals, Gulfsands Petroleum, Davis Petroleum and Sojitz. For more information, continue reading here..

Will ExxonMobil’s Polish Failure have a ripple effect on European Shale Operators?

Poland has the largest shale exploration potential in Europe by virtue of its attractive geology and by the Polish Government offering lucrative fiscal terms to prospectors. International majors, including ExxonMobil, Marathon Oil Corp, Chevron Corp and Talisman Energy Inc, are probing Poland’s shale deposits to ascertain if drilling techniques that revolutionized US gas production can unleash reserves big enough to supply Polish demand for more than three centuries. Continue reading here..

Marathon Oil cashes out Hilcorp & KKR for $3.5 billion in Eagle Ford shale sale

Fast & furious

Hilcorp’s founder just moved up the list of Forbes richest Americans with last month’s announcement that Marathon Oil would acquire his subsidiary Hilcorp Resources Holdings, LP’s assets in the Eagle Ford for $3.5 billion. Also lining its pockets is partner, Kohlberg Kravis Roberts & Co LP, who invested $400 million alongside HRH’s parent affiliate Hilcorp Energy Company in a 60:40 joint venture just 11 months ago. KKR’s “quick flip” is a wonderful story line when you consider the New Yorkers pulled the same trick with East Resources last year. There, KKR invested $325 million in advance of the Marcellus rush and turned that initial investment into $1.5 billion in less than a year when Shell came calling with $4.7 billion. Now KKR has pocketed another billion plus from a major, proving that every once in a while, Wall Street guys can make money in oil and gas. 

Looking back—

Those on the sell side of Hilcorp include some of the industry’s greatest majors, aka Amoco, Chevron, Exxon, Texaco and probably Marathon; who all spun off non-core assets so they could focus on more supposed profitable projects overseas. Fast forward, these same majors are now back, fast and furious, acquiring some of the same lands they once sold to independents like Hilcorp. And like KKR, the top guns at Hilcorp probably never imagined the quick riches they might receive selling assets to the likes of Marathon. But here we are.

As for Marathon—

This transaction tips the scale in South Texas shale sales and possibly recasts a deal for Forest who is still looking for answers on their acreage. Shortly after this deal, SM Energy reported two JVs for its Eagle Ford acreage, reaping more than $900 million. Mitsui paid ~$11,000 per acre and Talisman and Statoil teamed to pay ~$14,600 per acre.

In addition, Marathon’s generosity must feel good for all recent Eagle Ford claim jumpers (PVA & Rosetta drilling their own projects); promotees (Lewis, Chesapeake & Pioneer) and promoters (BP, CNOOC & Reliance) who now look prudent for early bets in the play. If you take the math further, some might argue that $10,000 per acre looks cheap now. 

But not cheap enough? If you consider the Koreans recent $14,000 per acre purchase for the right to play on Anadarko’s JV acreage, lands once owned by TXCO, an old fashioned exploration firm who went belly up on the eve of the Eagle Ford... never to fully realize the full potential of its South Texas acreage thanks to its untimely timing. As Hilcorp and KKR just proved... timing is everything.

Behind the numbers

For those that like simple math the Marathon metrics yield $25,000/acre based on the price of $3.5 billion divided by 141,000 acres. However, the deal does include 7,000 boe/d, which, if priced at $70,000-$80,000 boe/d, yields $490-$560 million for the proved reserves and only ~$2.98 billion for acreage. These calculations then translate into metrics of $20,851-$21,348 per acre, well above the $13,975 per acre set in Anadarko/KNOC JV transaction announced in March. But the Marathon deal is all cash, whereas Anadarko’s JV is all carry, widening the gap even further between the acreage valuations for the two transactions on a discounted cash basis.

KeyBanc Capital Markets analyst, Jack Aydin, who booked the deal at $21,100 per acre notes the value of this transaction “is toward the high end of the market’s expectations and considerably higher than other recent transactions in the play” where prices have run from $8,000-$15,000 per acre.  PLS also estimates the average price per net acre for 14 Eagle Ford transactions to be $8,400 per net acre. Wells Fargo analysts were more succinct. They called the deal “very rich”.

The following interactive chart shows the recent Eagle Ford transactions sorted by $/acre-

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What’s behind the $25,000 per acre? 

Some are starting to see the Eagle Ford condensate window as the best onshore play in the country. Marathon sees 400-500 mmboe resource potential from its position. Crunching the numbers, $3.5 billion for 473 mmboe of total risked reserves works out to $7.40/boe.  Looking at the acreage from a resource perspective works out to 3,355 boe per acre. (473 mmboe/141,000 net acres). Eyeing Marathon’s disclosure, the breakout by window is telling.  Of the 473 mmboe risked resource, 250 mmboe are under the 41,000 net acres in the condensate window – or 53% of the resource on 29% of the acreage.  Marathon’s EUR for the condensate window is 965 mboe, versus 645 mboe for the volatile oil and 445 mboe for the black oil windows. That’s in the ballpark of Petrohawk’s guidance for Blackhawk acreage with EURs of 1,070 mboe, also in Karnes and Dewitt counties.

Assuming the boe’s are valued equally across the play, the condensate window acreage would be valued nearly two times higher than volatile oil window and three times as much as black oil window.

To see what other operators are reporting about "Eagle Ford", use our oil and gas document library:

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Plans—

Overall, the Eagle Ford acquisition brings Marathon’s resource holdings to almost a million net acres across North America including the Eagle Ford, Bakken, Woodford Niobrara and in-situ position in Alberta, Canada. As it spins away from refining, these assets will give Marathon 35-40 working rigs in the U.S. and a strong oil sands push in its Birchwood in-situ acreage which altogether could create 175,000 boe/d of new unconventional volumes in the 2016-2017 timeframe, 1/2 that from the Eagle Ford.

QUICKLOOK

• Marathon doubles down on the Eagle Ford.
• New Marathon E&P unit needed a deal.
• Metrics “high” and “rich”.
• Quick flip for Hildebrand & KKR nets billions.
• Second big shale deal for KKR who also invested in East Resources.
• Marathon replaces the Koreans as the most aggressive buyer in the Eagle Ford.

$2 - $3 Billion Worth of Eagle Ford Shale Assets Up For Sale as of July 2011

Derrick Petroleum's "Deals in Play' database has recorded $2 - $3 billion worth of Eagle Ford Shale assets for sale as on July 2011. The Eagle Ford Shale is becoming prized property for oil and gas companies in 2011. The shale play area starts at the Texas-Mexico border in Webb and Maverick counties and extends 400 miles toward East Texas. The play is 50 miles wide, an average of 250 feet thick at a depth between 4000 and 12,000 feet, and has high carbonate content making it easier to fracture than other shales. In addition, it is also more liquid rich than other shales. The $/acre of the shale has been increasing rapidly over the last few years due to increasing successes of companies exploring this play. The high present $/acre relative to previous years is also bringing capital to firms who want to sell non-core Eagle Ford assets to focus on their core assets.

The following table from Derrick Petroleum’s ‘Deals in Play’ database shows opportunities available with respect to Eagle Ford assets as on 4 July 2011.

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Table 1: Is an interactive chart/ table showing data recorded from Derrick Petroleum's 'Deals in Play' database. Only deals above $10 million are shown. Net undeveloped acres have been sorted from highest (up) to lowest (down). Subscribers can click on the relevant bar to view detailed information from the database. 

The following table shows recent transactions involving the Eagle Ford Shale for insight into its recent $/Acre.

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Table 2: X axis shows Buyer-Seller. Y axis is deal value. $/acre is given above the bar's in the chart. Data is sorted by month and quarter. Only deals above $100 million in Q1 and Q2 2011 have been shown. Click on the bars for more detail on individual deals.

Analyst Comments
1. Total deal value involving Eagle Ford shales has been among the highest relative to the other US shales.
2. Number of deals involving Eagle Ford shale have been the highest so far in 2011 as compared to other shales (~25 deals), as recorded in Derrick's Deals database.
3. Eagle Ford shale looks set to dominate the deals market for unconventionals in 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.

Source: Derrick Petroleum - E&P Transactions Database

Marathon Oil reported 11% Growth in Sales Volume Over the Same Period Last Year; Continues its Strategy of Focusing on Unconventional, Liquids-Rich Resource Plays

Marathon reported Q1 2011 sales volumes averaged 400,000 boepd, up 11% over the same period in 2010. This was primarily the result of increased liquid hydrocarbon volumes from the Droshky development in the GoM, which commenced production in mid-2010, and Norway, partially offset by the impact of the suspension of Libyan production. Natural gas sales from Equatorial Guinea were higher in Q1 2011 due to a first quarter 2010 planned turnaround at Marathon's production facilities.


Marathon’s production in Libya is currently suspended as a result of continued political and civil unrest. Marathon had expected to produce approximately 48,000 boepd from the Waha Concession during 2011. In the first quarter of 2011, production available for sale from Libya averaged 28,000 boepd, of which approximately 21,000 boepd was sold. On a cumulative basis, the underlift for Libya at the end of the first quarter was approximately 847,000 boe.

Marathon estimates Q2 2011 production available for sale is projected between 340,000 and 360,000 boepd, excluding the effect of any future acquisitions or dispositions. Anticipated full-year E&P production available for sale is between 345,000 and 365,000 boepd.

Unconventional, Liquid-rich Resource Plays

Source: Derrick Petroleum E&P Transactions Database

During the quarter, Marathon spud its first well targeting the Eagle Ford Shale formation in south Texas. As the Company continues its strategy of focusing on unconventional, liquids-rich resource plays, Marathon has increased its holdings in the Eagle Ford Shale to approximately 29,000 acres, with the rights to acquire an additional 61,000 acres. The Company also has reached agreements on approximately 30,000 additional acres and expects to close those transactions in the second quarter.

 In early April 2011, Marathon signed an agreement to assign a 30 percent undivided working interest in the Company's approximately 180,000 net acres in the Niobrara Shale play. The company is currently acquiring 2-D and 3-D seismic data and expects to participate in eight to 12 gross wells by year end.

Source:Derrick Petroleum E&P Transactions Database
Exploration expenses were $230 million for the first quarter of 2011, compared to $98 million in the first quarter of 2010. Included in exploration expenses for the first quarter of 2011 were dry well expenses of approximately $159 million, primarily related to the Flying Dutchman well located in the Gulf of Mexico and the Romeo well in the Pasangkayu block offshore Indonesia. In March 2011, Marathon completed an evaluation and determined the options to develop Flying Dutchman were not viable. For Romeo, the reservoir's thickness and quality confirmed pre-drill geologic models, but the well was determined to be dry.

Source: Derrick Petroleum Planned Exploration Wells Database

Nexen joins Marathon to explore Poland shale gas resources.. Exxon seeks partners for its shale gas licenses in Poland.

Marathon Oil Corporation has signed an agreement with Nexen under which Nexen will acquire a 40% working interest in 10 of Marathon's concessions in Poland's Paleozoic shale play. This partnership provides not only financial risk mitigation but combines the extensive unconventional drilling and completion experience of Marathon and Nexen to fully evaluate the potential of these concessions.

Source: Marathon Oil Website

Marathon currently holds an interest in 11 concessions in Poland, encompassing 2.3 million acres. The shales are Lower Paleozoic and located at depths of between 8,000 and 13,000 feet. Marathon plans to acquire 2D seismic during the first half of 2011, potentially followed by the drilling of one to two wells in the fourth quarter of 2011 and seven to eight wells during 2012. Marathon will remain operator of the 11 concessions.

Poland shale gas- A Game Changer??

Poland's Lower Paleozoic shale play may be the largest and most significant opportunity for unconventional gas in central Europe and is evolving rapidly in the wake of successful shale plays in North America. Natural gas demand in the large and growing European market is approximately 50 to 55 billion cubic feet per day, with imports from outside the European Union accounting for approximately 50% of total gas requirements.

Source: Marathon - Howard Weil 2011 Energy Conference

In the last three years, Poland had issued more than 70 licenses for shale gas exploration which could make Europe less dependent on supplies from Africa and Russia. However, extraction of resources in Europe is more complex than in the US because of population density. Poland has 5.3 trillion cubic meters of shale natural gas, equal to more than 300 years of the country’s annual gas consumption, the Energy Information Administration of the U.S. Department of Energy said in a report. The companies are now drilling in Poland, but it will take at least a year to determine if shale gas production will be commercially feasible.

Lots more available on Poland table??

Poland’s shale resources are being targeted by Majors like ExxonMobil, Chevron, ENI, ConocoPhillips, Marathon, and Talisman as well as small independents like San Leon Energy, Realm Energy and BNK Petroleum. The following tables show the list of Poland shale gas deals.

Source: Derrick Petroleum E&P Transactions Database

As the companies' interest towards shale gas exploitation in Poland is heating up, few companies are calling for partners to give them a helping hand. Below is the list of Poland assets available for sale!!

Source: Derrick Petroleum Deals In Play Database

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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.

Source: Marathon- Howard Weil Energy Conference- Mar 2011

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: 

Source: Marathon Oil Mar 2011 PPT

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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.

Source: Derrick Petroleum E&P Transactions Database

For detailed discussion on Niobrara: http://mergersandacquisitionreviewcom.blogspot.com/2011/03/o-players-interest-towards-niobrara-is.html

Marathon - Howard Weil 2011 Energy Conference

http://docsearch.derrickpetroleum.com/pageNav/view1/docId/11530-0000/Marathon-Howard-Weil-2011-Energy-Conference.html

Marathon to divest non-core Marcellus acreage, where the metrics run at $7,000 per acre

Scotia Waterous (USA) Inc has been retained as exclusive financial advisor by Marathon Oil Corporation for sale of the company’s non-core Marcellus Shale assets in West Virginia and Pennsylvania. The offering has been organized into two packages: the operated leasehold and the non-operated leasehold. The total acreage for the offering is 81,397 gross (51,679 net) acres.


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Investment Highlights:
-- Operated leasehold: This package is comprised of 21,961 gross (net) acres with 100% WI in West Virginia, primarily in Randolph, Preston and Tucker Counties.
-- Non-operated leasehold: This package is comprised of 59,436 gross (29,718 net) acres with 50% WI in West Virginia and Pennsylvania. The acreage is operated by Triana Energy LLC, a Morgan Stanley backed private company, and is located primarily in Fayette County, Pennsylvania and Preston and Randolph Counties, West Virginia.
-- Joint Venture with Triana in which the leasehold is included within an Area of Mutual Interest to be developed by Triana on behalf of both parties. Triana has committed to $45 million drilling carry to earn 50% of AMI leasehold. Minimum drilling commitment in 2011 to drill 4 wells.
-- Encouraging results from Marathon’s drilling activity provides valuable technical data to partnership. Nine wells drilled to date with a focus on data collection and delineation of acreage. Seven operated, frac’d vertical wells with core and fluid efficiency test data. Two OBO horizontal wells providing production data and conventional core data.
-- Additional assets enhance ability of buyer to develop the asset base. Full compliment of regional geological and engineering analysis used to define the play. 100 square miles of 3D seismic currently being acquired over core leasehold. Company owned, buried 3D micro seismic array for stimulation monitoring. Two taps on major interstate pipelines.


Metrics for recent deals in Marcellus

Year	Heading	Deal Value ($MM)	$/Acre
2010	Epsilon Energy and Chesapeake form Marcellus JV	100	17,391
2010	Atlas Energy  and Reliance to form Marcellus JV	1,699	14,158
2010	Anadarko and Mitsui form Marcellus JV	1,400	14,000
2010	Williams acquires Marcellus acreage from Alta Resources	501	11,928
2010	BG and  EXCO form Marcellus JV	950	10,215
2010	EXCO and BG acquire Marcellus assets from Chief Oil & Gas	459.4	9,188
2010	Rex Energy and Sumitomo form Marcellus JV	140.4	8,595
2010	Shell acquires Marcellus acreage from East Resources	4,700	7,230
2010	Reliance enters into Marcellus JV with Carrizo	392	6,257
2010	EQT Corp acquires additional Marcellus acreage	280	4,827
2010	Trans Energy and Republic Energy form Marcellus JV	18	4,736
2010	Magnum Hunter acquires additional Marcellus assets	39.75	4,594
2010	Atlas Energy and Reliance jointly acquire Marcellus assets	191.9	4,531
2010	Antero Resources acquires Bluestone Energy Partners	180	4,500
2010	Statoil acquires Chesapeake’s additional Marcellus acreage	253	4,325
2010	Gastar and Atinum Partners form Marcellus JV	70	4,093
2010	Williams acquires additional acreage in Marcellus Shale	31	3,875
2010	EXCO Resources acquires additional Marcellus properties	95	3,392

Source: Derrick E&P Transactions Database

For more on Marathon,click here

Marathon Oil reported 2010 annual results; Added nine onshore exploration licenses with shale gas potential in Poland for a total of 11 licenses; Announced $5.27 billion capital, investment and exploration budget for 2011

Marathon’s annual 2010 sales volumes averaged 391,000 boepd down 2% over 2009 average of 400,000 boepd from continuing operations. This is due to the result of planned downtime associated with the turnaround of production facilities in Equatorial Guinea completed in the second quarter 2010, natural field declines and asset dispositions. The company achieved 95% reserve replacement ratio for the annual year 2010.

Marathon announced $5.267 billion capital, investment and exploration budget for 2011, consistent with prior guidance and a 9% increase from 2010 capital spending. The company aim at liquids rich opportunities such as the Bakken, Anadarko Woodford, Eagle Ford and Niobrara resource plays in the U.S.

The company’s capital spending in the upstream segments is approximately $3.7 billion or 71% of total spending for 2011. This Upstream program includes spending of $1.3 billion on base assets ($1 billion on E&P base and $300 million on Oil Sands Mining and Integrated Gas), $1.9 billion on growth assets such as liquids resource plays in the U.S., and $465 million specifically for impact exploration.

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