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Ensign’s Assets Are Acquired by Marathon for $3 Billion
01/05/2023
Marathon Oil Corp. closes the acquisition of Ensign Natural Resources’ Eagle Ford assets for $3 billion cash, according to the company’s release on December 27.
The purchase includes 130,000 net acres (99% operated, 97% working interest) in acreage adjacent to Marathon Oil’s existing Eagle Ford position. Ensign’s estimated fourth-quarter production will average 67,000 net boe/d, including 22,000 net bbl/d of oil.
According to Marathon’s release, this acquisition complies with every element of its disciplined acquisition criteria. It is accretive to the key financial metrics, it is driving higher shareholder distributions consistent with the operating cash flow driven Return of Capital framework, it is accretive to its inventory life with attractive locations that immediately compete for capital and it offers truly compelling industrial logic given the existing Eagle Ford footprint and its track record of execution excellence in the play.
The acquisition was announced on November 2, following Devon Energy Corp.’s purchase of Validus Energy for $1.8 billion. Those deals and the impending sale of Chesapeake Energy Corp.’s Eagle Ford assets put the mature shale play back into the spotlight after years in which the Permian Basin has taken center stage for M&A.
Analysts and dealmakers admit the Eagle Ford appears to be an area of focus for companies seeking to add inventory, while the others are getting out. Chesapeake, with its pivot to natural gas, which has been marketing its Eagle Ford position, is anticipated commanding $4.6 billion to $5.9 billion in value. Other companies, such as BlackBrush Oil & Gas LLC, GulfTex Energy LLC, and 1776 Energy Operators LLC also have the potential to lure buyers.
The acquired assets from Ensign span Live Oak, Bee, Karnes, and Dewitt Counties across the condensate, wet gas, and dry gas phase windows of the Eagle Ford.
Marathon Oil can deliver maintenance-level production from the acquired asset of 67 net boe/d (22 net bbl/d of oil) with almost one rig and 35 to 40 wells to sales a year.
The company's estimation of the asset does not include any assumptions for synergies or upside redevelopment opportunities.
Based in Houston, Ensign was formed in 2017 in partnership with Warburg Pincus, a global growth investor. The company secured an equity commitment from the Kayne Private Energy Income Funds platform in 2019 as part of an acquisition of Pioneer Natural Resources Co.’s Eagle Ford assets.
Marathon Oil is an independent exploration and production (E&P) company based in Houston, which is focused on the most significant oil-rich resource plays in the U.S. — the Eagle Ford in Texas, Permian in New Mexico, STACK and SCOOP in Oklahoma, and the Bakken in North Dakota.
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$3 Billion Deal, Marathon Oil Buys Ensign Natural Resources
A $3.0 billion cash definitive agreement to purchase the Eagle Ford assets of Ensign Natural Resources has been concluded by Marathon Oil Corporation on November 2.
Williams Buys MountainWest Pipeline System for $1.5 Billion
On December 15, Pipeline giant Williams made a deal to purchase MountainWest Pipelines Holding Co. from Southwest Gas Holdings Inc. for almost $1.5 billion including debt. Williams is paying $1.07 billion in cash and assuming $0.43 billion of debt to buy MountainWest, which comprises approximately 2,000 miles of interstate natural gas pipeline systems mainly situated across Utah, Wyoming, and Colorado.
The Williston Basin is a big area filled with layers of rock that sits next to the Rocky Mountains in western North Dakota, eastern Montana, and the southern part of Saskatchewan in Canada. This area covers roughly 110,000 square miles. Geologically, it's very similar to the Alberta Basin in Canada. People started drilling for oil in the Williston Basin back in 1936, and by 1954, most of the land where oil could likely be found was already claimed for drilling. The Bakken Formation with parts of Montana, North Dakota, Saskatchewan, and Manitoba has become one of only ten oil fields globally to yield over 1 million barrels per day (bpd) since the late 2000s. It is currently the third-largest U.S. shale oilfield, behind the Permian and Eagle Ford. The boom in the Bakken started around September 2008, coinciding with the U.S. housing market crash. The application of new technologies, such as swell packers enabling multiple-stage fracturing, significantly enhanced oil recovery, making the Bakken Formation a key player in the U.S. In 2022, the Bakken oil field saw big improvements in how much oil and gas it could produce. At the start of the year, 27 drilling rigs were working there, more than double the 11 rigs from the start of 2021. Important upgrades included making the Tioga Gas Plant able to process 150 million cubic feet more gas each day, and making the Dakota Access Pipeline bigger, increasing its oil transport capacity from 570,000 to 750,000 barrels every day.
Continental Resources is expanding its operations in the Midland Basin, including taking over some assets that used to belong to Occidental Petroleum. The company plans to use its expertise in exploration in this area.
Equinor and EQT Corporation have agreed that Equinor will exchange its operated assets in the Marcellus and Utica shale formations in Ohio for a stake in EQT’s non-operated interests in the Northern Marcellus formation.