Marathon Oil Corporation (NYSE:MRO) announced the signing of a definitive purchase and sale agreement to acquire PayRock Energy Holdings, LLC (“PayRock”), a portfolio company of EnCap Investments, for $888 million. PayRock has approximately 61,000 net surface acres and current production of 9,000 net barrels of oil equivalent per day (boed) in the oil window of the Anadarko Basin STACK play in Oklahoma.
- High quality inventory immediately competes for capital allocation within Marathon Oil’s portfolio
- $4.5 – 4.0 million completed well costs offer 60 – 80% before-tax IRRs at $50 WTI
- 330 million BOE 2P resource with 490 gross company operated locations
- 700 million BOE total resource potential from increased well density in Meramec and Woodford, as well as Osage development
- Implied acreage value of $11,800 / acre adjusting for proved developed producing (PDP) reserves
“Acquiring PayRock’s STACK position will meaningfully expand the quality and scale of Marathon Oil’s existing portfolio in one of the best unconventional oil plays in the U.S.,” said Marathon Oil President and CEO Lee Tillman. “They’ve built a material position in the high margin oil window of the STACK, and have consistently delivered industry-leading well results. The recent moves we’ve taken to strengthen the Company’s balance sheet, including the successful execution above the top end of our non-core asset divestiture target, have positioned us to be opportunistic to acquire what is an excellent strategic fit.
“We expect the 2016 capital program on the acquired acreage will be covered within our current $1.4 billion budget. As we look into 2017, we would anticipate a minimum four-rig drilling program in our pro forma STACK position, which will achieve leasehold drilling requirements while accelerating delineation work.”
The transaction is subject to customary closing conditions and is expected to close in third quarter 2016, funded with cash on hand. (Original Source)
Shares of Marathon Oil Corp closed last Friday at $13.16, up $0.49 or 3.87%. MRO has a 1-year high of $27.77 and a 1-year low of $6.52. The stock’s 50-day moving average is $12.99 and its 200-day moving average is $11.41.
On the ratings front, Marathon Oil has been the subject of a number of recent research reports. In a report issued on June 14, UBS analyst William Featherston reiterated a Buy rating on MRO, with a price target of $16, which implies an upside of 21.6% from current levels. Separately, on June 7, KLR Group’s John Gerdes initiated coverage with a Buy rating on the stock and has a price target of $21.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, William Featherston and John Gerdes have a total average return of -0.2% and 4.0% respectively. Featherston has a success rate of 50.8% and is ranked #2532 out of 3974 analysts, while Gerdes has a success rate of 52.7% and is ranked #609.
Overall, 5 research analysts have assigned a Hold rating and 5 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $16.67 which is 26.7% above where the stock closed last Friday.
Marathon Oil Corp. engages in the exploration, production, and market of liquid hydrocarbons and natural gas. It operates through the following segments: North America E&P, International E&P, and Oil Sands Mining. The North America E&P segment engages in the oil and gas exploration, development and production activities in the United States and Canada. The International E&P segment involves oil and gas exploration, development, and production activities in Angola, Equatorial Guinea, Ethiopia, Gabon, Kenya, the Kurdistan Region of Iraq, Libya, Norway, and the United Kingdom. The Oil Sands segment includes mining, extracts and transports bitumen from oil sands deposits in Alberta, Canada, and upgrades the bitumen to produce and market synthetic crude oil and vacuum gas oil.