Marathon Oil Corporation agreed on 20 June 2016 to pay US$888 million in order to purchase PayRock Energy Holdings LLC.
Venture capital firm EnCap Investments will sell PayRock, their Oklahoma and Kansas-focused portfolio company, to the Houston-based gas and oil producer as part of the deal.
The agreement will expand Marathon's foothold in the Oklahoma basin where it controls some 265,000 net acres. PayRock controls the current production of 9,000 net barrels of oil equivalent per day in the STACK area of the state. (STACK is an acronym for Sooner Trend (oil field), Anadarko (basin), and the counties of Canadian and Kingfisher).
Marathon last February announced it would allocate $204 million, or roughly 14 percent, of its 2016 capital spending towards the Oklahoma basin. With the purchase of PayRock, Marathon becomes the third-largest operator in the STACK region behind Devon Energy and Newfield Exploration.
"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 in a press release.
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"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," Tillman added.
The low price of oil and natural gas has led to Marathon reporting lower earnings in 2015 and the first quarter of this year. Its stocks have plummeted more than 50 percent in the past twelve months and by nearly 24 percent since November 2015. Nevertheless, shares jumped by nearly 10 percent on Monday following news of the PayRock acquisition.
By Erwin Cifuentes for Oilprice.com
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Erwin Cifuentes is a Contributing Editor for Southern Pulse Info where he focuses on politics, economics and security issues in Latin America and the Caribbean.… More