Marathon Oil Co. plans to buy Pennaco Energy, Inc. for $19/share in a $500 million transaction.
The boards of both firms approved the acquisition. Marathon will begin a cash tender offer about Jan. 8. The deal is subject to the usual conditions.
Pennaco, Denver, only produces coalbed methane gas (CBM) from the Powder River Basin of northern Wyoming and southern Montana. It is one of the largest leaseholders in the area with more than 400,000 net acres and net production of over 50 MMcfgd. Net proven reserves are 200 bcf, with over 800 bcf of upside potential. Marathon estimated that the ultimate acquisition and development costs of the proven, plus probable reserve base will be $4.50/boe.
Marathon President, Clarence Cazalot said, "Much of the growing global demand for energy will be met by natural gas, and this is particularly the case for the US where growth in electric power generation is a prime driver. The North American gas market is a core area for Marathon, and this acquisition will enhance our already strong presence."
Paul Rady, Pennaco chairman, president and CEO, said, "Over the past 21/2 years Pennaco's management team and employees have made outstanding progress in building and developing our position in the Powder River Basin coal bed methane play."