Matt Zborowski
Assistant Editor
Marathon Oil Corp., Houston, has agreed to acquire 21,000 net surface acres primarily in the Permian's northern Delaware basin of New Mexico from Black Mountain Oil & Gas LLC, Fort Worth, and other private sellers for $700 million in cash, excluding closing adjustments.
The deal includes up to 10 target benches in 5,000 ft of stacked pay with a base case that assumes up to 6 target benches, Marathon Oil says. Primary targets are in the Wolfcamp and Bone Spring formations.
The position has an estimated 230 million boe of risked resource with 440 gross company-operated locations, and 550 million boe of total resource potential with 950 total gross company-operated locations.
Marathon Oil says the northern Delaware inventory produces greater than 90% before-tax internal rate of return at a West Texas Intermediate crude oil price of $55/bbl and competes for capital allocation at top of the firm's portfolio.
The deal is effective Mar. 1 and expected to close in the second quarter.
New Delaware footprint
Marathon Oil entered the northern Delaware earlier this month by agreeing to purchase 51,500 acres from BC Operating Inc. as part of a $1.1-billion Permian deal (OGJ Online, Mar. 9, 2017).
The two deals give Marathon Oil 71,500 acres in the northern Delaware and more than 91,000 in the Permian as a whole.
"While we expect to pursue additional trades and grassroots leasing, this bolt-on achieves the scale necessary for efficient long-term development in the basin," said Lee Tillman, Marathon Oil president and chief executive officer, upon the second deal's announcement.
Marathon Oil says the implied total acreage cost of the two Permian deals is $18,400/acre with $23,400/acre in the northern Delaware, adjusting for existing production.
The firm's new position holds an estimated 580 million boe of risked resource with 1,070 gross company-operated locations, and 1.45 billion boe of total resource potential with 2,650 total gross company-operated locations from both tighter density and secondary targets.
Marathon Oil also expects further upside opportunities from 18,500 net acres in Northwest Shelf.
The acreage currently has 1 operated rig working, and the firm plans to add two more midyear.