Marathon Oil to acquire Ensign Natural assets to expand Eagle Ford position

Marathon Oil has agreed to acquire the Eagle Ford Shale assets of Ensign Natural Resources in an all-cash transaction valued at $3 billion to nearly double its position in the basin.

Through the transaction, Marathon Oil will acquire an additional 130,000 net acres (99% operated, 97% working interest) that span the Live Oak, Bee, Karnes, and Dewitt Counties across the condensate, wet gas, and dry gas phase windows of the Eagle Ford basin and more than 600 undrilled locations.

Marathon Oil will hold 290,000 net acres in the Eagle Ford on the completion of the acquisition that also includes 700 existing wells.

Accretive to Marathon Oil’s key financial metrics, the transaction is expected to drive a 17% increase in 2023 operating cash flow and a 15% increase in free cash flow.

Lee Tillman — Marathon Oil chairman, president, and CEO said: “The transaction is immediately accretive to our key financial metrics; it will drive higher distributions to our shareholders consistent with our operating cash flow driven Return of Capital Framework; it’s accretive to our inventory life with high rate-of-return locations that immediately compete for capital; and it offers compelling industrial logic by nearly doubling our position in a Basin where we have a tremendous track record of execution excellence.”

The estimated fourth quarter 2022 oil equivalent production of the assets involved in the deal is 67,000 net barrels of oil equivalent per day (boed), which includes 22,000 net bopd of oil.

Marathon Oil believes it can hold fourth-quarter production of the assets flat with approximately one rig and 35 to 40 wells to sales per year.

Ensign Natural Resources was founded in 2017 in partnership with global growth investor Warburg Pincus. The oil and gas company additionally secured an investment from the Kayne Private Energy Income Funds, the energy private equity division of Kayne Anderson Capital Advisors.

Brett Pennington — Ensign Natural Resources president and CEO said: “Over the past four years, Ensign has become one of the largest producers in the Eagle Ford basin, operating more high-quality drilling inventory than nearly all other private operations in the basin, with strong drilling results. I am proud of what we have built at Ensign and for the dedication and hard work of our employees.

“We are excited to contribute our unique Eagle Ford assets to Marathon Oil, a world class exploration and production company. I would also like to thank Warburg Pincus and Kayne Anderson for their close partnership and support, particularly throughout the past few years of volatility.”

The Eagle Ford Shale is situated in South Texas and produces from depths ranging from 4,000 and 14,000 feet.

Morgan Stanley is acting as lead financial advisor to Marathon Oil and is financing the company with respect to a part of the purchase price while White & Case is the outside legal counsel for the American oil and gas company.

Expected to close by year-end 2022, the transaction is subject to customary terms and conditions, including closing adjustments.