Friday, October 19, 2012

Marathon High-Grading Eagle Ford Acreage

Marathon High-Grading Eagle Ford Acreage

     The recent decision by Marathon to sell-off approximately 97,000 acres of their less economic dry gas and marginal black oil window Eagle Ford acreage in order to focus and concentrate on drilling and developing their over pressure volatile oil window acreage is roundly seen by analyst's as a net positive for the company. There has lately been a virtual stampede among operators to sell off non-core assets. Shedding their less economic acreage in favor of holding and fast-track developing their over pressure volatile oil window has become the du jour operator business model to follow of late. This sale will further enhance and validate the wisdom of last year's purchase by Marathon of an approximately 65% working interest in a large swath of EFS acreage from Hilcorp for $25,000 per acre. At the time last year Eagle Ford naysayers and those of little faith of the extreme economics of the play blustered profusely how foolish the $25,000 per acre price paid was. If as expected, Marathon successfully flips this less valuable acreage for the average price it paid last year of $25,000 per acre it will be seen by investors as smart business move.

A chorus of crude oil experts at the DUG Eagle Ford Conference recently joined in singing the praises of the Eagle Ford by proclaiming it's as good or better than anything found in the Middle East. The light sweet volatile oil window is just awesomely economic beyond belief.  As operators pivot into oil factory mode and the extreme economics are better understood there will be deals for many, many multiples of the highest prices paid per acre to date. Publicly we know that Aurora Oil & Gas paid over $100,000 per acre for approximately 70% working interest in Sugarkane acreage in Karnes County a few months back. Expect private deals in the future to shatter this once thought lofty price. The show has just begun, Eagle Ford is the wonder of the oil industry today.

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