American Oil and Gas Reporter - December 2022 - 53

SpecialReport: Eagle Ford Playmakers
Marathon Oil is clearly a believer in
the Eagle Ford and Austin Chalk. On
Nov. 2, Marathon Oil announced it had
entered into a definitive agreement to acquire
the Eagle Ford assets of Ensign
Natural Resources for total cash consideration
of $3.0 billion. " All these factors
combine to make the Eagle Ford one of
the country's most cost-competitive
basins, " Kokoski says.
Crude oil production in the Eagle Ford
averaged 1.2 million barrels a day in
September, according to the U.S. Energy
Information Administration. Despite the
recent increase, less crude oil volume is
being produced in the Eagle Ford region
than prior to the pandemic (1.4 MMbbl/d
in April 2020) and significantly less than
the all-time high of 1.7 MMbbl/d recorded
in March 2015.
Kokoski describes the Eagle Ford as
" a mid-cycle basin in which the activity
level and all that has been learned from
that activity has driven operation efficiencies
to an enviable level.
" Moreover, the play holds a least another
decade of drilling inventory that will benefit
from those efficiencies, " he continues.
" Throw in alternative development techniques
such as enhanced oil recovery, redevelopment
within existing spacing units
and refracturing of existing wells, and it is
easy to see why Marathon Oil was excited
by the opportunity to increase its commitment
to the basin. It is also easy to see
why the Eagle Ford is expected to continue
to play a prominent role in U.S. oil and
gas production for the foreseeable future. "
Scaling Up Operations
The Ensign acquisition will significantly
increase the size and scale of
Marathon Oil's Eagle Ford operations,
according to Kokoski. He points out the
acquisition includes 130,000 net acres in
Texas' Live Oak, Bee, Karnes and DeWitt
counties, 700 existing wells, more than
600 highly economic undrilled locations
with an expected inventory life of more
than 15 years, and net production of approximately
67,000 barrels of oil equivalent
a day during the fourth quarter.
" The new inventory is predominately
in the condensate and wet gas windows,
Marathon Oil Corp. is scaling up its South Texas operations after announcing in early
November that it has entered into a definitive agreement to acquire Ensign Natural
Resources' Eagle Ford assets for a total cash consideration of $3 billion. The acquisition
includes 130,000 net acres in Texas' Live Oak, Bee, Karnes and DeWitt counties, 700
existing wells, more than 600 undrilled locations with an expected inventory life of more
than 15 years, and net production of approximately 67,000 boe/d during the fourth quarter.
and the acreage extends into dry gas
areas, " Kokoski states. " The combined
assets now provide us with exposure to
the entire Eagle Ford fluid regime. While
we remain focused on high-value oil and
condensate targets, we see potential longterm
benefits tied to the additional gas
exposure accompanying the Ensign assets.
" This
acquisition is a unique opportunity
that provides immediate financial,
return of capital and inventory accretion
while preserving our balance sheet
strength. Also, valuation is based on a
nominal one rig maintenance program
with no synergy credits and no refrac/redevelopment
upside. Plus, we also believe
that tangible assets acquired in this transaction
are eligible for full expensing in
2022, contributing to our income tax optimization
efforts. This could defer our
exposure to the alternative minimum tax,
offering yet another positive value capture
opportunity not assumed in our valuation, "
Kokoski states. " It is in a basin we know
well, where we are consistently at the
top of the peer group in operation performance
and capital efficiency. We believe
it is in a basin that will continue to offer
competitive and compelling returns. "
Prior to the Ensign acquisition,
Marathon Oil held 160,000 net acres in
the Eagle Ford and operated 2,200 wells.
Kokoski explains that gross production
averaged just under 160,000 boe/d in
2022, with Marathon Oil's net share averaging
approximately 85,000 boe/d.
" These wells produce from the Lower
Eagle Ford, the primary reservoir target,
as well as the Upper Eagle Ford and
Austin Chalk, " he notes. " Operations are
centered in Karnes County, but we also
have significant activity in Atascosa and
Gonzales counties and a smaller presence
in Live Oak, DeWitt and Lavaca counties.
We expect to end the year having completed
around 110 new wells, which is a
pace consistent with prior years. "
Marathon Oil's acreage, prior to the
Ensign acquisition, is predominantly in
the oil window, although the company's
acreage position extends down dip in
certain areas into the condensate window,
according to Kokoski.
Remarkable Year
It was just over a year ago that Penn
Virginia closed its acquisition of established
Eagle Ford player, Lonestar Resources,
and rebranded itself as Ranger
Oil Corporation, Ranger Oil's President
and Chief Executive Officer Darrin Henke
says the growth of the company has
been spectacular.
" It has been a remarkable year, " Henke
relates. " Due to the Lonestar acquisition
DECEMBER 2022 53

American Oil and Gas Reporter - December 2022

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