Thursday, March 9, 2017

Marathon Update; To Sell Canadian Sands; To Buy Permian -- March 9, 2017

Updates

Later, March 21, 2017: Marathon buys another 21,000 acres in the Permian; at $700 million in cash works out to about $33,000/acre.

Later, 1:42 p.m. Central Time: Market Street had this to say about MRO exiting Canada; focusing on the Permian. Spoiler alert: the market loved it.
  
Original Post

From E & P Industry Research.

From a press release dated today, March 9, 2017:
Marathon Oil Corporation announced today it has signed an agreement to sell its Canadian subsidiary, which includes the Company's 20 percent non-operated interest in the Athabasca Oil Sands Project (AOSP), to Shell and Canadian Natural Resources Limited for $2.5 billion in cash, excluding closing adjustments.
Marathon Oil also announced the signing of a definitive agreement to acquire approximately 70,000 net surface acres in the Permian basin from BC Operating, Inc. and other entities for $1.1 billion in cash, excluding closing adjustments. The acquisition includes 51,500 acres in the Northern Delaware basin of New Mexico, and current production of approximately 5,000 net barrels of oil equivalent per day (boed).
This is interesting because I thought I just read that Shell was selling some of its western Canadian oil sands. Yes, I did -- earlier this morning: Shell sells sands -- $7.25 billion -- Reuters.

Will use proceeds to acquire more Permian assets, data points:
  • up to 10 targets within approximately 5,000 feet of stacked pay; base case assumes up to 6 target benches
  • 70,000 net acres with 51,500 net acres in the Northern Delaware basin
  • total implied acreage cost: $14,000
  • at $55 WTI, 90% before-tax IRRs
  • primary targets: Wolfcamp and Bone Spring
  • 350  million boe of risked resource at $2.80/BOE with 630 gross company operated locations
  • 900 million boe of total resource potential with 1,700 total upside locations
  • one operated rig; will add second rig mid-year 
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Now, Back To That Shell / Sands Story Linked Above

Here's the story:
Royal Dutch Shell has agreed to sell most of its Canadian oil sands assets for $7.25 billion to Canadian Natural, the company said on Thursday.
The deal also includes a joint acquisition by Shell and Canadian Natural of Marathon Oil Canada Corporation, a subsidiary of Marathon Oil, for $1.25 billion each to be paid in cash, Shell said.
Shell will sell its existing and undeveloped Canadian oil sands interests and reduce its share in the Athabasca Oil Sands Project (AOSP) to 10 percent, but it will remain as operator of the AOSP Scotford upgrader and the Quest carbon capture and storage project.

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