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Friday, August 27, 2010

Resolute Energy: Another Bakken Play

Resolute Energy is yet another energy company that I was unaware of until today's edition of the Oil and Gas Journal which reported joint venture activity between Resolute and Marathon. Resolute is not entirely new to the Bakken; it has previously partnered with GeoResources in North Dakota.

The real question is why a fairly large company (MRO) with a market cap of $21 billion, debt of $7 billion, annual cash flow of $6 billion, and $2 billion cash on hand would partner with anyone, much less a small cap company (REN) with a market capitalization of about $600 million.

I can think of only two reasons. I suppose others can think of a lot more.

2 comments:

  1. What are the two reasons you can think of? I'm not connecting the dots...

    ReplyDelete
  2. When I don't post my thoughts on something, it means I think I am so wrong, I don't want to be embarrassed by posting.

    So, with that caveat (that I am probably really, really wrong), and there are no dots to connect:

    1. Even big companies like Marathon can have a cash flow problem, and look for other sources of capital when drilling $7 million wells in the outback;

    2. Relatives or friends of friends sit on both the Marathon and the Resolute boards (or the decision-making folks).

    More likely: many wells in the Bakken have "shared risk" and in this case it may simply be that Marathon let the "oil patch" know they were looking for (a) partner(s), and Resolute produced the best offer.

    Anyway, in the big, big scheme of things, it doesn't matter. It's just fun to think about all the possibilities, and you can probably think of several that make even more sense.

    If I remember correctly, Marathon was a pioneer in horizontal drilling in the Bakken, so I don't think it was the fact that Resolute brought any special expertise.

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