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$3 Billion Deal, Marathon Oil Buys Ensign Natural Resources
11/16/2022
A $3.0 billion cash definitive agreement to purchase the Eagle Ford assets of Ensign Natural Resources has been concluded by Marathon Oil Corporation. The transaction is subject to customary terms and conditions, including closing adjustments, and is anticipated closing by year-end 2022, according to the company press release on November 2.
The transaction is considerably accretive to Marathon Oil's key financial metrics without delay, anticipated driving a 17% increase to 2023 operating cash flow and a 15% increase to free cash flow. The transaction was acquired at about 3.4x 2023 EBITDA and a 17% free cash flow yield, accretive relative to Marathon Oil's 2023 stand-alone metrics at the same price deck (4.7x EV/EBITDA, 13% FCF Yield).
As the transaction is accretive to Marathon Oil's cash flow profile, it will improve shareholder distributions, consistent with the company's transparent Return of Capital Framework that is solely driven by operating cash flow and, in a $60/bbl WTI or higher price environment, calls for not less than 40% of annual operating cash flow to be returned to equity holders.
To get deeper, Marathon Oil expects the transaction to increase 2023 shareholder distribution capacity by practically 17%. Additionally, due to the cash flow accretive nature of the transaction, Marathon Oil expects to raise its quarterly base dividend an additional 11% post transaction close to 10ct/sh. Marathon Oil still considers achieving its aim to take back at least 50% of adjusted operating cash flow to shareholders, outperforming its 40% framework minimum.
This transaction considerably improves Marathon Oil's Eagle Ford position through the addition of 130,000 net acres with 97% working interest situated mainly in the prolific condensate and wet gas phase windows of the play. The company considers acquiring more than 600 undrilled locations, representing an inventory life greater than 15 years, with inventory that immediately competes for capital in the Marathon Oil portfolio.
The acreage is adjacent to Marathon Oil's existing Eagle Ford position, letting the Company leverage its knowledge, experience, and operating strengths in the Basin, while raising its Basin-scale to 290,000 net acres and facilitating optimization of supply chain accessibility, and contributing to cost control in a tight service market. The acquisition also includes 700 existing wells, most of which were completed before 2015 with early-generation completion designs. These existing locations offer upside redevelopment potential, none of which was considered in the Company's valuation of the asset or inventory count.
The 130,000 net acres (99% operated, 97% working interest) Marathon Oil is purchasing from Ensign Natural Resources span Live Oak, Bee, Karnes, and Dewitt Counties across the condensate, wet gas, and dry gas phase windows of the Eagle Ford. The estimated fourth quarter 2022 oil equivalent production is 67,000 net boed (22,000 net bopd of oil). Marathon Oil supposes to hold its fourth quarter production flat with virtually 1 rig and 35 to 40 wells to sales per year.
The Company's valuation of the asset was based on this maintenance-level program and does not have any synergy credits or upside redevelopment opportunities. The transaction is expected to be closed by year-end 2022 with an effective date of October 1, 2022. Purchased tangible assets are eligible for full expensing for the purpose of income tax optimization.
Morgan Stanley is serving as the lead financial advisor to Marathon Oil and is providing committed financing to Marathon Oil with respect to a portion of the purchase price. White & Case LLP is serving as outside legal counsel for Marathon Oil.
Evercore and J.P. Morgan Securities LLC are serving as financial advisors to Ensign Natural Resources. Sidley Austin LLP is serving as the principal legal advisor to Ensign Natural Resources.
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Lime Rock Resources Starts the Year With a Bang — a Money Bang!
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Still waters run deep: after patiently waiting for 2 years, Lime Rock Resources starts the year with a pair of acquisitions worth $358.5 million The two acquisitions include Abraxas Petroleum’s Williston Basin position in North Dakota: about 3,500 acres of land and 19,400 boed of net production, as well as properties situated in Burleson, Milam, and Robertson in Texas from a third party, that contain 46,000 contiguous net acres and produce 7,700 boed as of the closing of the deal. The company intends to intensify its focus on low-risk opportunities and margins, which will significantly boost Lime’s market position going further.
Ensign’s Assets Are Acquired by Marathon for $3 Billion
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Marathon Oil Corp. closes the acquisition of Ensign Natural Resources’ Eagle Ford assets for $3 billion cash, according to the company’s release on December 27. The purchase includes 130,000 net acres (99% operated, 97% working interest) in acreage adjacent to Marathon Oil’s existing Eagle Ford position. Ensign’s estimated fourth-quarter production will average 67,000 net boe/d, including 22,000 net bbl/d of oil.
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Rangeland Energy has agreed to sell Rangeland Midstream Canada to Kingston Midstream Alberta and remains committed to future Canadian midstream investments. Texas-based Rangeland Energy, supported by financial partner EnCap Flatrock Midstream, has inked a deal to sell its Canadian subsidiary, Rangeland Midstream Canada Ltd., to Calgary's Kingston Midstream Alberta Ltd. for cash.
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The merger between ONEOK and Magellan received approval from Magellan shareholders, securing just 55% of the total votes at Magellan’s meeting on Sept. 21. ONEOK Inc. has successfully concluded the acquisition of Magellan Midstream Partners LP on Sept. 25. The deal will bring together their respective assets and expertise, resulting in a powerful entity boasting an extensive network of approximately 25,000 miles of pipelines primarily focused on transporting liquids.
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Viper Energy's deal, comprised of cash and equity, secures an additional 2,800 net royalty acres in the Midland Basin and 1,800 in the Delaware Basin. Viper Energy Partners LP, a Diamondback Energy Inc. subsidiary, has inked a deal to acquire mineral and royalty interests in the Permian Basin. The deal, valued at around $1 billion, is with Warwick Capital Partners and GRP Energy Capital. Viper was established by Diamondback with the purpose of owning, purchasing, and capitalizing on oil and natural gas assets in North America, specifically targeting mineral and royalty interests.