Marathon Oil will Acquire Payrock Energy Holdings for $888 million


Marathon Oil Corp (NYSE: MRO) announced on Monday that it would acquire PayRock Energy Holdings, a portfolio company of Encap Investments, for $888 million.

Marathon Oil owned around 265,000 net acres in Oklahoma, and the purpose of the acquisition is to boost its presence in this area. The company said four months ago that it has distributed $204 million, 14% of its total capital spending in 2016 to Oklahoma basin. PayRock Energy Holdings, a portfolio company of Encap Investments that focused on Oklahoma and Kansas, produces about 9,000 net barrels of oil equivalent per day and has about 61,000 net surface acres in Oklahoma.Marathon Oil CEO Lee Tillman said that when the crude prices increase, the 61,000 net surface acres his company acquired, located in one of the best shale oil reservoirs in the U.S., is going to be more attractive for investment.

“The asset quality is exceptional, we certainly see that next incremental dollar of capital, as prices get more constructive, flowing into Oklahoma.” Lee Tillman said on a conference call. “Acquiring PayRock’s STACK position will meaningfully expand the quality and scale of Marathon Oil’s existing portfolio in one of the best unconventional oil plays in the U.S.,” Lee Tillman said.

Marathon said that the Payrock purchase is expected to close in the third quarter of 2016 and is subject to customary closing conditions. To support its finance, the company has already cut its production, sold off stocks worth more than $1billion, reduced spending and would sell off oil-and-gas acreage that is not center to its operations. On Monday, Marathon also credited the sales that strengthened the financial statements for the acquisition and also said that issuing new shares was not needed for the deal.

Up to last Friday’s close, Marathon’s shares have decreased more then 50% in the past year. Shares increased 10.03% to $14.48 per share at 3:59PM EDT on Monday.

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