Marathon Zeros In On EnCap-Backed Eagle Ford Player Paloma Partners II

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Estimated Price
750MM
Description

To purchase company that owns roughly 17,000 net acres in TX Eagle Ford play primarily in Karnes & Live Oak cos., gaining 7,000 BOE/d.

Marathon Oil Corp., Houston, (NYSE: MRO) plans to purchase privately held, Houston-based Paloma Partners II LLC, an EnCap Investments LP-backed entity, for $750 million in cash.

Paloma II owns roughly 17,000 net acres in the Eagle Ford shale play, primarily in Karnes and Live Oak counties, Texas. Net production as of April 1 was approximately 7,000 barrels of oil equivalent per day.

EnCap made an initial investment in Paloma Partners II in 2009, when the company was focused on acquisition and development of acreage in the southwestern portion of the Haynesville trend.Paloma Partners II subsequently created two additional EnCap-sponsored entities, San Juan Partners and Paloma Barnett.

Marathon reported in April that it entered multiple agreements to acquire approximately 20,000 net acres in the core of the Eagle Ford shale formation in transactions valued at $767 million. In addition to undeveloped acreage, the transactions included 13 gross wells producing 7,000 barrels equivalent, and approximately 45% of the acreage is held by production.

Principal shareholders or Paloma Partners are Paloma Resources LLC, Encap Energy Capital Fund VII LP, and Macquarie Americas Corp.

Jefferies & Co. Inc. and Baker & McKenzie LLP are financial and legal advisors, respectively, to Paloma Partners II.

The deal is expected to close during the third quarter.

Wells Fargo Securities LLC senior analyst David Tameron says according to state data through February, Paloma had 10 producing well bore.

“The acreage is in and around current Marathon acreage including acreage acquired from Hilcorp,” says Tameron. “If production is valued at $75,000 per barrel equivalent per day, total price allocated to production would equate to $525 million.”

Tameron adds that assuming 90% of acreage remains undeveloped, that implies undeveloped acreage was purchased for approximately $14,700 per net acre. At $60,000 per flowing barrel, undeveloped would be valued at closer to $21,500 per acre.