Marathon Oil Corporation announced that it has completed an agreement with Denali Oil & Gas for entry into the Eagle Ford Shale formation in Wilson and Atascosa counties, Texas. Under the terms of the agreement, Marathon will pay Denali $10 million as well as drill and complete four wells to earn approximately 17,000 net acres. Marathon also has the option to purchase Denali's remaining 58,000 net acres in the Eagle Ford Shale in these two counties. If Marathon executes this option, the full 75,000 net acres, including the initial payment, carried well interest and lease extensions, will cost approximately $2,800 per acre or a total of approximately $209 million. Marathon has until Oct. 31, 2011, to exercise this option.
In the event Marathon does not exercise its purchase option, Denali has the option to sell the remaining 58,000 acres to Marathon. The total cost under this option, including the initial payment, carried well interest and lease extensions, would be $92 million or approximately $1,225 per acre. Denali has until the later of Nov. 15, 2011, or 15 days after the completion of the final well, to exercise this option. This agreement covers all of Denali's acreage in Wilson and Atascosa counties but excludes Denali's 25,000 acres in Gonzales and Fayette counties.
"Since acquiring our first Shale assets in the onshore U.S. market in 2006, Marathon has developed substantial expertise that we can apply to emerging plays like the Eagle Ford and create more opportunities for mid- and long-term profitable production growth," said Dave Roberts, the Company's executive vice president, Upstream. "This new entry reinforces a key element of our Upstream strategy of targeting unconventional, primarily liquids-rich resource plays providing low-risk, scalable growth."
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