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Marubeni Gains Stake in Marathon's DJ Basin Acreage

Houston-based Marathon, which is the fourth largest integrated producer in the United States, began leasing acreage in the DJ Basin in 2010. It currently is acquiring 2-D and 3-D seismic data and expects to participate in eight to 12 gross exploration wells by the end of the year.

The Marubeni transaction is expected to be completed by the end of the month. Marathon and Marubeni already are partners in the deepwater Ozona discovery in the Gulf of Mexico (GOM), which had been scheduled to ramp up this year (see Daily GPI, Oct. 31, 2008). A unit of Marubeni last year also paid $650 million for BP plc's stakes in four deepwater fields in the GOM (see Daily GPI, Oct. 26, 2010).

Canaccord Genuity analysts John Gerdes and Cameron Horwitz noted that the transaction price was "slightly above" the $4,750/acre price that Chesapeake Energy Corp. received from China National Offshore Oil Corp. Ltd. in February, a deal in which the Chinese national gained a one-third interest in 800,000 net acres in the DJ Basin (see Daily GPI, Feb. 3).

Analysts with Tudor, Pickering, Holt & Co. Inc. (TPH) also weighed in, noting that the transaction would give Marathon a return of more than three times its $1,500/acre acquisition cost; the producer acquired the acreage less than a year ago.

"Acreage located in areas with few Niobrara wells (even vertical) says supply tight and buyers betting on the come," said the TPH team. Marathon's "acreage ring fences most Niobrara activity to date in the DJ Basin north of Wattenberg." The Wattenberg Field, a basin-centered field north of Denver, is considered one of the largest natural gas deposits in the United States. The field has produced more than 4 Tcf of gas.

TPH analysts said they were "cautious to assign $5,000/acre to smaller positions" in the DJ Basin, "as scale matters to buyers" and the Chesapeake and Marathon deals "were both sizeable. But for larger players [we] think a read-through [is] justified."

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