Marathon Oil Corp. last week acquired 8,700 net acres of natural gas-weighted properties in the Piceance Basin of Colorado in a cash transaction valued at $354 million. The acreage, acquired from Petroleum Development Corp. (PDC), is located in Garfield County in the Greater Grand Valley Field Complex, which is flanked by, and on-trend with, adjacent Marathon production.

The Houston-based independent expects to drill about 700 wells on its new leasehold over the next 10 years. Marathon said the drilling program has the potential to add nearly 180 MMcf/d net of gas production by 2014, with net recoverable resources estimated to be more than 900 Bcf net. First production is expected in late 2007. The primary reservoir is the Williams Fork formation of the Mesaverde Group, which is characterized as a massive 1,300 foot sequence of stacked over-pressured channel sands in a continuous gas accumulation. The target reservoir is encountered at measured depths of 6,500 to 8,500 feet.

“The Piceance Basin currently is one of the most active basins in North America, and this acquisition supports our ongoing efforts to sustain the strength of our North American production business,” said Steven B. Hinchman, Marathon senior vice president of worldwide production. “We will be applying Marathon’s extensive experience in drilling and completion techniques to help realize the full potential of this prolific resource basin.”

Marathon’s principal exploration and development activities in the United States are in Alaska, New Mexico, Oklahoma, Texas, Wyoming and the Gulf of Mexico. The Wyoming assets are located in the Powder River Basin, where Marathon is one of the top leaseholders. Its net gas production there averages around 125 MMcf/d. About 79 MMcf/d of the basin production is coalbed methane gas, which represents 26% of Marathon’s U.S. production.

In 2004, Marathon’s total U.S. natural gas production averaged 631 MMcf/d, or 63% of its worldwide gas output.

PDC, headquartered in Bridgeport, WV, said it retained about 475 additional undeveloped locations on 10-acre spacing on the Grand Valley Field leasehold in addition to all of its producing properties in the field. The company intends to use the sale proceeds to fund a variety of projects, which could include the repurchase of up to 10% of the common stock additional drilling on the retained undeveloped locations as well as on other properties, purchase of producing properties from other producers, or acquisition of acreage in other areas to support both development and exploratory drilling ventures.

“We believe this is a great transaction for both PDC and Marathon,” said PDC President Thomas E. Riley. “Marathon acquired a high quality natural gas prospect with great low-risk development potential, and PDC monetized an asset that the company would not have otherwise developed during the next five years or more.”

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