Eagle Ford operator Paloma Partners II LLC revealed on Wednesday that it is being taken over by Marathon Oil Corp. for $750 million in cash.
The partnership owns about 17,000 net acres, primarily in Karnes and Live Oak counties in South Texas. Net production as of April 1 was about 7,000 boe/d.
Principal shareholders are privately held Paloma Resources LLC, Encap Energy Capital Fund VII LP and Macquarie Americas Corp. Paloma Resources’ three focus areas are the Eagle Ford, Haynesville and Barnett shales.
Through February, the Railroad Commission of Texas said Paloma had 10 producing well bores in the Eagle Ford, according to Wells Fargo Securities senior analyst David Tameron. In a note following the announcement Tameron wrote that the Paloma acreage “is in and around” Marathon’s big leasehold, including land that it acquired last year from Hilcorp Resources Holdings LP (see Shale Daily, June 2, 2011).
“If production is valued at $75,000/boe/d, total price allocated to production would equate to $525 million,” Tameron wrote. “Assuming 90% of [the] acreage remains undeveloped, that would imply that 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/acre.
“We believe the transaction provides a good marker for nearby by public operators,” including some within Wells Fargo’s coverage universe: EOG Resources Inc. (see Shale Daily, May 10a); Carrizo Oil & Gas Inc. (see Shale Daily, May 10b); and Cabot Oil & Gas Corp. (see Shale Daily, April 30).
In April 2010 Paloma Partners made news in a Bureau of Land Management quarterly oil and gas lease sale for properties in New Mexico, Oklahoma, Texas and Kansas. The partnership had the highest bid per acre for a parcel and the highest overall total per parcel in the sale by bidding $10,000/acre for 1,006.4 acres in Shelby County, TX — a total bid of $10.07 million.
Last year Karnes City officials unanimously agreed to sign a drilling lease agreement with Paloma Partners, which gave the city a $10,000/acre bonus for 140.32 acres and a 25% royalty for three years with the option for another two-year lease, including another bonus.
The sale to Marathon is expected to be completed by the end of September. Jefferies & Co. Inc. acted as financial adviser, while Baker & McKenzie LLP was legal adviser to Paloma Partners.
Marathon currently holds approximately 413,000 net unconventional acres in the Bakken, 322,000 acres in the Eagle Ford and 160,000 acres in the Cana-Woodford, according to company documents. The Houston-based major also has significant acreage positions in the Niobrara-DJ (144,000 acres) and Marcellus (82,000 acres).
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