Having announced Oct. 15 that it will unload 96,738 net acres in South Texas’ Eagle Ford play as part of a goal to shed non-core properties, Marathon Oil’s non-essential Bakken acreage in North Dakota and Montana is likely to be next on the chopping block — perhaps as soon as Nov. 6, when the company is scheduled to report third-quarter earnings.
The company is looking to raise $1.5 billion to $3 billion by year-end 2013 through divestures.
But unlike its early October placement of some 80,000 acres up for sale in the Marcellus gas play, Marathon’s reasons for dropping nearly one-third of its 325,000 net Eagle Ford acreage was not about reducing its focus on the oil-rich region, but instead dropping leases that were reportedly a combination of gassier and lower productive oil areas in the play.
In fact, Marathon’s chief operating officer and executive vice president, David Roberts, was clear at an Oct. 15 conference that despite the acreage reduction, the company’s 2016 daily production goal and estimated capex for the next five years would remain the same for the Eagle Ford: 120,000 net barrels of oil equivalent per day, up from 21,000 net boe a day during the second quarter (28,500 boe a day in July); and about $1.6 billion a year for capital spending, which is close to one-third of Marathon’s current capex.
So just where would Marathon cut in North Dakota and Montana?
Probably not much acreage in the Myrmidon, Hectar and Ajax areas where it has had 16 successful Three Forks tests, including five with 24-hour initial production, or IP, rates of 730, 1,201, 1,259, 1,618, and 1,930 barrels of oil from the following 2012 wells, respectively: Boy Chief USA 11-15TFH (online Jan. 12); Eckelberg 14-23TFH (March 13); Boy Chief USA 31-4TF (Jan. 12); Weninger 44-34TFH (April 19); and Wakelum 31-3TFH (March 17). (See adjacent chart from Marathon’s latest information posted to its online Investor Center.)
At its Aeneas and Myrmidon projects in McLean and southern Mountrail counties, Marathon was averaging an estimated ultimate recovery, or EUR, rate of 570,000 boe per well at mid-year (up from 350,000 in 2008).
At its Hector and Ajax projects in Dunn County, to the south, Marathon was averaging an EUR rate of 498,000 boe per well (up from around 200,000 in 2008.)
According to Marathon’s Investor Center map, in mid-August the company had six rigs working in those three areas, and one at Diomedes in Williams County, N.D., where “data acquisition programs (are) under way to evaluate the Three Forks second bench.”
According to the state’s Oil and Gas Division website’s Oct. 18 rig report there were four rigs operating in Dunn County, one in McLean, one in Mountrail and two in McKenzie counties.
Per Marathon’s latest investor information its average 2012 Bakken IP is 1,338 boe per day, a 120 percent increase over 2010.
Other good news from the region:
• Marathon’s estimated EURs per well have grown from 350,000 boe to 550,000;
• Spud to spud cycle times have dropped from 90 days to 28 days;
• Thirty-stage fracks have become the norm;
• Eight million to 12 million barrels of oil in place on a 1,280-acre unit, which increases to 40-60 million barrels when adding in other Bakken members, such as the Three Forks benches;
• Producing 43 degree API crude with a 600-1,200 gas/oil ratio, or GOR.
Still, with close to 420,000 net acres in the Bakken, Marathon is only projecting a net Bakken oil production of 36,000 barrels of oil a day for 2016; and 38,000 barrels of oil equivalent per day — as compared to the Eagle Ford’s 120,000 boe in the same time frame.
Of course, it helps to have 20 rigs and four dedicated frac crews operating in the Eagle Ford (to drop to 18 by year-end), as compared to seven in the Bakken (five by the end of the year).
Marathon executives have repeatedly said the Eagle Ford play is the premier resource play in the U.S. in terms of profit, partly because Eagle Ford has the benefit of being closer to refineries; production growth that is supported by infrastructure; and lower drilling costs, in part because Marathon is drilling 9,000-foot laterals in the Bakken and only 5,000 to 5,600-foot laterals in the Eagle Ford.
The company’s rig numbers and oil production projections for its Bakken petroleum system acreage are significantly lower than those for its Eagle Ford holdings, suggesting a larger chunk of Marathon’s North Dakota and Montana leases will be put on the chopping block.
Unconfirmed rumors predict Marathon will make an announcement about the sale of its non-core Bakken leases in its Nov. 6 third-quarter conference call, which will be available online, per an Oct. 9 press release.
Howard J. Thill, Marathon vice president of investor relations and public affairs, will host the call. Also participating from the company will be Clarence Cazalot, chairman, president and CEO; Janet Clark, executive vice president and chief financial officer; and Roberts.
Tune it to http://www.MarathonOil.com at 2 p.m. eastern standard time; click on the 2012 Third Quarter Financial Results link. Replays of the conference call will be available on the website through Nov. 20.
