Marathon Oil will spend $3.5 billion in cash to snap up oil and natural gas fields in Texas as the company boosts exploration and production in a highly targeted and energy rich region.
The Houston company said Wednesday that it has reached an agreement with the owner, Hilcorp Resources Holdings, a partnership that includes Kohlberg Kravis Roberts & Co.
Marathon gets about 141,000 net acres within the Eagle Ford shale formation. The region overlaps Atascosa, Karnes, Gonzales and DeWitt counties the southern part of the state. As of May 1 the land was producing 7,000 barrels of oil equivalent per day. Marathon plans to add new wells and produce 80,000 barrels per day by 2016.
The Eagle Ford formation has become one of the most active plays in the country because it contains not only natural gas, but crude oil as well. And the price of oil is skyrocketing again.
Oil prices have surged more than 30 percent in the past 12 months and a barrel was trading above $100 Wednesday. Natural gas prices have remained relatively flat.
Marathon said that the 36 wells currently working in the area are producing mostly crude oil and condensate.
The deal is expected to close on Nov. 1. Combined with other acquisitions, Marathon says its position in the Eagle Ford should double this year to 285,000 net acres.
Company shares dropped $1.12, or 2 percent, to $53.05 in premarket trading, with fresh job numbers sending most indexes lower.