April 21, 2024

DealBook: K.K.R. Venture Sells Shale Assets for $3.5 Billion

Clarence P. Cazalot Jr., Marathon Oil’s chief executive.Tim Boyle/Bloomberg NewsClarence P. Cazalot Jr., Marathon Oil’s chief executive.

A partnership of Kohlberg Kravis Roberts Company and Hilcorp Energy said on Wednesday that it had agreed to sell its oil and natural gas assets in the Eagle Ford shale formation in south Texas to Marathon Oil for $3.5 billion.

The deal appears to be a big windfall for the private equity firm. Just a year ago, K.K.R.made an initial investment of $400 million to form a joint venture, Hilcorp Resources, with Hilcorp Energy of Houston to acquire, own and develop oil and natural gas assets within the Eagle Ford shale,

For Marathon, the acquisition bolsters its position in shale oil and gas production at a time when the company is planning to focus on exploration and production and spin off its downstream business.

“This transaction enhances our already strong North America position focused on unconventional, liquids-rich resource plays that provide low-risk, scalable and profitable growth,” Clarence P. Cazalot Jr., Marathon’s chief executive, said in a statement. “This and other projects under development serve as a catalyst for Marathon to increase our projected upstream production growth to 5 to 7 percent on a compound average annual growth rate during the period 2010-2016.”

The acquisition includes 141,000 net acres, 36 producing wells and 10 wells that have been drilled and are awaiting completion. It is expected to close on Nov. 1.

Marathon said it would use cash on hand and cash generated from operations to finance the transaction. The company announced in January that it planned to split into two, spinning off its refining, marketing and pipeline transportation businesses into a new company, Marathon Petroleum.

Jefferies Company and the law firm Andrews Kurth advised Hilcorp Resources on the sale. Simpson Thacher Bartlett
served as legal adviser to K.K.R.

Barclays Capital and the law firm Baker Botts advised Marathon.

Article source: http://feeds.nytimes.com/click.phdo?i=8d2b08723dc5e45cb46304a12a4f7c56

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