uploads///MRO PayRock STACK Production

Marathon Oil’s Production Volumes after PayRock Acquisition

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Jun. 22 2016, Published 2:47 p.m. ET

Marathon Oil’s pro forma STACK production for 1Q16

For 1Q16, Marathon Oil (MRO) reported total STACK production of ~8 Mboe (thousand barrels of oil equivalent) per day. PayRock’s current production is ~9 Mboe per day. This means that on a pro forma basis, the enlarged Marathon Oil 1Q16 STACK production will be ~17 Mboe per day. That’s an increase of ~113% compared to its current 1Q16 STACK production.

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Marathon Oil’s pro forma total production for 1Q16

For 1Q16, Marathon Oil reported total production of ~388 Mboe per day. PayRock’s current production is ~9 Mboe per day. This means that on a pro forma basis, the enlarged Marathon Oil 1Q16 production will be ~397 Mboe per day, an increase of ~2% compared to its current 1Q16 production.

Marathon Oil’s pro forma STACK acreage

Currently, Marathon Oil has STACK acreage of ~142,000 acres. PayRock’s current STACK acreage is ~61,000 acres. This means that on a pro forma basis, the enlarged Marathon Oil STACK acreage will be ~203,000, an increase of ~43% compared to its existing STACK acreage.

Other upstream companies that are also active in the STACK region are Devon Energy (DVN), Newfield Exploration (NFX), and Chesapeake Energy (CHK). These companies have STACK acreages of ~430,000 acres, 275,000 acres, and 52,000 acres, respectively.

Devon Energy (DVN) and Newfield Exploration (NFX) are primarily crude oil (USO) (UWTI) (DWTI) producers. Chesapeake Energy (CHK) is primarily a natural gas (UNG) (UGAZ) (DGAZ) producer.

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Marathon Oil’s pro forma STACK 2P resource

Currently, Marathon Oil has a STACK 2P (proved and probable) resource of 735 MMboe (million barrels of oil equivalent). PayRock’s current STACK 2P resource is 330 MMboe. This means that on a pro forma basis, the enlarged Marathon Oil STACK 2P resource will be 1,060 MMboe, an increase of ~45%.

PayRock’s resource potential upside estimates

According to Marathon Oil’s estimates, PayRock acreage has a total resource potential upside up to ~700 MMboe. This is from increased well density in the Meramec and Woodford target areas and the development of the Osage target area.

As of December 31, 2015, Marathon Oil’s 1P (proved reserves) resource totaled 2,163 MMboe.

Next, let’s see if Marathon Oil’s debt burden will increase after it acquires PayRock.

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