Marathon Oil expands South Texas position with $3 bln Ensign buy
Nov 2 (Reuters) - Marathon Oil Corp said on Wednesday it had struck a deal to buy natural gas-focused assets from private equity-backed Ensign Natural Resources for $3 billion in cash, nearly doubling its position in South Texas' Eagle Ford shale basin.
The deal comes as energy producers are reaping massive financial benefits from elevated oil and natural gas prices caused by disruption to markets in the wake of Russia's invasion of Ukraine. Marathon Oil itself topped Wall Street estimates with its concurrent earnings announcement.
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While high profit levels have drawn the ire of politicians, in particular with U.S. midterm elections next week, the cash being generated by oil and gas companies is providing resources for them to repay debt, reward shareholders and pursue deals.
Marathon, which reported a jump in third quarter profit on Wednesday, said the Ensign acquisition would be immediately accretive to the company's financials, including boosting its projected free cash flow in 2023 by 15%. The company expects to raise its base dividend by an additional 11% after closing the purchase, which is expected by the end of this year.
The company's chief executive, Lee Tillman, said in a statement the deal struck "the right balance between immediate cash flow accretion and future development opportunity", with additional benefits stemming from Marathon's existing Eagle Ford position being close to Ensign's acreage.
Ensign was formed in 2017 with capital provided by Warburg Pincus. Fellow alternative asset manager Kayne Anderson joined the ownership in 2019.
The company owns and operates 130,000 net acres with estimated fourth quarter 2022 production at 67,000 barrels of oil equivalent per day, mostly in the form of condensate, wet and dry gas.
Morgan Stanley and White & Case LLP provided financial and legal advice, respectively, to Marathon Oil. Ensign was supported by investment bankers from Evercore and JPMorgan Chase and lawyers from Sidley Austin LLP. (Reporting by Ruhi Soni in Bengaluru and David French in New York; Editing by Anil D'Silva, Shinjini Ganguli and Richard Pullin)