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Page added on September 27, 2012
Marathon Looks to Exit Marcellus Shale
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Marathon Oil Corp. is putting its natural gas-rich acreage in the Marcellus Shale formation up for sale as it trims non-core assets, people familiar with the situation said.
Marathon Oil is putting about 80,000 acres in West Virginia and Pennsylvania up for sale because the company doesn’t consider them central to its growth plans, a person familiar with the company’s plans said Wednesday. The company could realize up to $1,000 an acre, the person estimated, adding that a specific price hasn’t been set yet.
Another person familiar with the company’s thinking said that the move is part of Marathon’s re-evaluation of its portfolio in the wake of last year’s spin-off of its refining division.
Marathon Oil wouldn’t comment “on rumors and speculation in the market,” company spokeswoman Lee Warren said.
The Marcellus Shale, a vast shale rock formation underlying the northeastern U.S., has become a major source of natural gas because after companies began applying hydraulic fracturing there. The region could have up to 262 trillion cubic feet of technically recoverable natural gas, according to a 2009 Department of Energy study.
Marathon drilled its first Marcellus well in 2009. In 2011, it formed a joint venture to develop its acres with Triana Energy Investments LLC, an independent oil and gas exploration company backed by Morgan Stanley Private Equity.
But demand for natural gas hasn’t kept up with escalating production, causing prices to drop below $3 a million British thermal units from nearly $16 in December 2005. More recently, Marathon and other energy producers have been focusing their drilling activities on more profitable oil fields.
Marathon, which was one of the first large oil companies to dabble in oil-rich shale regions such as South Texas’s Eagle Ford shale, considers its Marcellus assets marginal to its operations.
“Natural gas in the U.S. is a victim of the industry’s success,” Marathon Oil Chief Operating Officer David Roberts said in a recent interview. “We started to diminish our focus on the Marcellus and we continued to have it as something that’s further down our pecking order.”
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7 Comments on "Marathon Looks to Exit Marcellus Shale"
BillT on Thu, 27th Sep 2012 2:38 pm
In other words. the bubble is about to burst and they are getting out before it happens.
Arthur on Thu, 27th Sep 2012 3:21 pm
Do I understand this right that this company is selling 262 trillion cubic feet of gas for 80 million?
Thanks to google I know that 100 cubic feet costs ca. 70 $ cents.
In other words, supposedly the Marcellus shale represents (262 trillion / 100) * 70 cent = 262 billion $.
But now they are going to dump it for 0.08 billion $ or ca. 0.1/300 = 1/3000 of the ‘real value’.
Something stinks here and it does not smell like natural gas.
KingM on Thu, 27th Sep 2012 6:29 pm
Reading comprehension fail. “The Marcellus Shale, a vast shale rock formation underlying the northeastern U.S., has become a major source of natural gas because after companies began applying hydraulic fracturing there. The region could have up to 262 trillion cubic feet of technically recoverable natural gas, according to a 2009 Department of Energy study.
That’s over tens of thousands of square miles. They are selling the rights to 80,000 acres, or 125 square miles.
Loren on Thu, 27th Sep 2012 7:44 pm
With natural gas going for about $3 a MMBtu there is ZERO cubic feet of “economically” recoverable natural gas. But there is probably a couple trillion cubic feet of technically recoverable natural gas? Hence the sale of the land.
The mad dash to the exit has begun.
Mike999 on Thu, 27th Sep 2012 8:22 pm
There’s also the well known rapid drop off rate of these drill sites, requiring you to drill again and again and again. Expensive cost recovery at dirt cheap prices.
Arthur on Fri, 28th Sep 2012 9:20 am
Thanks KingM for answering my question. You are probably right that ‘the region’ mentioned in the fifth paragraph is larger than the piece of land Marathon wants to sell.
Kenz300 on Sat, 29th Sep 2012 2:55 pm
Coal powered power plants are shutting down and being replaced with a mix of natural gas, wind and solar. New natural gas powered plants can be ramped up and down easily to adjust to fluctuations in energy produced from wind and solar. Demand for natural gas will increase as more natural gas plants take the place of coal fired plants.
Long haul truckers are converting to LNG to save fuel costs. Many companies are now converting their fleets to use natural gas.
Ford, Chrysler and GM are now selling CNG fueled pick up trucks and CNG fueled cars are also being produced.
Demand for natural gas is increasing and is taking market share away from oil and coal.