A subsidiary of Marathon Oil Corporation (MRO) has struck a joint venture deal with Houston-based Lucas Energy Inc. (LEI) for the development of Eagle Ford and Buda formations in Wilson County in Texas.
Under the agreement, Marathon, through its subsidiary Marathon Oil (East Texas) LP, acquired 50% of Lucas’ leasehold interest rights in Wilson County. This also represents approximately 1,000 net acres below the base of the Austin Chalk formation. Marathon will hold the operatorship of the agreement, while Lucas is expected to own the rights above the Austin Chalk formation in Eagle Ford.
Based in Houston, Texas, Lucas is an independent oil and gas company with approximately 12,500 gross acres (10,400 acres net) of oil and gas leases in South Texas, primarily in the Gonzales County and Wilson County, Texas. Lucas holds hydrocarbon interests in Austin Chalk, Buda and Eagle Ford Shale formations.
Eagle Ford is one of the most prolific shale plays in the U.S., where a number of companies are actively exploring oil and natural gas. We believe Marathon’s strong inventory of development projects provides for visible production growth over the coming years. Additionally, its interests in liquid rich resource plays and other focus areas such as Indonesia, the Kurdistan Region of Iraq and Poland also provide impetus to the growth profile.
However, the heavy downstream exposure of Marathon, the fifth largest refiner and marketer of petroleum products in the U.S., leaves it relatively less diversified compared to its integrated peers, such as, ConocoPhillips (COP), Hess Corp. (HES) and Murphy Oil Corp. (MUR). The company’s results remain heavily exposed to refining/marketing margins, particularly in the Midwest region.
Marathon shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
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