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Marathon Oil Corp. (MRO - Free Report) has seen its shares fall by 43% over the last year, but their most recent buyout could signal change.
On Monday, Marathon announced that it is buying out PayRock Energy Holdings for $888 million. According to the Wall Street Journal, PayRock owns 61,000 net surface areas in the area of Oklahoma known as the Stack, which is considered by some to be one of the best shale oil reservoirs in the U.S.
Following this report, Marathon stock closed at $14.48/share, up 10.03% for the day after opening at $13.85 per share. Marathon raised the funds for the acquisition by decreasing spending, cutting production and selling off more than $1 billion in stock. The company plans on focusing on lower risk domestic production.
Recent Transactions and Plans
This is Marathon’s largest transaction since earlier in the month, when Marathon agreed to spend $334.6 million to settle a dispute over refinery pollution across five U.S. states.
It has been a difficult time for MRO as it faces the same difficulties as many other energy companies which are at the mercy of volatile crude prices. This latest move could be the start of a new trend though, as Marathon expects returns on newly drilled wells in the region of 60% to 80% on $50/bbl. oil, news that investors are happy to hear.
Marathon is not the first to purchase property in the Stack, as Devon Energy (DVN - Free Report) and Newfield Exploration are also involved in the region. The purchase brings Marathon’s total ownership in the Stack up to 200,000 acres and falls well within their announced $1.4 billion capital expenditures budget.
Marathon currently sits at a Zacks Rank #3 (Hold).
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Marathon Oil Buys PayRock Energy, MRO Stock Jumps 10%
Marathon Oil Corp. (MRO - Free Report) has seen its shares fall by 43% over the last year, but their most recent buyout could signal change.
On Monday, Marathon announced that it is buying out PayRock Energy Holdings for $888 million. According to the Wall Street Journal, PayRock owns 61,000 net surface areas in the area of Oklahoma known as the Stack, which is considered by some to be one of the best shale oil reservoirs in the U.S.
Following this report, Marathon stock closed at $14.48/share, up 10.03% for the day after opening at $13.85 per share. Marathon raised the funds for the acquisition by decreasing spending, cutting production and selling off more than $1 billion in stock. The company plans on focusing on lower risk domestic production.
Recent Transactions and Plans
This is Marathon’s largest transaction since earlier in the month, when Marathon agreed to spend $334.6 million to settle a dispute over refinery pollution across five U.S. states.
It has been a difficult time for MRO as it faces the same difficulties as many other energy companies which are at the mercy of volatile crude prices. This latest move could be the start of a new trend though, as Marathon expects returns on newly drilled wells in the region of 60% to 80% on $50/bbl. oil, news that investors are happy to hear.
Marathon is not the first to purchase property in the Stack, as Devon Energy (DVN - Free Report) and Newfield Exploration are also involved in the region. The purchase brings Marathon’s total ownership in the Stack up to 200,000 acres and falls well within their announced $1.4 billion capital expenditures budget.
Marathon currently sits at a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>