Marathon acquires STACK-focused PayRock Energy for US$888 million

PayRock operates 61,000 net acres primarily in the STACK (Sooner Trend, Anadarko Basin, Canadian and Kingfisher counties) oil window located to the east of Marathon's position in Blaine and Canadian counties. The deal includes 9,000 boe/d of flowing production. It was rumoured that PayRock's sponsor, EnCap Investments, was looking for a sale price of as much as US$1.5 billion. Our US$1.2 billion valuation (NPV10) is largely predicated on impressive type curves in the STACK Meramec Oil window. Marathon has rapidly increased its Oklahoma resource base over the past two years. In the STACK it has grown from roughly 400 million boe in 2014 to over 1 billion boe (2P) post-acquisition. The STACK is viewed as a low-cost/high-margin growth platform for the company, providing diversification from existing operations in the Eagle Ford and Bakken. Marathon has stated that the STACK will be the first of its US L48 resource plays to receive incremental capital as commodity prices recover.