Ensign Natural Resources, a Warburg Pincus-backed oil and gas explorer and producer operating in South Texas’ Eagle Ford Shale, announced Nov. 2 the sale of its assets to Marathon Oil for $3 billion in cash, doubling the latter’s position in the basin.
The transaction is expected to be completed by year-end if it clears regulators.
The deal was the third billion-dollar transaction announced this week that was advised by Texas attorneys.
Evercore and J.P. Morgan Securities were financial advisors to Ensign, which tapped Sidley Austin as outside counsel.
The Sidley team was led by partner Tim Chandler and senior counsel Jim Rice in Houston and included managing associate John Brannan in Dallas, senior managing associate Jeff Kinney in Houston and associate Sabina Wahl, also in Houston.
Others included partners Mark Holmes, A.J. Ericksen, Taylor Pullins and Chad McCormick in Houston, partners Colin Diamond and Victoria Rosamond in New York, partner Rebecca Farrington in Washington, D.C., associates Helen Xiang, R.J. Colwell, Neil Clausen, Clint Farha, Steven Amrein, Jessica Webb, Muhammad Moawaz Hasan and Alex Bischoff in Houston and associate Ashley Stoner in Washington, D.C.
Marathon’s in-house counsel included senior counsel Matthew McGowan and its general counsel is Kim Warnica.
Morgan Stanley is Marathon Oil’s financial advisor and providing committed financing.
Ensign owns and operates 130,000 acres in the core of the Eagle Ford with estimated fourth quarter 2022 production of 67,000 barrels of oil equivalent per day, making the company one of the top private operators in the basin.
Marathon Oil said the deal will provide immediate double-digit accretion to key financial metrics and shareholder distributions while at the same time maintaining low leverage and an investment grade balance sheet. The company anticipates raising base dividend an additional 11 percent post-close.
“This acquisition in the core of the Eagle Ford satisfies every element of our exacting acquisition criteria, uniquely striking the right balance between immediate cash flow accretion and future development opportunity,” chairman, president and CEO Lee Tillman said in a statement.
Marathon Oil believes it can hold fourth quarter production flat with 1 rig and 35 to 40 wells to sales per year. The company said its valuation of the asset was based off this maintenance level program and doesn’t include any synergy credits or upside redevelopment opportunity.
The deal should help elongate Marathon Oil’s inventory profile, which has been a concern for investors, according to a Thursday note by analyst Matt Portillo at TPH & Co., a unit of Perella Weinberg Partners .
Ensign, led by Brett Pennington, was formed in late 2017 in partnership with Warburg Pincus. It further secured an equity commitment from the Kayne Private Energy Income Funds, the energy private equity platform of Kayne Anderson Capital Advisors.
Ryan Dalton led the deal from Warburg Pincus, which has more than $85 billion in assets under management. Mark Teshoian is managing partner at Kayne Anderson, which manages $35 billion in assets.