Tuesday, March 12, 2019
The explorer is opting to snap up cheap acreage in overlooked areas like the Louisiana Austin Chalk.
(Bloomberg) — Marathon Oil Corp. is mirroring private equity as it looks for the next big thing in U.S. crude.
Instead of buying up smaller players in the crowded Permian Basin of West Texas and New Mexico, the explorer is opting to gobble up cheap acreage in overlooked areas like the Louisiana Austin Chalk, Chief Executive Officer Lee Tillman said in an interview at the CERAWeek by IHS Markit conference in Houston.
We’re “truly doing onshore exploration,” he said. “We’ve created a team there that in many respects looks like an internal PE — private equity — model.”
The groups are smaller and are compensated based on hitting certain “milestones,” like getting the green light to acquire acreage or approval to start drilling. Last year, that team led the company to acquire 260,000 net acres of drilling rights in the Louisiana Austin Chalk for less than $850 an acre.
“If it works — and that’s still a question — that kind of investment gives you the opportunity to create outsized, full-cycle returns because your entry cost is so low,” Tillman said. “If we’re successful, that’s a basin-opening opportunity.”
To contact the reporter on this story: Rachel Adams-Heard in Houston at firstname.lastname@example.org To contact the editors responsible for this story: Simon Casey at email@example.com Carlos Caminada, Joe Carroll
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