Aurora Oil & Gas Ltd., an Australian explorer focused on the Eagle Ford shale formation in Texas, may triple the number of new wells drilled, accelerating development of its assets in the region with Marathon Oil Corp. (MRO) as operator.
Aurora, whose shares gained more than fourfold in Sydney in the past year, may participate in drilling as many as 180 new wells in 2012 compared with 60 wells this year, Executive Chairman Jon Stewart said in a phone interview today from Perth. That may increase Aurora’s spending to as much as $350 million next year from $110 million in 2011, he said.
Marathon is expected to become operator of Aurora’s Eagle Ford shale holdings after agreeing yesterday to buy KKR & Co.- backed Hilcorp Resources Holdings LP’s assets for $3.5 billion, Stewart said. Hilcorp Resources is a partnership between Hilcorp Energy Co., the current operator of the Aurora acreage, and KKR.
“Marathon coming to the party and paying the price they have gives further credence to what we’ve been saying,” Stewart said. “Their financial and operating capacity accelerates the development, and from our perspective, that’s a very good thing. The faster we develop, the greater the value to us.”
Aurora may fund the development plans with as much as $150 million of debt, compared with as much as $100 million previously expected, he said. Aurora prior to the Marathon deal expected to drill about 80 wells next year, Stewart said, adding that the company has yet to confirm the plans with Marathon.
The Eagle Ford shale-rock formation holds oil, petroleum liquids and gas. Producers use hydraulic fracturing to release the fuel, injecting a mixture of water, sand and chemicals.
Shares of Aurora rose 9 percent today to close at A$3.65, compared with a 2.3 percent drop for the benchmark S&P/ASX 200 Index. That values Aurora at A$1.47 billion ($1.56 billion).
Aurora is in an “Eagle Ford sweet spot” and is likely to convert most of its possible reserves into the proven and probable category this year, Sandra McCullagh and Nik Burns, analysts at Credit Suisse in Sydney and Melbourne, wrote in a May 24 report. “Considerable upside remains.”
Marathon said yesterday it will buy leases on 141,000 net acres with production equivalent to 7,000 barrels of oil a day and may be able to claim reserves equivalent to 100 million barrels by the year-end.
“They identified the acreage we’re involved in as the best acreage within the transaction, and where they are going to focus capital spending and development,” Stewart said.
Europe’s Royal Dutch Shell Plc (RDSA), India’s Reliance Industries Ltd. and China’s Cnooc Ltd. are among companies that have acquired Eagle Ford assets since 2010 as oil and gas producers tap into shale-rock formations seeking new supplies.
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