As per the terms of the agreement, Marathon will pay Denali $10m as well as drill and complete four wells to earn approximately 17,000 net acres.
The company also has the option to purchase Denali’s remaining 58,000 net acres in the Eagle Ford Shale in these two counties.
If Marathon executes this option, the full 75,000 net acres, including the initial payment, carried well interest and lease extensions, will cost approximately $2,800 per acre or a total of approximately $209m.
Marathon has until 31 October 2011 to exercise this option.
In the event Marathon does not exercise its purchase option, Denali has the option to sell the remaining 58,000 acres to Marathon.
The total cost under this option, including the initial payment, carried well interest and lease extensions, would be $92m or approximately $1,225 per acre.
Denali has until the later of 15 November 2011, or 15 days after the completion of the final well, to exercise this option.
This agreement covers all of Denali’s acreage in Wilson and Atascosa counties but excludes Denali’s 25,000 acres in Gonzales and Fayette counties.
