COP Acquires MRO and USA Weekly Rig Count as of 5/29/24

Summary Assessment of ConocoPhillips’ acquisition of Marathon Oil

Before jumping to the weekly US rig count summary, I wanted to provide a quick summary of the announced acquisition of Marathon Oil (MRO) by ConocoPhillips (COP) (link). The ~$21B all-stock transaction represents a strengthening of COP’s onshore activity throughout the United States, with particular alignment in the Eagle Ford, Bakken and Delaware basins.

Given COP’s joint venture interest in the ~$13B Port Arthur LNG Phase 1 project, the acquisition could potentially signify COP’s effort to build out an integrated value chain from West Texas, through the Eagle Ford to Port Arthur. Currently, COP has throughput capacity to the West Coast and Gulf of Mexico markets, while also having throughput capacity secured on the upcoming 2Bcfpd Matterhorn Pipeline that will take gas volumes from West Texas to Houston beginning in 3Q24. In the near term, Matterhorn alleviates the gas takeaway constraints that have hampered regional gas pricing in the Permian; however, steady production growth in West Texas, coupled with 7+Bcfpd of newly constructed LNG capacity forecasted in the next 4-5 years offers a compelling narrative for future pipeline and infrastructure development. At present, there are two intrastate pipelines awaiting FID, (1) Targa Resources’ (TRGP) 530-mile, ~2Bcfpd Apex pipeline (2) Energy Transfer Partners LP's (ET) 260-mile, 1.5-2Bcfpd Warrior pipeline, and a third, the 690-mile 2Bcfpd DeLa Express interstate pipeline that would connect the Permian to the Louisiana coast. While investment decisions on these pipelines projects could extend out to 2026, it is likely that COP will play an active role in securing meaningful takeaway capacity on one of these proposed pipelines.

The MRO acquisition is expected to close in 4Q24 and based on current guidance and my estimates, the consolidated Eagle Ford FY24 gas production is estimated at ~300MMcfpd, while the consolidated Delaware/Midland FY24 gas production is estimated at ~1,050MMcfpd. Given the Phase 1 nameplate capacity of 1.6Bcfpd (12 MTPA), and an operational first train by mid-2027, followed by a second train in 2028 there appears to be ample runway for further COP acquisitions in south Texas.

USA Weekly Rig Count as of 5/29/24

Following up from last week’s initial US rig count summary, I wanted to quickly explain the map illustrated below. The number accompanying the bubble dots represents the number of active rigs in each of the seven primary basins in the Lower 48, while the bar chart in the lower-left represents the eighth “region” that Baker Hughes categorizes as “Other”. The color scheme of green/yellow/red accounts for the week-over-week variance in the regional active rig total; green indicates rig adds for the week, yellow indicates no change and red indicates a decrease in rigs. Hopefully this provides better context when reviewing the chart.

As always, if you have any questions feel free to reach out to me directly at [email protected] …and yes, I’m absolutely using a Gmail account for this newsletter.

Baker Hughes Rig Count (as of 5/24/24)

• Current week total rig activity was at 600, down from 604 rigs the previous week (-1 rig, 5/17/24)

• Rig adds were in Haynesville (+1) and Other States (+1; +1 Louisiana; +1 Michigan)

• Rig reductions were in four basins, Appalachia (-3), Anadarko (-1), DJ-Niobrara (-1), and Eagle Ford (-1)

Rig Count by E&P (as categorized by OilGasLeads.com)

• Rig activity for the week of 5/19/24 by Companies Mentioned totaled 310, down from 314 the previous week.

• Rig count leaders by E&P include XOM (37), COP (28), OXY (26) EOG (26), DVN (21), FANG (13), MRO (12)

• No rig adds identified this week.

• Rig reductions were COP (-1), DVN (-1), CIVI (-1) and CHK (-1)

Companies Mentioned

• Exxon Mobil Corporation (XOM)

• Chevron Corporation (CVX)

• Chesapeake Energy Corporation (CHK)

• Southwestern Energy Company (SWN)

• ConocoPhillips (COP)

• EOG Resources, Inc. (EOG)

• EQT Corporation (EQT)

• Occidental Petroleum Corporation (OXY)

• Coterra Energy Inc. (CTRA)

• Devon Energy Corporation (DVN)

• Antero Resources Corporation (AR)

• Ovintiv Inc. (OVV)

• Diamondback Energy, Inc. (FANG)

• Endeavor Energy Resources, LP (Private)

• Marathon Oil Corporation (MRO)

• APA Corporation (APA)

• Range Resources Corporation (RRC)

• Comstock Resources, Inc. (CRK)

• Permian Resources Corporation (PR)

• Matador Resources Company (MTDR)

• Civitas Resources Inc. (CIVI)

• CNX Resources Corporation (CNX)

• Murphy Oil Corporation (MUR)

• Chord Energy Corporation (CHRD)

• Magnolia Oil & Gas Corporation (MGY)

• SM Energy Company (SM)

• Crescent Energy Company (CRGY)

• High Peak Energy Inc. (HPK)

• Targa Resources (TRGP)

• Energy Transfer Partners LP (ET)

_{Disclaimer: All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Patrick Enwright accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and Patrick Enwright makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained.}