One energy analyst who does not cover Marathon and cannot be quoted on the deal said EOG and other major Eagle Ford players didn't rally extensively because the price paid by Marathon is so aggressive that the market won't assume other players like EOG Resources will receive similar valuations.
"Investors will struggle with a valuation above $20,000 per acre and if everything could sell at that price than all the stocks would be a screaming buy. Investors typically discount recent transactions metrics, and this one looks like a pretty full value for those assets, " the analyst said, adding, "When you are paying full value, it takes longer for the company to demonstrate that the price paid is adding value."
Furthermore, many of the major players in the Eagle Ford have already joint ventured assets, and for their stocks to rally on the Marathon deal there would have to be the assumption they will be selling assets outright in the foreseeable future, which isn't the case across the board.
Even some of the stocks that were receiving a minor boost from the Marathon deal don't have plans to sell their Eagle Ford assets soon, and therefore they don't receive an implied value of as much as $20,000 per acre if there isn't the likelihood of the assets being shopped any time soon, analysts noted.Analysts, even those who believe that the deal will pay off for Marathon long term, viewed the pricing as aggressive. "It's a rich multiple any way you slice it," said Raymond James analyst Pavel Molchanov. Kevin Cabla, analyst at Raymond James, said the pricing is bullish, even at the low-end of estimates and taking into account proven reserves. Phil Weiss, analyst at Argus Research, said the initial reaction is a mix of the high price being paid and the actual acreage resource being more valuable than previous deals indicated. "It's some of both. Sustained high oil prices do provide some valuation support," the analyst wrote in an email to TheStreet. Three recent Eagle Ford deals valued acreage between $10,000 and $12,000.
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