Marathon Oil Sheds Downstream Operations

By Eric Fox | July 05, 2011 AAA

Marathon Oil (NYSE:MRO) has completed the spin off of its refining and other downstream businesses and is now free to pursue a singular focus on oil and gas exploration and development opportunities. The company has an extensive set of assets in the United States and abroad.
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Spin Off
Marathon Oil completed the spin off of its downstream segment as Marathon Petroleum Corporation (NYSE:MPC), effective on June 30, 2011. The company issued one share of Marathon Petroleum Corporation to shareholders for every two shares owned of Marathon Oil.

Another integrated oil and gas company that is shedding part of its downstream operations is Murphy Oil (NYSE:MUR). The company is marketing its three refineries and expects to close on a deal in the second half of 2011.

Upstream Segment
Marathon Oil has a large inventory of producing and prospective oil and gas assets across the world. The company reported average daily production of 391,000 barrels of oil equivalent (BOE) per day in 2010, and proved reserves of 1.638 billion BOE at the end of 2010.

United States
Marathon Oil has been accumulating a number of assets, located mostly in the onshore United States, to provide growth for the company over the next five years. The company plans to spend between $1.5 billion and $2.5 billion per year on these assets and generate 25% compound annual growth from here through 2015.

Eagle Ford Shale
One area the company is focused on is the Eagle Ford Shale in Texas. Marathon Oil entered the play in 2010, and in June 2011 announced the purchase of 141,000 net acres of leasehold for $3.5 billion. The company estimates that the resource potential of the acreage is between 400 million and 500 million BOE.

Marathon Oil also has acreage prospective for other emerging plays in the United States, including the Bakken, Woodford and Niobrara.

Gulf of Mexico
Marathon Oil is involved in the Gulf of Mexico and has 21 prospects under evaluation. The company has tentative plans to drill an exploratory well in the Innsbruck field in 2011. Marathon Oil also owns a 15.25% interest in the Gunflint prospect, operated by Noble Energy (NYSE:NBL). Noble Energy estimates that the area has gross resources of up to 500 million BOE.

Oil Sands
Marathon Oil owns a 20% interest in the Athabasca Oil Sands Project (AOSP) and also has an interest in 52,000 net acres of other operated and non-operated oil sands leases. The AOSP is operated and 60% owned by Royal Dutch Shell (NYSE:RDS). The project has current capacity of 155,000 barrels per day, with a 100,000-barrel-per-day expansion under construction. Chevron (NYSE:CVX) is also involved at AOSP and has a 20% ownership.

International
Marathon Oil's international assets are located in a number of areas including West Africa, the North Sea and Libya. The company is also conducting exploratory activities in Indonesia, Kurdistan and Poland.

The Bottom Line
Marathon Oil has completed the spin off of its refining, marketing and transport operations and is now able to focus exclusively on the company's oil and gas assets. The company has a number of domestic and international properties to choose from. (For related reading, also check out Unearth Profits In oil Exploration And Production.)

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