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Marathon Oil Corporation Message Board

  • patient_lt_investor patient_lt_investor Jul 9, 2014 1:27 PM Flag

    Is MRO a Likely Takeover Candidate?

    Excerpts from Today's Motley Article:

    Now would be as good a time as any for companies to get on with it and make a deal. The M&A market has boomed this year, reaching levels not seen since before the financial crisis.

    Chevron (NYSE: CVX ) and ExxonMobil (NYSE: XOM ) are likely to be doing the bidding as both behemoths had net debt-to-equity ratios of less than 10% at the end of the first quarter. Each had tens of billions available to complete any deal.

    So which companies would fit best in their portfolios?

    First, there's Marathon Oil (NYSE: MRO ) . Marathon is a pure domestic U.S. play, which would work well with Chevron, one of the largest domestic oil producers. Marathon would be a good bolt-on addition to ExxonMobil as well, which after the acquisition of XTO is still overweight in domestic gas.

    Further, the company's small size and attractive portfolio would make it a tasty bite for any major.

    Over the past few years, Marathon has been reducing its international exposure and is instead focusing on domestic plays. The company has acreage within the Bakken, Oklahoma, and the Eagle Ford. In total, Marathon has 2.4 billion barrels of resources available to it and 4,500 well locations.

    The company does still have some international operations, however. These include prospects offshore Africa, the Gulf of Mexico, and Iraqi Kurdistan. That said, around 60% of the company's production is domestic.

    Nevertheless, it's Marathon's size that makes the company attractive. Marathon reported production of 483,000 barrels of oil equivalent per day at the end of 2013, around 10% of Exxon's current daily production and 20% of Chevron's.

    Moreover, the company's current market capitalization is only around $27 billion. This means that either Chevron or ExxonMobil could acquire Marathon for less than their annual capex budgets and add a double-digit boost to production.

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