Leading integrated oil and gas firm Marathon Oil Corporation (MRO) plans to sell majority of its acreage in Texas' Eagle Ford basin. The company aims to shed the non-core properties while reorganizing its portfolio following the spin-off of its refining division last year.
Marathon Oil holds 325,000 acres in Eagle Ford shale and will likely shed about 100,000 acres in Wilson, Karnes and Bee Counties. It could receive up to $25,000 an acre on sale of the said assets. Major portion of the land, which will be put up for sale, is located in Wilson County. The company plans to sell the acreage as there is no drilling activity in the region.
Over the next five years, management plans capital spending of $1.6 billion per year in the Eagle Ford. They also expect net production to be 120,000 barrels of oil equivalent per day by 2016.
Management opines that this sale will not affect the company’s plan or production target. Its oil and gas production in the Eagle Ford during the second quarter of 2012 rose 50% sequentially.
Earlier this month, Marathon Oil announced its plans to offload 80,000 acres in the Marcellus region in West Virginia and Pennsylvania.
Houston, Texas-based Marathon – which last year spun off its refining/sales business into a separate, independent and publicly traded company Marathon Petroleum Corporation (MPC) – retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the stock.
Marathon is a leading energy firm with a large and geographically-diverse reserve base and solid project pipeline. Additionally, the company possesses a healthy balance sheet, which helps it to capitalize on investment opportunities. We also like the strong growth potential of Marathon’s high-margin liquids-rich unconventional plays, which diversify its portfolio and are expected to further drive its overall volumes.
While being incrementally more positive on the company, we believe Marathon will take some time to fully absorb the outcome of the spin-off. Consequently, we would rather wait for a better entry point before accumulating shares.
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