[Editor's note: This is a developing story. Updated at 11:17 a.m.]
Marathon Oil Corp. (NYSE: MRO) continues to sell noncore assets, saying Oct. 3 it has a buyer for its nonoperated, conventional CO2 and waterflood assets in West Texas and New Mexico. Marathon will collect $235 million for the assets, before closing adjustments.
The position averaged about 4,000 barrels of oil equivalent per day (boe/d), 90% oil, in the first half of 2016. Marathon will eliminate more than 10% of the 34 Mboe/d it produces from other U.S. conventional onshore assets, said Tom Driscoll, managing director at Barclays Research in an Oct. 3 report.
In April, the Houston-based company said it would divest $950 million in assets from its Wyoming upstream and midstream operations. Since August 2015, Marathon has announced or closed noncore asset sales of more than $1.5 billion.
“Investors will likely be pleased that MRO continues to increase its focus on its core assets, but the transaction is unlikely to materially impact investor views,” Driscoll said.
Marathon’s sale price equates to an attractive $59,000/ boe/d and $63,000/ boe/d when converting oil to gas at a 20 to one ratio. “This compares to a MRO trading multiple of about $49,000 and $70,000, respectively,” Driscoll said.
Marathon’s management doesn’t expect to push through many large deals, but will likely continue to prune its portfolio to reduce its “relatively high” debt load, Tudor, Pickering, Holt and Co. said.
“Though [the] amount of reserves was not given, valuation looks positive versus recent deals,” the firm said in an Oct. 3 note.
Marathon will announce its third-quarter 2016 earnings on Nov. 2 and conduct a conference call at 9 a.m. ET Nov. 3.
In June, Marathon acquired PayRock Energy Holdings LLC, an EnCap Investments company, for $888 million. PayRock has about 61,000 net surface acres and production of 9,000 net boe/d in the Anadarko Basin’s Stack Play.
Marathon had net proved reserves at year-end 2015 of 2.2 Bboe in North America, Europe and Africa.
The effective date of the transaction is Sept. 1, and closing is expected by year-end.
Darren Barbee can be reached at dbarbee@hartenergy.com.
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