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Marathon Oil Focuses on Share Buyback

MRO SNP TAT

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Leading integrated oil and gas firm, Marathon Oil Corp. (MRO - Analyst Report) is pursuing its plan to buyback common shares worth $1 billion. The company has also provided an update relating to its asset sale and purchase activities.

Marathon Oil expects its share repurchase program to be executed in two stages. In the first phase, a substantial part of the $500 million stock buyback is complete. However, the second phase will comprise the repurchase of the remaining $500 million worth of shares, after completion of the previously declared divestment of the company’s 10% ownership in offshore Angola-based Block 31. 

On June 2013, Marathon Oil entered into a deal with Sonangal Sinopec International Ltd – a subsidiary of crude oil and natural gas producer China Petroleum and Chemical Corp, or Sinopec (SNP - Analyst Report), to divest its interest in Block 31 for roughly $1.5 billion.

Moreover, after the $1 billion share repurchase, Marathon Oil is expected to have $800 million buyback remaining under its authorized share repurchase program. Management believes that the share repurchases will create long term value for the share holders.

Additionally, Marathon Oil announced that it has inked a production sharing and joint agreement contract with Sonangol EP. Per the contract, Marathon Oil will divest its 10% ownership in Block 32, based off the coast of Angola, for a consideration of roughly $590 million.

The deal will be closed by the fourth quarter of 2013, subject to approvals from the government. Marathon Oil added that including the divestment of Block 32, its present agreed or completed selling of assets is at $3.5 billion, which is ahead of the company’s three-year target range.

Additionally, Marathon Oil plans to buy roughly 4,800 acres of land in the Texas-based Eagle Ford shale field. The company is expected to invest $97 million for the asset acquisition.

Houston, Texas-based Marathon Oil currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile one can look at TransAtlantic Petroleum Ltd. (TAT - Snapshot Report) and PostRock Energy Corp. that add value. TransAtlantic Petroleum holds a Zacks Rank #1 (Strong Buy) while PostRock Energy sports a Zacks Rank #2 (Buy).

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