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Oil and natural gas exploration and production (E&P) firm, Marathon Oil Corporation (MRO - Analyst Report) has entered into a farmout agreement with Africa Oil Corp (AOIFF), an upstream operator.

Per the contract, Marathon Oil is expected to acquire roughly 50% ownership in Ethiopia’s Rift Basin. Notably, the government of Ethiopia has approved the said deal. Marathon Oil will likely pay approximately $3.0 million as an entry fee. Moreover, Marathon Oil is anticipated to spend $15.0 million of Africa Oil's portion in the joint venture expenses to explore the Rift Basin.

Africa Oil will continue to operate the block, however, Marathon Oil might gain operational rights if the exploration of the block results in some profitable discovery.

Houston, Texas-based Marathon Oil is a leading integrated oil and gas firm with extensive upstream operations. The company’s business is organized into three segments – North America Exploration and Production, International Exploration and Production, and Oil Sands Mining.  

However, Marathon Oil reported weaker-than-expected fourth-quarter 2013 earnings on Feb 5, 2014. Lower price realizations and rising exploration costs hampered the results. The company announced adjusted earnings of 60 cents per share, below the Zacks Consensus Estimate of 74 cents.

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 consider better-ranked players in the energy sector like Range Resources Corporation (RRC - Analyst Report) and Helmerich & Payne Inc (HP - Analyst Report). Both the stocks sport a Zacks Rank #1 (Strong Buy).

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