Marathon Oil Corporation (MRO - Analyst Report) announced plans to divest a sizeable portion of its Alaska upstream assets. In this regard, the company entered into a definitive agreement with private energy firm Hilcorp Energy. However, none of the companies disclosed the purchase price of the properties.
The Alaskan subsidiary of Hilcorp will acquire Marathon’s net proved reserves, worth 17 million barrels of oil equivalent, which spans 10 fields in the Cook Inlet. This property is estimated to generate an average daily production of about 93 million cubic feet of natural gas and 112 barrels of oil.
The agreement, which is slated to be closed by the fall of 2012, also includes the sale of natural gas storage (12.5 billion cubic feet of natural gas as of end-2011) along with the interests in natural gas pipeline transmission systems.
This divesture, however, does not feature the Alaska onshore drilling rig owned by Marathon. The company intends to market that property separately.
Marathon took a major restructuring step in July 2011 by segregating its refining/sales business into an independent and publicly traded company Marathon Petroleum Corporation (MPC - Analyst Report).
Following that, Marathon Oil has embarked on a number of initiatives aimed at boosting its profitability and to position it competitively among other group members.
This sale forms a part of Marathon’s strategy of divesting assets that do not fit into its long-term growth plan. During the last five years, Marathon has sold approximately $3.5 billion worth of non-core oil and gas properties around the world, thereby freeing up capital to concentrate on its longer-term high-grade prospects.
Marathon targets to shed an additional $1.5–$3.0 billion of assets over the next two to three years.
Marathon shares currently retain a Zacks #2 Rank, which translates into a short-term Buy rating.