Marathon Oil signs agreement to divest Gulf of Mexico assets

Marathon Oil Corp. (NYSE: MRO) has signed an agreement for the sale of its operated producing properties in the greater Ewing Bank area and non-operated producing interests in the Petronius and Neptune fields in the Gulf of Mexico for $205 million.

The buyer will assume all future abandonment obligations for the acquired assets. These assets represent a majority of Marathon’s operated and non-operated producing properties in the Gulf of Mexico.

Marathon Oil will retain its interests in certain other producing assets and acreage in the Gulf of Mexico, as well as its interests in the Gunflint development and Shenandoah discovery. The company holds an 18% working interest in Gunflint and a 10% stake in Shenandoah.

Marathon also holds a 58% working interest in the Solomon deepwater exploration prospect (Walker Ridge Block 225), noted Seaport Global Securities (SGS) in analyzing the news on Monday. Gulf of Mexico production, according to the analysts, stood at 17 Mboepd in 2014 (14 Mbpd liquids, 16 MMcfpd natural gas). “In Q3, MRO included GOM production in its “All Other North America” segment which had total production of 35 Mbopd,” they noted.

Marathon’s majority exit from the Gulf of Mexico “underscores its tightening focus on onshore US resource development,” said SGS in its investor note. “The price received isn’t pretty ($12K/flowing boe based on figures from the FY14 10-Q); however, net of AROs (which are not quantified) and higher unit LOE costs, we think it makes sense for the company to shed these assets,” the analysts continued.

The effective date of the transaction is Jan. 1, and closing is expected before year’s end.

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