Source: Marathon Oil
The company's stock values jumped Thursday morning on the news that the Board of Directors of Marathon Oil Corporation (NYSE: MRO) has approved moving forward with plans to spin off Marathon's downstream business, creating two independent, highly focused energy companies.
Marathon Petroleum Corporation (MPC), to be headquartered in Findlay, Ohio, is expected to be the fifth largest U.S. refiner with a top-tier downstream portfolio of strategically aligned assets concentrated mainly in the Midwest, Gulf Coast and Southeast regions of the U.S. MPC is anticipated to trade on the NYSE under the ticker symbol "MPC". The spin-off is expected to be tax-free and to be effective June 30, 2011.
Marathon Oil Corporation (MRO) will be a global upstream company with a strong portfolio of assets delivering defined growth leveraged to crude oil production and with exploration upside. MRO will continue to be based in Houston, Texas and trade on the NYSE under its ticker symbol "MRO".
"The substantial improvement in the global business and financial environments over the last two years has created the conditions under which we believe it is now appropriate to move forward with the formation of two strong independent energy companies. Marathon has a long history of adapting to changing market and business conditions and at this point in our almost 125 year history, there is a compelling strategic rationale for this transformation," said Clarence P. Cazalot, Jr., Marathon president and CEO.
"Complementary to the much improved economic environment, Marathon has largely completed a program of significant investment in both our upstream and downstream businesses that will provide each company with a solid foundation to be a leader in its respective industry. We expect these two strong and competitive companies will each have a sound platform for continued long-term shareholder value growth.
"Through experienced leadership, highly skilled and dedicated people and excellent assets, these two companies will be poised for continued profitable growth. While we will move forward as two independent companies, Marathon's long-held core values will continue to underpin the decisions and activities of each company. These values include a focus on operational excellence and reliability, capital and financial discipline, a commitment to health and safety, environmental stewardship, honesty and integrity, corporate citizenship and working as a high performance team," concluded Cazalot.
The benefits of creating these two operationally and financially strong energy companies include:
Enhanced flexibility to pursue tailored strategies - Each company should have a greater ability to make business and operational decisions in the best interests of its business and to allocate capital and corporate resources with a focus on achieving its own strategic priorities. A more focused business strategy should also result in an expanded portfolio of attractive growth opportunities for each company.
Superior transparency - improved investor focus - As independent energy companies, analysis and investment decisions will be more transparent, allow for more specific comparisons against peers, competitors, benchmarks and performance metrics and thus facilitate evaluation assessments which will likely make the two companies appeal to different sets of shareholders seeking to invest in specific segments of the oil and gas industry. With improved investor focus, it is also anticipated each company will realize a reduction in their individual cost of equity.
Strengthened ability to attract and retain talent - More focused business models will enhance each company's ability to attract and retain individuals with the appropriate skill sets as well as to better align compensation and incentives with the performance of these different businesses.
Commenting on the benefits of spinning off the downstream businesses, Gary R. Heminger, Marathon Oil Corporation downstream executive vice president and designated president and CEO of MPC, said, "With a fully aligned downstream business Marathon Petroleum Corporation will have the ability to pursue a strategy specific to the strengths we have developed over many years. We will remain focused on growing shareholder value, retaining and attracting talented employees, further building the valued relationships we have with our many customers and business partners, and improving the transparency of our business segments."