Leading integrated oil and gas firm
Marathon Oil Corporation
) plans to sell majority of its acreage in Texas' Eagle Ford basin.
The company aims to shed the non-core properties while reorganizing
its portfolio following the spin-off of its refining division last
MARATHON PETROL (MPC): Free Stock Analysis
MARATHON OIL CP (MRO): Free Stock Analysis
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Marathon Oil holds 325,000 acres in Eagle Ford shale and will
likely shed about 100,000 acres in Wilson, Karnes and Bee Counties.
It could receive up to $25,000 an acre on sale of the said assets.
Major portion of the land, which will be put up for sale, is
located in Wilson County. The company plans to sell the acreage as
there is no drilling activity in the region.
Over the next five years, management plans capital spending of $1.6
billion per year in the Eagle Ford. They also expect net production
to be 120,000 barrels of oil equivalent per day by 2016.
Management opines that this sale will not affect the company's plan
or production target. Its oil and gas production in the Eagle Ford
during the second quarter of 2012 rose 50% sequentially.
Earlier this month, Marathon Oil announced its plans to offload
80,000 acres in the Marcellus region in West Virginia and
Houston, Texas-based Marathon - which last year spun off its
refining/sales business into a separate, independent and publicly
Marathon Petroleum Corporation
) - retains a Zacks #3 Rank (short-term Hold rating). We are also
maintaining our long-term Neutral recommendation on the stock.
Marathon is a leading energy firm with a large and
geographically-diverse reserve base and solid project pipeline.
Additionally, the company possesses a healthy balance sheet, which
helps it to capitalize on investment opportunities. We also like
the strong growth potential of Marathon's high-margin liquids-rich
unconventional plays, which diversify its portfolio and are
expected to further drive its overall volumes.
While being incrementally more positive on the company, we believe
Marathon will take some time to fully absorb the outcome of the
spin-off. Consequently, we would rather wait for a better entry
point before accumulating shares.