Leading U.S. energy firm,
Marathon Oil Corporation
) has inked a farm-out agreement with Total Gabon, marking a
re-emergence in the West African country of Gabon.
Marathon quit its operations in the country in 2009, with the
sale of its interests in three offshore production blocks -
Tchatamba Marin, Tchatamba South and Tchatamba West.
Per the terms, Marathon Upstream Gabon Limited - an affiliate of
Marathon Oil - will take over a 21.25% working interest in the
Diaba License G4-223 and its associated permit.
Located about 31.1 miles from the southern coast of Gabon and at
water depths of 328.1 feet to 11,482.9 feet, the Diaba license
spans over an area of approximately 3,503.9 square miles.
Following this deal, Total Gabon will continue to act as the
operator of the license with 42.50% interest. The other partners in
the holding are CIE Gabon Diaba Ltd. (21.25% stake) - a unit of
Cobalt International Energy
) and the Republic of Gabon (15% interest).
Pending certain regulatory approvals by the domestic authority,
the deal is expected to be closed in the third quarter of 2012.
The company plans to commence drilling on the concession in the
first quarter of 2013, after the necessary seismic surveys and
interpretations are complete.
Marathon management remains highly optimistic about this
alliance that will allow work on the pre-salt regions in the Diaba
permit. Marathon believes that this collaboration will broaden its
portfolio of assets on the global platform and pave way for further
Houston, Texas-based Marathon Oil is an integrated oil and gas
firm with extensive upstream operations, worldwide. The company's
business is organized in three segments - Exploration and
Production (accounting for more than 80% of Marathon's total
income), Oil Sands Mining, and Integrated Gas.
We believe that Marathon exhibits a geographically diverse
reserve base and solid project pipeline. Additionally, the company
possesses a healthy balance sheet, which helps it to capitalize on
investment opportunities. Marathon's emphasis on the high-margin
North American unconventional resource plays should further improve
its growth profile.
However, due to its integrated nature, Marathon is particularly
susceptible to the downside risk from any weakness in the global
economy. We are also concerned about business risks associated with
operations in oversea areas as well as technical disruptions and
cost overruns in various projects.
Hence, we believe that the upside potential of Marathon is
limited and maintain our long-term Neutral recommendation on the
stock. Marathon shares currently retain a Zacks #3 Rank, which
translates into a short-term Hold rating.
COBALT INTL EGY (CIE): Free Stock Analysis
MARATHON OIL CP (MRO): Free Stock Analysis
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