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Marathon Oil sells Gulf of Mexico fields in $205m deal

An anonymous buyer secured most of Marathon Oil's GoM fields in a major restructuring by the US company

Marathon Oil has reached an agreement to sell most of its Gulf of Mexico (GoM) oilfields to an anonymous buyer in a deal worth around $205m. The company continues its transformation into a player focused more narrowly on shale in the US.

The package includes its operating interest in the Ewing Bank cluster of producing fields; its non-operating 30% interest in the Neptune field; and its 50% interest in the Petronius field. The company produced around 17,000 barrels a day (b/d) in the GoM last year.

The independent producer isn’t abandoning the GoM though. It is hanging on to its interests in the promising Shenandoah deep-water discovery in the Lower Tertiary section of the GoM and the Gunflint development project.

Marathon has been undergoing a major restructuring since it split its exploration and production and refining businesses in 2011. And the oil downturn has accelerated the transformation as the company looks to rein in spending and free up cash to spend on its US shale properties.

Earlier this year it sold off mature conventional oilfields in Texas and Oklahoma for $100m. More recently it has sold frontier exploration acreage in Ethiopia and Kenya. In 2014, Marathon sold its offshore Norwegian business for $2.1bn and its stakes in deep-water Angola Blocks 31 and 32 for $2bn.

The company has set a disposal target of $500m, so further asset sales are likely to come later this year. “What we've identified for sale are non-core E&P and midstream assets, operated and non-operated, that simply do not compete for capital today given the depth and breadth of our inventory in the US resource plays”, the company’s chief executive Lee Tillman told analysts in a November 5 conference call.

Marathon, like other US independents, is following its peers as oil prices remain low for an extended period of time. Spending is on track to be $3.1bn this year, down from an initial target of $3.5bn and 30% less than 2014. The company says it will spend just $2.2bn in 2016, a further 29% cut from 2015. Marathon also cut its dividend by 75% to allow it to fund spending with its cash flow, instead of borrowing. That should win it favour with investors looking for capital discipline at a time when many struggling shale players are getting deeper into debt.

Austerity will, however, come at the expense of production growth – a trend that is being seen across the US upstream. The company hopes it will be able to keep production flat at its end-2015 output of around 430,000 barrels of oil equivalent/day. 

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