By the OGJ Online Staff
HOUSTON, Nov. 2 -- Marathon Oil Co., Houston, Friday said it is buying CMS Energy Corp.'s upstream and downstream interests in Equatorial Guinea for $993 million.
Marathon said the acquisition is part of its plan to grow through the creation of new core business areas.
Marathon will acquire a 52.4% interest in, and operatorship of, the offshore Alba Block, which contains the producing Alba gas field as well as undeveloped discoveries, and several undrilled prospects.
It also will get a 37.6% interest in the adjacent offshore Block D; a 52.4% interest in an onshore gas processing plant; a 45% interest in a joint venture onshore methanol production plant; and a 43.2% interest in an onshore liquefied petroleum gas processing plant.
The deal is expected to close in January.
Alba field, which began producing in 1991, has reserves of 5 tcf of gas and 300 million bbl of condensate. It is producing 230 MMcfd of wet gas, from which 17,000 b/d of condensate and 2,400 b/d of LPG are recovered at the plant on Bioko Island. About 115 MMcfd of the remaining lean gas is then fed to the methanol plant. Marathon's net share is expected to average 18,000 boe/d in 2002.
Plans have been submitted to increase gross production to 800 MMcfd and expand the condensate recovery and LPG facilities. This should result in Marathon's net production increasing to nearly 40,000 boe/d by 2004.
Marathon's net reserves associated with this acquisition are 142 million bbl of liquids and 646 bcf of gas, or 250 million boe. Of that, 183 million boe of proven reserves will be booked on closing with the remainder on securing the appropriate approvals for the expansion project in early 2002.
Marathon said based on the 250 million boe reserve level, the cash acquisition cost is $3.97/boe. By including $327 million of anticipated future development costs, the full cycle acquisition and development cost is $5.28/boe.
It said, "Significant incremental potential value exists in commercializing the remaining dry gas reserves. Marathon sees great promise in known technologies that could allow this gas, and future opportunities, to be commercialized."