Kinder Morgan trying to buy Marathon's stake in Yates field

June 23, 2003
Kinder Morgan Energy Partners LP is negotiating with Marathon Oil Corp. to buy Marathon's 42.5% interest in Yates field. Kinder Morgan already owns 7.5% interest in Yates, which has largest onshore reserves in the Lower 48.

By OGJ editors
HOUSTON, June 23 -- Kinder Morgan Energy Partners LP is negotiating with Marathon Oil Corp. to buy Marathon's 42.5% interest in Yates oil field. Kinder Morgan already owns 7.5% interest in Yates, which has largest proven onshore reserves in the Lower 48.

A final decision on the proposal is expected by the fourth quarter. As of Dec. 31, 2002, Marathon held net proved reserves of 117 million bbl in Yates field.

Yates field is "an ideal asset for CO2 flooding," Kinder Morgan said.

In other news, Marathon and Kinder Morgan plan to dissolve MKM Partners LP, which produces oil and natural gas in the Permian basin. A related company, MKM Holdings LLC, also will be dissolved.

Kinder Morgan, which owns 15% partnership interest, plans to acquire MKM's 12.75% interest in the SACROC Unit in the Kelly-Snyder oil and natural gas field (OGJ, May 12, 2003, p. 47).

The SACROC Unit currently produces about 20,000 b/d of oil by using CO2 technology, Kinder Morgan said.

In addition, Kinder Morgan plans to buy Marathon's wholly owned subsidiary, Marathon Carbon Dioxide Transportation Co., for an undisclosed amount.

The transportation company owns 65% interest in Pecos Carbon Dioxide Pipeline Co. The transaction will bring Kinder Morgan's total interest in the system to nearly 70%.

Standard & Poor's Ratings Services, New York, said the announced transactions would not affect Kinder Morgan's ratings or outlook, but its proposed acquisition of Marathon's Yates field interest could have a "material negative impact on Kinder Morgan's credit quality, depending on financing."

Both the SACROC field transaction and the dissolution of the MKM partnership are expected to close in the second quarter, the companies said.

The pipeline company's sale is expected to close during the fourth quarter. The 8 in. pipeline runs 25 miles from McCamey, Tex., to Iraan, Tex.

Marathon's net share of production is 2,000 boed from the SACROC Unit. As of Dec. 31, 2002, Marathon held net proved reserves of 9 million bbl there.