By OGJ editors
HOUSTON, June 24 -- Houston-based Marathon Oil Corp. signed a definitive agreement to acquire Globex Energy Inc. of Houston in a deal valued at $155 million.
Marathon said that among other benefits, the acquisition would bolster the firm's holdings off Equatorial Guinea, which was established as a core area earlier this year through the purchase of the upstream and downstream interests in that country for $993 million from CMS Energy Corp., Dearborn, Mich. (OGJ, Nov. 12, 2001, p. 40). The deal will add 38 million boe in proven reserves to Marathon's operations portfolio.
Globex is an independent exploration and production company with operations exclusively outside the US. The firm holds 10.9% interest in Alba field off Equatorial Guinea and 12.5% interest in Stag field on the Northwest Shelf off Australia. Marathon already operates and holds 52.4% interest in the Alba production-sharing contract for Alba field. The current net production from Alba and Stag fields is 4,000 boe/d and 2,200 boe/d, respectively. Alba field is estimated to hold 5 tcf of dry gas and 300 million bbl of condensate, Marathon said.
In addition, Marathon will acquire a 9.4% interest in exploration Block D off Equatorial Guinea, which will raise its ownership in the block to 47%. Also, Marathon will now hold an additional 9% interest in the Bioko Island, Eqatorial Guinea, LPG processing facility, raising its interest in the plant to 52.2%. The Bioko plant recovers 17,000 b/d (gross) of condensate and 2,400 b/d (gross) of LPG from production from Alba field. About 120 MMcfd of lean gas is then fed to a methanol plant, in which Marathon holds 45% interest. The plant produces 2,500 tonnes/day of methanol.
In Australia, Marathon will acquire a 19% interest in one exploration block and a 15% interest in two additional exploration blocks in the Carnarvon basin on the Northwest Shelf.
The deal, which is still subject to the approval of the Australian Foreign Investment, is expected to close before the end of this month.
Reactions
"(Marathon's) Globex acquisition adds additional attractive West African exposure," said Tyler Dann, Banc of America Securities LLC analyst, in a research note following Marathon's acquisition announcement.
"Marathon is poised to improve its upstream business," Dann said. "Marathon believes it has the ability to grow proved reserves by 40% by 2004 at a cost of around $5-6/boe, far below the company's 3-year average historical finding and development cost of $11.98/boe."
Based on the purchase price and level of reserves, Marathon acquired Globex for $4.08/boe, said Steven A. Pfeifer, first vice-president with Merrill Lynch. "The company expects to add an additional 12 million boe of proven reserves in (Equatorial Guinea) upon approval of an expansion project. The acquisition price appears rich given the 17-year reserve-to-production ratio of acquired reserves," Pfeifer said in a research note.
Marathon's Globex acquisition represents 17% of its $900 million exploration and production capital outlay budget for 2002, Pfeifer said, adding that Marathon's "disappointing exploration and development results will likely require the company to purchase reserves to replace production."