Marathon to decide by midyear on sale of oil assets

USX-Marathon Group will decide by midyear whether it will spin off or sell its Marathon Oil Co. unit, said Marathon Pres. Clarence Cazalot. The company said last December it might consider a sale pending a recommendation from financial advisors.


By the OGJ Online Staff


NEW ORLEANS, La., Mar. 28�USX-Marathon Group will decide by midyear whether it will spin off or sell its Marathon Oil Co. unit, said Marathon Pres. Clarence Cazalot.

�There�s not much we can say about it now,� Cazalot told reporters on the sidelines of the Howard Weil energy investment conference. �[It will be] after the board makes a decision, probably midyear. Study is underway.�

The company said last December it might consider a sale pending a recommendation from financial advisors. That study is not complete, but Wall Street analysts speaking on condition of anonymity told OGJ Online they expect Marathon to be sold or spun off by the third quarter.

The company in December said it would reorganize itself to boost performance through �targeted� exploration projects, job cuts, and budget tightening.

And one way Cazalot plans to make his company more attractive to investors is by expanding its international portfolio.

�The real growth we see is international,� Cazalot noted in an earlier presentation to analysts and investors. Five focus areas for future growth are North Africa, West and South Africa, the Middle East, Eurasia, and Southeast Asia.

Marathon�s upstream presence overseas is much smaller than its larger competitors, with a 2001 exploration plan that calls for exploration in only two areas outside North America: Angola and Europe (UK, Ireland, the Netherlands, and Norway). Of the 414,000 boe/d Marathon produces, more than 70% is from the US or Canada.

But the company says its smaller size gives it an advantage in negotiations.

�We are less intimidating to international partners,� Cazalot notes.

The company is hoping to score big in the Middle East, where production costs are the lowest anywhere.

�We are in negotiations with the Saudis and in Kuwait on mainly gas midstream projects,� Cazalot said in a brief interview. In his presentation, Cazalot suggested that the company�s strong demand for Middle East crude at its Midwest refineries �is a fact not lost when looking at upstream investments.� About 297,000 b/d of Middle East crude is used in the company�s seven refineries (Marathon has a 62% interest in those plants through its holding in Marathon Ashland Petroleum LLC).

Turning to the more well recognized downstream part of Marathon�s business, Cazalot said there are no plans to sell any refineries although �like the upstream properties we have now, we continue to look at our refineries to make sure they fit.�

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