Marathon Oil targets $1bn in asset sales

OREANDA-NEWS. February 22, 2016. Marathon Oil is targeting up to \\$1bn in asset sales to plug its budget gap in 2016, more than three times last year's figure.

"There is no question that the sales market is much more challenging that it was even last year," chief executive Lee Tillman said in an earning call. But based on "the transactions we have been able to complete and the quality as well as the diversity of the identified non-core assets, we are comfortable increasing that target."

The new target is \\$750mn-\\$1bn versus last year's actual of \\$300mn. US upstream and midstream properties, both operated by the company and those in which it is an equity partner, are among those that are being offered for sale.

The new goal displays the aggressive push independent US oil and gas producers are making to shore up their balance sheet as cash flows dwindle amid a plunge in crude prices to near 13-year lows below \\$30/bl.

Credit ratings agencies, meanwhile, have voiced apprehension over lofty divestiture targets as most potential buyers hunker down to conserve cash with forward oil prices remaining weak.

Marathon Oil also lowered its capital expenditure (capex) guidance for 2016 to \\$1.4bn, 50pc lower than 2015 and 75pc below the 2014 level. The capex plan "is designed as balance sheet protection as our top priority," Tillman said.

About 70pc of Marathon's 2016 capex would be directed toward its shale acreage in the Eagle Ford in Texas, the Bakken in North Dakota, the South Central Oklahoma Oil Province (SCOOP) and the STACK, also in Oklahoma. The remaining would to go toward completing long-cycle projects that contribute to output growth while the independent "will minimize allocation to conventional exploration," Tillman said.

But the producer did not rule out further adjustment to "short-cycle investments if needed based on commodity prices and the outcome of our non-core asset sales," he said. The sharply lower capex is "calibrated to a view of WTI in the upper \\$30s."

The capex cut would result in an output drop of 6-8pc in 2016, after adjusting for asset sales.

The company yesterday said its global oil and gas output rose by 8pc in 2015, with the US posting a 21pc increase even as capex was cut by more than half to \\$3bn.

It posted a loss of \\$2.2bn for the year versus a profit of \\$3.05bn a year earlier and a loss of \\$793mn for the fourth quarter compared with a profit of \\$926mn a year earlier.