Marathon Considers Splitting Businesses

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Marathon Considers Splitting Businesses

HOUSTON -- In an effort to increase shareholder value, the board of directors for Marathon Oil said a possible division into two independent publicly traded companies could come to fruition. According to a released statement, one entity would consist of Marathon's Exploration and Production, Integrated Gas and Oil Sands Mining businesses, while the other would center on the company's Refining, Marketing and Transportation business.

The initiative, underway for a number of months, most recently saw the hiring of financial advisor Morgan Stanley and the law firms of Baker Botts LLP and McKee Nelson LLP as advisors. Upon further research and discovery, the board is expected to make a decision during the first quarter of 2009.

In other news, Marathon reported that its second quarter net income was $774 million, compared to net income of $1.550 billion in the comparable quarter. According to the company, results include a non-cash, after-tax, market-to-market loss of $220 million on "derivatives intended to mitigate price risk related to future sales of Canadian synthetic crude. The last of these derivatives is set to expire in the fourth quarter of 2009."

Clarence P. Cazalot, Jr., Marathon president and CEO, said in a statement: "The second quarter 2008, compared to the second quarter 2007, was a challenging quarter financially, particularly as a result of the significantly lower refining and wholesale marketing realized margins in a very difficult downstream environment and the derivatives loss incurred in the Oil Sands Mining segment. However, our Upstream business had a record quarter in profitability and our Integrated Gas segment continues to perform well."

The company's 180,000 barrels per day (bpd) refinery expansion at its Garyville, La., facility is almost 60 percent complete and scheduled for late 2009 launch. "Construction recently started on the Detroit Heavy Oil Upgrading Project, and upon completion in late 2010, it will allow us to refine an additional 80,000 bpd of heavy crude oil," Cazalot said in a statement.