With an asset sale reportedly in the works, Marathon Oil Corp. could soon join a wave of U.S.-based oil producers leaving the North Sea as they focus on core domestic production areas.
Marathon has put its British North Sea assets up for sale, according to a report from Reuters, with the expectation that they could fetch approximately $200 million. Such a sale would put Marathon among the ranks of EOG Resources Inc., ConocoPhillips, Hess Corp. and even supermajor Chevron Corp. as U.S. companies that are divesting at least some of their North Sea holdings. The reason for most of the sales has been simple: the North Sea, which lies between Britain and Scandinavia off northwest Europe, is no longer a cost-effective prospect for U.S. producers compared to options elsewhere.
During a recent presentation at a Barclays conference, Marathon CEO Lee Tillman touted the company's "multi-basin model" and mentioned the Bakken and Eagle Ford shales, the SCOOP/STACK plays in Oklahoma and the Delaware Basin. All four regions are unconventional plays in the U.S., and none mentioned the North Sea.
Mizuho Securities Co. Ltd. analyst Paul Sankey said Marathon's expected return for the British North Sea holdings was "light," and the company could turn a larger profit if it put its other North Sea holdings on the market. "We currently hold [about $550 million] for the remaining North Sea position … which amounts to ~$30k/flowing barrel of production," he said in a research note Oct. 3.
Another company investing heavily in U.S. shale is EOG, which is taking a similar approach to Marathon's. The company put its North Sea assets up for sale in April, intending to focus on plays like the Permian Basin, the Powder River Basin, the Eagle Ford and the DJ Basin.
EOG has found a buyer for its North Sea holdings but has not announced who that buyer is. EOG Spokeswoman Kim Ehmer said the transaction is pending regulatory approval.
ConocoPhillips has also divested its U.K. North Sea assets, making a swap with BP PLC to expand its position in Alaska.
"These transactions are significant for ConocoPhillips because they continue our strategy of coring up our legacy asset base in Alaska," Chairman and CEO Ryan Lance said in early July. "We have a long history of creating value in Alaska and an ongoing commitment to invest in our legacy assets, as well as in the development of our recent exploration success."
Hess is focusing its capital and production activity in the Bakken and off the coast of Guyana. When it moved to pull out of the North Sea, CEO John Hess made it clear that the money raised would be directed to one of those key plays.
"Proceeds from these asset sales, along with cash on the balance sheet, will prefund development of our world class investment opportunity in offshore Guyana," he said in a statement in October 2017.
Apache Corp. has also made the decision to get out of the British portion of the North Sea but remained firm that the rest of its holdings in the area are in its long-term plans. CEO John Christmann said during the company's second-quarter earnings call that capital was increasing for North Sea operations, with the year's greatest production coming in the fourth quarter of 2018.