Marathon Oil Is on a Profitable Run as It Sheds Non-Core Assets

Tickers in this article: MRO

NEW YORK (TheStreet) -- Marathon Oil  has been having a profitable garage sale for the past three years as it makes room for powerful domestic growth. Since 2011, the Houston energy company has sold over $6 billion worth of assets in order to simplify and concentrate on its core business.

Marathon is employing the time-honored principle of concentrating on what you do best and spending the majority of your time and resources on the most lucrative activities.

Utilizing this approach the company recently sold its operations in Norway for about $2.7 billion in cash. This prized North Sea part of Marathon's production fetched a good price as management waited patiently for oil and gas prices to spike in synch with its increased production.

The proceeds from the Norwegian sale, which is expected to close by the end of 2014, will be mainly spent to beef up onshore domestic energy production. Company officials also suggested the possibility of an additional $1 billion or $2 billion share buyback following the disposal of the North Sea assets.

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Marathon's future growth is more attainable on its home turf. With gushers flowing in Texas' Eagle Ford shale, North Dakota's Bakken shale, and Oklahoma's SCOOP and STACK resource basins, the company has the chance to increase production in these locations by 30% during 2014.

By reducing its international operations Marathon has positioned itself to focus its productive efforts where costs are more predictable and operating margins are best. Of the company's nearly $6 billion capital spending budget this year, over 70% is focused on North American exploration and production.

Apparently the value of Marathon's acreage in the Bakken shale, Eagle Ford shale, and Oklahoma Resource Basins is worth a lot more than investors first believed. This may be why the company stated that the "breakeven time" for its North American wells is now less than two years.

Marathon shares are up over 13% based on the Monday close of $40. Analyst Credit Suisse suggested Marathon's North American assets are worth about $35 per share, or around $24 billion. That's 88% of the current price of Marathon's stock.