Vermilion Snaps Up Marathon's Stake in Corrib Development Off Ireland
Marathon Oil has entered into a definitive agreement with Vermilion Energy Trust, under which Vermilion will purchase Marathon's wholly owned subsidiary, Marathon International Petroleum Hibernia Limited, which holds Marathon's 18.5 percent interest in the Corrib natural gas development offshore Ireland. The companies expect to close the transaction, subject to Government and regulatory approvals, during the second half of 2009.
The final sale proceeds will range between $235 million and $400 million, subject to the timing of first commercial gas at Corrib. An initial payment of $100 million will be made at closing, with the remaining balance due at the time of first commercial gas. The Operator expects first gas to occur between late 2010 and late 2011. Pursuant to the agreement, Vermilion will assume its share of future capital expenditure obligations in order to reach first gas, which are anticipated to range up to $300 million net to the acquired interest. These capital costs are primarily for the completion of the facilities necessary to bring this gas on-stream. The transaction will have an effective date of Jan. 1, 2009.
Marathon's total net proved reserves associated with the Corrib development as of year-end 2008 were 98 billion cubic feet of natural gas (16.4 million barrels of oil equivalent). Shell serves as the operator holding a 45 percent interest; Statoil Hydro holds a 36.5 percent working interest.
As a result of this agreement and the previously announced sale of its wholly owned subsidiary Marathon Oil Ireland Limited, Marathon's Irish oil and gas exploration and production business will be reported as a discontinued operation in its consolidated financial statements.
Additionally, an after-tax loss on the sale of Marathon International Petroleum Hibernia Limited, currently estimated at $150 million, will be reported in the second quarter of 2009. This estimated loss could be adjusted in future periods primarily because a portion of the sales proceeds are contingent on the timing of first commercial gas.
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