Marathon Sells Interest in Yates Field to Kinder Morgan

Marathon Oil

Marathon Oil has entered into purchase and sale agreements with Kinder Morgan Energy Partners, L.P. under which Marathon will sell its 42.45 percent working interest in the Yates field unit and its 100 percent interest in the Yates Gathering System in the Permian Basin of West Texas for $225.5 million. The companies expect to close the transaction in November.

Upon closing, this transaction will result in a cash benefit to Marathon of approximately $390 million due to the company's tax basis in the underlying assets.

This transaction follows actions announced earlier this year by Marathon and Kinder Morgan when the companies dissolved MKM Partners L.P. (and a related company, MKM Holdings LLC), and Kinder Morgan acquired MKM Partners' 12.75 percent interest in the SACROC field. Additionally, Marathon and Kinder Morgan signed a letter agreement under which Kinder Morgan would acquire Marathon's indirect, wholly owned subsidiary, Marathon Carbon Dioxide Transportation Company, which owns a 65 percent interest in The Pecos Carbon Dioxide Pipeline Company. The sale of Marathon Carbon Dioxide Transportation Company for approximately $2 million also is expected to close in November.

The Yates field was discovered in 1926 and has produced nearly 1.5 billion barrels of oil. The field currently has more than 360 active producing wells and covers a unitized area of approximately 26,400 acres or almost 41 square miles. Marathon's net share of current Yates production is approximately 7,500 barrels per day. The company's proved reserves associated with the Yates field total 175 million barrels of oil equivalent.

The Yates Gathering System consists of approximately 87 miles of pipeline ranging from two to 12 inches in diameter that gathers production and transports it to central tank batteries for shipment to markets.

With the completed sale of Marathon's interest in the Yates field and Yates Gathering System, the company will have sold approximately $1.2 billion in assets this year as part of a program to sell non-core assets. Proceeds from these sales are being used to strengthen Marathon's balance sheet and to invest in high value business opportunities such as the company's purchase of Khanty Mansiysk Oil Corporation earlier this year.