Leading integrated oil and gas company Marathon Oil Corporation (MRO) announced the discovery of oil at the Atrush-1 in the Kurdistan Region of Iraq. Marathon acquired a 20% stake in the block, through its subsidiary Marathon Petroleum KDV B.V. in October, 2010, making its foray into the country’s oil and gas industry.
The remaining 80% working interest in Atrush is with the joint-venture company General Exploration Partners, Inc., a subsidiary of Aspect Holdings, LLC and ShaMaran Petroleum, Inc.
Situated at approximately 55 miles northwest of Erbil, the well was drilled to about 11,000 feet of depth and encountered almost 400 feet of net pay in the Jurassic zone. The companies performed drill stem tests to estimate the reservoir pressure gradients, fluid content and properties, and reservoir deliverability. Although restricted by tubing sizes and testing equipment, flow rates were established at over 6,000 barrels of oil per day from the three horizons.
Based in Houston, Texas, Marathon exhibits an array of upstream and downstream activities with operations spread across the globe including countries like the U.S., Canada, U.K., Norway, Equatorial Guinea and Angola.
We believe that Marathon’s endeavor in the unexplored terrains of Iraq will strengthen its foothold in the Middle East over the coming years. Moreover, the company’s development projects in liquid rich resource plays and other focus areas provide long-term production growth visibility.
However, there appears limited upside potential for the company’s shares considering its sensitivity to gas/oil price volatility, as well as drilling results, costs, geo-political risks and project timing delays. Marathon also faces stiff competition from peers such as Chevron Corp. (CVX) and Exxon Mobil Corporation (XOM). As such, we expect Marathon to perform in line with the broader market and maintain our Neutral rating.
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