Marathon
and Kinder Morgan announce plans to dissolve MKM Partners L.P. in
Permian Basin
Posted: 22 June 2003
Marathon Oil Corporation announced it has, through its subsidiaries,
signed a Dissolution and Distribution Agreement with Kinder Morgan
Energy Partners, L.P. to dissolve MKM Partners L.P. (and a related
company, MKM Holdings LLC), which has oil and gas production operations
in the Permian Basin of Texas.
Marathon holds an 85 per cent equity interest in the MKM partnership.
Prior to the dissolution of the partnership, MKM Partners L.P.,
Marathon, and Kinder Morgan have signed the following agreements
related to other assets in the Permian Basin:
- A purchase and sale agreement under which Kinder Morgan will
acquire MKM Partners L.P.'s 12.75 per cent interest in the SACROC
field for an undisclosed amount;
- A letter agreement under which Kinder Morgan will acquire Marathon's
indirect, wholly-owned subsidiary, Marathon Carbon Dioxide Transportation
Company, which owns a 65 percent interest in The Pecos Carbon
Dioxide (CO2) Pipeline Company; and
- An agreement under which Marathon and Kinder Morgan will explore
the potential sale of Marathon's interest in the Yates field to
Kinder Morgan.
Marathon anticipates the sale of MKM's interest in the SACROC field
and the dissolution of the MKM partnership will be concluded in
the second quarter.
The sale of Marathon's interest in the Pecos CO2 Pipeline is expected
to be concluded during the fourth quarter.
A decision on the possible sale of Marathon's interest in the Yates
field is expected during the fourth quarter. As a result of the
above, Marathon expects to take an after- tax charge of approximately
$75-85 million to second quarter earnings.
"These actions are consistent with the steps we are taking
to optimise Marathon's global asset portfolio, while adding financial
flexibility in our drive to improve profitability and build superior
shareholder value," said Clarence P. Cazalot, Jr., Marathon
President and CEO.
Earlier this year, Marathon announced plans to divest of certain
non-core downstream and upstream assets.
The company currently estimates that total 2003 asset sales are
likely to exceed $700 million. Proceeds will be used to strengthen
the company's balance sheet and to invest in high potential business
opportunities.
MKM Partners L.P. was formed in January 2001. Marathon's current
net share of production from the SACROC field is approximately 2,000
barrels of oil equivalent per day (boe/d) and 7,500 boe/d from the
Yates field.
At year- end 2002, Marathon held 9 million and 177 million barrels
of net proved reserves in the SACROC and Yates fields, respectively.
The Pecos CO2 Pipeline is an eight-inch, 25-mile long pipeline that
runs from McCamey to Iraan, Texas.
Posted by Richard Price,
Editor Pipeline Magazine
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