Marathon Oil Co., which completed its acquisition of gasproducer Pennaco Energy Inc. earlier this month, expects toincrease its oil and gas production another 3% this year throughexploration and possible acquisitions, said CEO Clarence Cazalot.However, Cazalot was coy about whether parent company USX-MarathonGroup would spin off or sell its growing energy unit this year.

Speaking at the Howard Weil energy investment conference in NewOrleans, Cazalot said that a study is under way about a possiblespin off of Marathon Oil from its parent, but he said he could notsay anything about it yet. Last December, USX-Marathon indicated itwould consider selling Marathon Oil pending a recommendation fromits financial advisers.

In December, Marathon Oil paid $500 million to acquiretwo-year-old Pennaco, a company whose key assets are tied tocoalbed methane gas production in the Powder River Basin ofnorthern Wyoming and southern Montana (see Daily GPI, Dec. 27,2000).

Of the Pennaco acquisition, Cazalot said, “Much of the growingglobal demand for energy will be met by natural gas, and this isparticularly the case for the United States. The North American gasmarket is a core area for Marathon, and this acquisition willenhance our already strong presence. Its assets will provide asignificant new reserve base that we can develop and deliverquickly to the marketplace.”

However, Marathon Oil may make itself more attractive topossible suitors with an expanded portfolio of internationalassets, Cazalot said. There are no North American assets on theradar, but Cazalot said the company is considering more developmentin Libya, Saudi Arabia and Kuwait. He said the company also sees”great potential” in South and Southeast Asia.

Its upstream presence is heavy in North America: of the 414,000boe/d it produces, more than 70% is from exploration and productionactivities in the United States and Canada. Cazalot said thatMarathon Oil is not considering getting rid of any of its upstreamactivities, either. In fact, he said, “we continue to look at ourrefineries to make sure they fit.”

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