The Board of Directors of Marathon Oil Corporation has approved moving forward with plans to spin off Marathon’s downstream business, creating two independent energy companies.
Marathon Petroleum Corporation (MPC), to be headquartered in Findlay, Ohio, is expected to be the fifth largest US refiner with downstream assets concentrated mainly in the Midwest, Gulf Coast and Southeast regions of the US. Marathon Oil Corporation (MRO) will be a global upstream company based in Houston, Texas.
Marathon claims that the benefits of creating these two energy companies include:
Enhanced flexibility to pursue tailored strategies. Each company should have a greater ability to make business and operational decisions in the best interests of its business and to allocate capital and corporate resources with a focus on achieving its own strategic priorities. A more focused business strategy should also result in an expanded portfolio of attractive growth opportunities for each company.
Superior transparency and improved investor focus. As independent energy companies, analysis and investment decisions will be more transparent, allow for more specific comparisons against peers, competitors, benchmarks and performance metrics and thus facilitate evaluation assessments which will likely make the two companies appeal to different sets of shareholders seeking to invest in specific segments of the oil and gas industry. With improved investor focus, it is also anticipated each company will realize a reduction in their individual cost of equity.
Strengthened ability to attract and retain talent. More focused business models will enhance each company’s ability to attract and retain individuals with the appropriate skill sets as well as to better align compensation and incentives with the performance of these different businesses.
MRO will operate and report through three segments: Exploration & Production, Oil Sands Mining and Integrated Gas. MPC will also operate and report through three segments: Refining & Marketing, Speedway and Pipeline Transportation.
The transaction is expected to be effective 30 June 2011, with distribution of MPC shares shortly thereafter.