Marathon Oil Corp. ended talks to sell part of its stake in the Athabasca Oil Sands Project as Canadian oil sands deals languish in the face of low heavy crude prices and competing U.S. shale investments.
Marathon didn’t reach an agreement with a prospective buyer for part of the company’s 20 percent stake in the project and isn’t engaged in any more discussions, the Houston-based company said in a statement today. Royal Dutch Shell Plc owns 60 percent of the Alberta project and operates it, while Chevron Corp. owns 20 percent.
The announcement comes after ConocoPhillips said last month its effort to sell stakes in Canadian oil-sands assets may stretch into 2014. Athabasca Oil Corp., which said in August it had signed a letter of intent with a partner to develop oil-sands properties, has yet to announce a deal. The holdings are among 11 billion barrels of recoverable reserves valued at an estimated C$17 billion ($16.5 billion) that were put up for sale in the oil sands last year, according to investment bank Peters & Co.
“The oil sands is languishing right now because they’re really in direct competition with the shale plays in the U.S.,” Fadel Gheit, a New York-based analyst at Oppenheimer & Co. who rates Marathon a buy, said in a phone interview today. The need for new pipelines, environmental resistance and the low price of Canadian crude make U.S. assets with higher rates of return “much more attractive” than oil sands, he said.
A lack of pipelines from Alberta’s oil sands is depressing prices for Canadian heavy crude, which today were $20 a barrel less than West Texas Intermediate, a U.S. benchmark. Environmental groups opposed to rising emissions from oil-sands development are attempting to block new pipelines that would allow producers to bring more bitumen to markets.
Lee Warren, a Marathon spokeswoman, declined to comment on why talks broke down, why the company is no longer trying to sell the stake or identify the potential buyer. The company said in October it was in talks to sell part of its stake.
Marathon still plans to divest $1.5 billion to $3 billion in a three-year asset sale program that will end this year, the company said today. About $1.3 billion in sales have been announced or closed so far.
ConocoPhillips has said before it’s not in a hurry to sell Canadian oil-sands assets.
“We have received significant interest in them and we are currently evaluating our options,” Davy Kong, a spokeswoman for the Houston-based company, said in a phone interview today.
Prospective buyers of oil-sands assets aren’t worried about “short-term” issues such as lower prices for Canadian heavy oil, Andre De Leebeeck, vice president of investor relations for Calgary-based Athabasca, said in a phone interview today. “Long term, oil sands are competitive. Large players have a decades-long view.”
De Leebeeck declined to comment on any discussions with potential partners.