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Oil giant Marathon sells interest in Corrib gas field for $400m

Friday, June 26, 2009

The Corrib gas field could produce enough gas to meet 75 per cent of Ireland’s peak winter needs for up to a decade

BARRY O’HALLORAN

US OIL company Marathon is selling its share of the Corrib natural gas field off the west coast to Canadian rival Vermilion in a deal potentially worth $400 million (€285 million).

Both groups announced the sale early yesterday. Marathon said that it has agreed to sell its 18.5 per cent stake in the Corrib field, off the Mayo coast, to Vermilion, for an initial payment of $100 million, once the deal goes through later this year.

The sale will end Marathon’s long-term involvement in Ireland, and means that the Corrib’s other owners, exploration giants Shell and Statoil Hydro, will have a new partner on the project, Vermilion.

Under the agreement’s terms, Vermilion will make further payments of between $135 million and $300 million, depending on when Corrib first begins producing commercial quantities of gas.

This is expected some time between late 2010 and late 2011. The terms mean that Marathon could earn between $235 million and $400 million from the sale.

The agreement values the Corrib field at this point, before it has produced any gas, at just over $540 million. The Corrib could produce enough gas to meet 75 per cent of Ireland’s peak winter gas needs for up to a decade.

The partners also believe it could contain more commercial quantities of gas than established to date, and intend to begin drilling new exploration wells next year. Marathon will report an after-tax loss of $150 million on the deal in its results for the second quarter of 2009. This is based on the $100 million initial payment that it will receive once the sale goes through.

The company pointed out yesterday that this figure could be adjusted in future periods because part of the sale price is linked with the timing of gas production.

The Texas-based company has been operating natural gas fields in the Celtic Sea off the south coast since the 1980s, and was been a long-term supplier to State company Bord Gáis. It sold its remaining Celtic Sea interests to Petronas last December.

Vermilion Energy Trust is based in Alberta, in western Canada. The company has been in operation since 1994, when it began trading as a “junior” exploration group.

It has oil and gas producing fields in Australia, Canada, France and the Netherlands.

The Corrib field will be its first Irish venture. The company said yesterday that its established share of its production will be the equivalent of 17.5 million barrels of oil, and could potentially be twice that figure.

During the first quarter of this year, the company reported that its businesses generated a cash flow of $68.4 million Canadian dollars (€42 million), a sharp fall on the $132 million it reported for the same period in 2008. The company blamed last year’s sharp fall in oil and gas prices for the decline.

This article appears in the print edition of the Irish Times

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