Marathon Oil jettisons Canadian oil, buys Permian Basin land

Marathon Oil Corp. has agreed to sell off its Canadian oil sands business for $2.5 billion, jettisoning an expensive segment that harvested about a tenth of its oil, the company said Thursday.

The sale to Royal Dutch Shell and Canadian Natural Resources, expected to close in mid-2017, would cut a quarter of the company’s operating expenses this year.

“Historically, our interest in the Canadian oil sands has represented about a third of our company’s other operating and production expenses, yet only about 12 percent of our production volumes,” Marathon President and CEO Lee Tillman said in a written statement.

Separately, the Houston driller also agreed to snap up 70,000 net acres in the Permian Basin in West Texas for $1.1 billion in cash. The transaction with private company BC Operating, includes 51,500 acres in the Northern Delaware basin in New Mexico.

All told, the Texas and New Mexico land has about 5,000 feet of “oil-rich stacked pay,” Tillman said, referring to the multiple subterranean layers of oil-soaked rock that have attracted drillers to the region despite high land prices. That deal is expected to close in the second quarter.

The transaction puts the value of the Permian Basin land at $13,900 per acre.