Marathon Oil’s debt
As of March 31, 2017, Marathon Oil’s (MRO) total debt stood at ~$7.3 billion. Out of this, ~$682 million is due in fiscal 2017 and ~$854 million is due in fiscal 2018. As of March 31, 2017, MRO had ~$2.5 billion in cash and short-term investments, meaning MRO’s net debt was ~$4.8 billion at the end of 1Q17. As of 1Q17, MRO has a total-debt-to-equity ratio of ~58%.
Will Permian acquisitions increase Marathon Oil’s debt?
In 1Q17, Marathon Oil announced its entry in the Permian Basin by acquiring a total of 91,000 net acres in two separate transactions valued at ~$1.8 billion. Around the same time, MRO exited its Canadian oil sands mining business by selling it for ~$2.5 billion. Thus, the company’s entry in the Permian Basin won’t strain its balance sheet, as it will use the proceeds from divestment to fund the Permian acquisitions.
In fact, even after funding the Permian acquisitions, MRO will be left with surplus funds of around ~$700 million from divestment proceeds, which it plans to use for existing debt reduction. Thus, MRO’s debt could fall by as much as ~10% before 3Q17.
MRO’s peer Diamondback Energy (FANG), which also operates in the Permian Basin, has a total debt-to-equity ratio of only ~21%.