Marathon Oil Announces $1 Billion Gross Debt Reduction
November 28 2017 - 4:50PM
Marathon Oil Corporation (NYSE: MRO) announced today that it has
entered into a transaction to redeem at par the outstanding $1
billion of 5.125 percent municipal revenue bonds due in 2037. This
transaction will reduce gross debt by $1 billion and annual cash
interest expense by $51 million while preserving the ability to
remarket up to $1 billion of the tax-exempt municipal bonds to
third parties between closing and the maturity date of 2037.
When combined with the Company’s previous refinancing
transaction in third quarter 2017, Marathon Oil’s gross debt has
been reduced by approximately $1.75 billion, and annual cash
interest expense has been reduced by approximately $115
million.
“We continue to strengthen our balance sheet, and this
transaction takes advantage of a unique element of our capital
structure to reduce gross debt while preserving future optionality
in the tax-exempt bond market,” said Dane Whitehead, Marathon Oil
executive vice president and CFO. “Importantly, it also lowers our
annualized corporate costs by another $50 million.”
Marathon Oil has agreed to purchase, with cash on hand, $1
billion of Revenue Refunding Bonds (Marathon Oil Corporation
Project) Series 2017 having a term rate of 3.75 percent that will
mature on June 1, 2037, to be issued by the Parish of St. John the
Baptist, State of Louisiana. The Parish will use the proceeds to
redeem $1 billion of 5.125 percent Fixed Rate Revenue Bonds
(Marathon Oil Corporation Project) Series 2007A, for which the
Company is currently the obligor. The purchase of the refunding
bonds by the Company and the redemption of the original bonds will
result in a reduction of total gross debt of $1 billion and
generate annual cash interest savings of $51 million.
Marathon Oil will be obligated to service the principal and
interest payments associated with the refunding bonds but will also
own the refunding bonds resulting in no net debt service cost to
the Company. The Company has the right to tender the refunding
bonds at par and remarket them to investors at any time up to the
2037 maturity date and in any amount up to the full $1 billion,
subject to market conditions.
The Company’s total liquidity as of Sept. 30 was $5.2 billion,
which consisted of $1.8 billion in cash and cash equivalents and an
undrawn revolving credit facility of $3.4 billion. Approximately
$750 million in remaining proceeds from the sale of the Company's
Canadian subsidiary is scheduled to be received in first quarter
2018.
The refunding transaction is expected to close on Dec. 18, 2017,
subject to customary closing conditions. It is being underwritten
by Morgan Stanley & Co. LLC. Terms of the refunding bonds and
the sale thereof will be as described in the official statement
relating to the refunding bonds which will be available no later
than Dec. 7, 2017 on the website of the Municipal Securities
Rulemaking Board via its Electronic Municipal Market Access system
at www.msrb.org.
This news release shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of
these securities in any state or jurisdiction in which such offer,
solicitation or sale of these securities would be unlawful prior to
registration or qualification under the securities laws of any such
state or jurisdiction.
This release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical fact, including statements
regarding the completion of the proposed offering and use of
proceeds thereof, as well as our ability to remarket the funds and
receipt of the remaining sale proceeds, are forward-looking
statements. While the Company believes that its assumptions
concerning future events are reasonable, a number of factors could
cause results to differ materially including the failure to satisfy
closing conditions, our ability to remarket the bonds as well as
risk factors, forward-looking statements and challenges and
uncertainties described in the Company's 2016 Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, and other public filings and
press releases, available at www.marathonoil.com. Except as
required by law, the Company undertakes no obligation to revise or
update any forward-looking statements as a result of new
information, future events or otherwise.
Media Relations Contact
Lee Warren: 713-296-4103
Investor Relations Contact
Zach Dailey: 713-296-4140
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