Marathon Oil lead contender to buy Enron Oil & Gas
Which leaves Marathon Oil.
This report can confirm that Houston-based Marathon Oil has emerged as the lead contender to acquire Enron Oil & Gas, and with it the company's 30% stake in Panna, Mukta and Tapti. We can also confirm that Marathon is unhappy and a little confused at Enron's delayed response to its offer, which is now widely believed to be the best that Enron has received.
An industry source tells us Marathon has valued Panna, Mukta and Tapti at approximately $450m,but has told Enron it will only pay $300m because of "unresolved issues" attached to the sale. Principle among these is 'Section 4.10' of the Joint Operating Agreement, which in theory permits joint venture partners ONGC or Reliance to arbitrarily seek removal of any new operator if the old one (Enron) decides to sell up and move out.
Such a move would require oil ministry approval, but Marathon believes the threat is real. Other areas of concern include unpaid cash calls to the joint venture by Reliance and ONGC and on-going arbitration.
Absence of a firm gas offtake agreement with Gas Authority of India and obstacle in the way of a development programme for Tapti also figure as obstacles. "Most of the companies that examined this deal discounted $150m to take in all the problems," adds a source.
"It's the equivalent of six months headache."