Marathon Oil to boost shale position

HOUSTON (Reuters) - Marathon Oil Corp will buy more acreage in shale basins where it already has operations in order to boost its exploration business, the company's chief executive said on Friday.

The exploration and production company will look for small acquisitions in the Eagle Ford field in Texas, the Niobrara field in Colorado and Wyoming and the Bakken field in North Dakota, CEO Clarence Cazalot told Reuters in an interview.

"You'll note about all of those, they are predominantly liquids focused," Cazalot said. "We are not spending very much money on natural gas."

Marathon Oil's spin-off of its refining business took effect at midnight last night. Marathon Oil shareholders received one share of Marathon Petroleum Corp for every two shares of Marathon Oil held.

Shares of Marathon Oil, which now has a market capitalization of $23 billion, rose 2.6 percent in midday trading, on a day when the CBOE index of oil companies was off more than 2 percent.

Shares of Marathon Petroleum, in their debut on the New York Stock Exchange, rose 3.4 percent.

Earlier this month, Marathon said it planned to buy oil and gas properties in the Eagle Ford shale field in South Texas for $3.5 billion. Analysts pegged the per-acre value at about $20,000, the highest price paid to date.

Marathon Oil and others are snapping up acreage in North American shale fields where there is crude oil or natural gas with a high liquids content. Both can be sold at a steep premium to "dry" natural gas.

COSTS UP

Larger exploration rival Devon Energy Corp said earlier this week it was raising its 2011 capital expenditures by $1 billion, in part due to higher oilfield service costs.

Marathon Oil's Cazalot said the entire industry is struggling with inflation, but the company has no plans to increase its 2011 spending plan. In February, the company said this year's exploration spending would be nearly $4 billion.

"We don't see that we are going to raise our 2011 capex," Cazalot said, adding, "I think this (inflation) is sort of a temporary situation."

Oilfield service companies are rapidly adding capacity to perform hydraulic fracturing and are building new drilling rigs as well. That capacity should help ease inflation when it hits the market, Cazalot said.

Following the split, Fitch downgraded Marathon's debt rating one notch to "BBB" from "BBB+", citing a loss of earnings diversification as well as the potential for expensive acquisitions aimed at growing production and reserves.

Marathon Oil, based in Houston, retained no interest in Marathon Petroleum, based in Findlay, Ohio.

Shares of Marathon Oil rose 82 cents to $32.80 on the NYSE. Marathon Petroleum rose $1.37 to $42.77.

(Reporting by Anna Driver, editing by Gerald E. McCormick, John Wallace and Derek Caney)