HOUSTON - Marathon Oil Corp (NYSE:MRO) has agreed to a settlement with the Environmental Protection Agency (EPA) and the Department of Justice concerning alleged Clean Air Act violations at its operations on the Fort Berthold Indian Reservation between 2015 and 2019. The settlement, announced Thursday, involves a consent decree that is pending a 30-day public comment period before court consideration.
The Houston-based company, which did not admit liability, will undertake mitigation projects and implement specific injunctive relief measures as part of the agreement. Additionally, Marathon Oil will pay a $64.5 million civil penalty, a sum that has been largely accrued in its first-quarter report for 2024.
Marathon has already initiated early compliance with the injunctive requirements in anticipation of the settlement terms and expects to complete the necessary work by 2025. The estimated cost of the injunctive relief is approximately $177 million, with over 70% already incurred or accounted for in the company's 2024 capital budget. The remaining costs are projected to be covered by the end of 2025.
The consent decree outlines a compliance schedule with deadlines through at least 2026, including ongoing requirements for permitting, inspection, monitoring, maintenance, auditing, and reporting. These activities may lead to temporary production halts or reductions at certain wells and facilities.
Marathon Oil has been proactive in reducing emissions by voluntarily adopting advanced technologies, such as its new lowest emitting automated facilities (LEAF), particularly in the Bakken region. These efforts are part of the company's broader strategy to enhance compliance and reduce emissions.
The company also indicated that the settlement would not materially affect its business, operations, or its proposed merger with ConocoPhillips (NYSE:COP), which is currently underway.
In other recent news, Marathon Oil Corporation (NYSE:MRO) has agreed to a $241 million settlement over allegations of air pollution violations. This settlement includes a record penalty and environmental equipment upgrades. The company is expected to invest around $177 million to bring its facilities up to compliance standards, which could reduce carbon dioxide emissions by 2.25 million tons over the next five years. This development comes amidst Marathon's ongoing acquisition by ConocoPhillips in a deal valued at $22.5 billion.
In relation to the acquisition, Mizuho Securities has increased its price target for Marathon Oil shares to $34.00, maintaining a neutral rating. This adjustment reflects the exchange ratio provided in the deal with ConocoPhillips. However, RBC Capital has maintained its outperform rating on Marathon Oil shares with a steady price target of $33.00, while Citi has revised its stance on Marathon Oil stock from a buy to a neutral position, reducing the price target from $32.00 to $29.00.
InvestingPro Insights
As Marathon Oil Corp (NYSE:MRO) navigates through its recent settlement and looks toward the future, it's important for investors to consider the company's financial health and market performance. According to InvestingPro data, Marathon Oil currently boasts a market capitalization of $16.01 billion, with a solid P/E ratio of 11.21 over the last twelve months as of Q1 2024, indicating a potentially attractive valuation relative to earnings. The company also shows a robust gross profit margin of 75.91% over the same period, which may reflect efficient operations despite recent regulatory challenges.
InvestingPro Tips highlight that Marathon Oil has been enhancing shareholder value through aggressive share buybacks and has a history of maintaining dividend payments for 54 consecutive years. Furthermore, the company has raised its dividend for three consecutive years, with a dividend growth of 10% in the last twelve months as of Q1 2024, showcasing its commitment to returning value to its shareholders. For investors seeking additional insights, there are more InvestingPro Tips available, offering in-depth analysis and metrics to guide investment decisions. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and discover the full range of exclusive tips and data available on InvestingPro.
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