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Why Mobil wants Marathon: strong string of reserves

Why is Mobil Corporation interested in buying Marathon Oil? In one word, according to Wall Street oil analysts: reserves. Marathon, a Findlay, Ohio, company, has been successful at digging holes in the ground and finding substantial amounts of oil or gas. ''The company has good assets,'' says Paul Mlotic, an analyst at Cyrus J. Lawrence. ''It's not surprising it would be attractive to a takeover, given the assets and the price of the stock in relation to those assets.''

The battle for control of those assets is tied up in court. On Nov. 2, Marathon Oil filed an antitrust suit in Cleveland, and a federal judge has issued a temporary restraining order against Mobil, blocking its $85-a-share takeover bid. The restraining order is set to expire at noon next Tuesday. At that time, unless the judge finds antitrust grounds to extend the order or make it permanent, Mobil can proceed with its bid. Analysts speculate that if that happens, Marathon might search for another suitor to buy its assets.

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Among those assets are:

-- The Yates Field in West Texas. The company, in partnership with Gulf Oil, Standard Oil of California, and some smaller companies, shares in the production of oil from Yates, the second-largest producing field in the United States.

Last year Marathon received 55,195 barrels of crude per day from its 49.48 percent participation in the field. And late last month the company, as operator of the field, asked the Texas Railroad Commission, the state agency that controls Texas oil production, for permission to increase the production from 125,000 barrels a day to 150,000 barrels. This could add another 20,000 barrels a day to Marathon's take.

-- The Big Horn Basin in Wyoming. Last year Marathon squeezed 35,679 barrels of oil per day from fields that were discovered 50 to 60 years ago. Analysts say it's important that production has risen 1,700 barrels a day from eight years ago, when the company began a pressure maintenance program. As a result of the company's reservoir management efforts, it will recover 60 million more barrels of oil than it expected. The company has also greatly increased its ownership of land in the Overthrust Belt area of the Rocky Mountains.

-- The Gulf of Mexico. One of Marathon's most important discoveries last year was in the Gulf, on South Pass Block 89, where Marathon discovered some new oil and gas reserves. According to a company spokesman, one producing platform has been built and erected and a second platform will be floated out to the location next week. But no production has been established yet. The company also discovered natural gas on Matagorda Island Block 565, but no production has been established on this block, either.

In total output offshore Louisiana, the company pumps 3,644 barrels of oil per day and produces 160.8 million cubic feet of gas per day. Onshore in the Gulf area the company produces 10,829 barrels per day and 19.3 million cubic feet of gas.

-- The Cook Inlet of Alaska. The company produces 24,496 barrels a day from its Alaska properties. Production is declining 14 percent annually, however, and is expected to continue to do so.

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-- The Brae Field in the North Sea. Marathon is spending $2 billion to develop a field that next summer will start pumping oil at a daily rate of 100, 000 barrels and 148 million cubic feet of gas.Marathon has a 38 percent interest in the field.

The company also has large operations in Libya, where its share of production is about 17,300 barrels of oil a day. But the operations have been severely curtailed, the company notes, because the price of Libyan crude has not been competitive. Over a nine-month period the company has averaged 64,300 barrels a day and last year lifted it 102,000 barrels.

Looking at these assets, analyst Mlotic says, ''If Mobil gets the company at figures the company is worth $230 a share. The analyst points out that in Du Pont's acquisition of Conoco, Conoco ultimately sold for 50 percent of Mlotic's evaluation of its asset value. If Marathon were worth 50 percent of what Mlotic figures the assets are, the company would sell for $115 a share.

Still other analysts point out that on a per-barrel basis, Mobil would be buying Marathon's assets quite cheaply. Bruce Lazier of Paine Webber Mitchell Hutchins Inc. figures that at $85 a share, Mobil is paying $3 to 3.50 for each barrel of Marathon's oil. It costs a lot more to explore for it.

Some of Marathon's major shareholders agree with the analysts that Mobil's bid is too low. H. Bradley Perry, president of David L. Babson & Co., whose clients own close to 2 million shares of Marathon, says, ''The market thinks the company is worth more than Mobil offered, and we tend to agree.'' Mr. Perry says Babson has accumulated such a large position because ''we believe the company is very successful at finding large oil and gas reserves.'' Obviously, he adds, ''so does Mobil.''

If Mobil is to succeed in its takeover bid, the opinion of such institutional customers will be important. According to Computer Directions Avisors Inc., in Silver Spring, Md., 246 institutional companies owned 45 percent of the stock as of June 30. The largest were National City Bank of Cleveland, with 3,143,000 shares; J. P. Morgan, with 2,168,000 shares; David L. Babson & Co., with 1,380, 000 shares reported to the SEC but over 2 million actually controlled; the Prudential Insurance Company of America, with 1,665,000; and Manufacturers Hanover Trust Company, with 941,000.

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