In the world of public companies, mergers and acquisitions are a common occurrence. Recently, however, we've witnessed more and more entities doing just the opposite, spinning off business segments in an effort to "unlock shareholder value." Fortune Brands, Kraft, and a slew of oil and gas companies spun off businesses in 2011, including Marathon Oil (NYSE: MRO). As Marathon shows us, breaking up can be hard to do, at least at first.

A tough fourth quarter
Marathon had a lot going on in 2011, so there are plenty of excuses to choose from when explaining a 22% drop in net income during the fourth quarter. For starters, as noted above, we have a spinoff, this one of Marathon's refining and marketing business. Add to that a halt in Libyan oil production and it's no wonder that fourth-quarter earnings plummeted from $706 million in 2010 to $549 million in 2011.

Analysts, who as we'll see later love to exclude things from their forecasts, still expected earnings of $0.82 a share after the spinoff, higher than the $0.78 per share that Marathon delivered. Miraculously, buoyed by the high price of oil (arguably derived in part from a shutdown in Libyan production), the company did beat analyst expectations on revenue. Wall Street expected $2.97 billion and Marathon came in at $3.81 billion.

Geopolitical risk
As you read analyst takes on Marathon's fourth-quarter and full-year results, you stumble across the phrase "excluding Libya" more than once. Obviously, the impact of the Arab Spring affected the oil and gas companies operating in the region -- Marathon, Total (NYSE: TOT) and Eni (NYSE: E) all had to shut down production as the political uprising threatened the safety of their operations. But why bother "excluding Libya" when that has increasingly become the nature of doing business in the oil and gas world?

Marathon, for one, has announced plans to continue exploration in Poland and Kurdistan. Poland, okay, I'll give you that, there is very little risk there, but Kurdistan? Who knows what's going to happen in Iraq in the next six weeks, six months, or six years? Even ExxonMobil (NYSE: XOM) is not immune to trouble there. The point is, production is not guaranteed in certain areas and investors should keep that in mind when weighing the likelihood that any given E&P will beat Wall Street estimates.

A renewed focus on domestic assets
Though there is always the possibility that legislation will have a negative impact energy development in the U.S., it is still exponentially less risky for an E&P to operate in the U.S. than on foreign soil.

To this end, Marathon is vigorously pursuing its domestic energy game plan. The company plans to add seven rigs to its U.S. operations by the third quarter of 2012. In a surprise to no one, four of those rigs are destined for the liquids-rich Eagle Ford shale play, and one of them heads to the Bakken oil fields of North Dakota.

Foolish takeaway
Focusing on developing production in the U.S. is a smart plan for Marathon moving forward. Its goals are certainly ambitious -- Marathon aims to double daily production from the Eagle Ford -- but the company has acreage in some of the most lucrative domestic plays. Barring some unforeseen disaster, 2012 should be a stronger year for Marathon.

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