--Marathon enters Kenya, an increasingly attractive country for oil explorers

--Company already has operations in Libya, Angola and Equatorial Guinea.

--Shares down 2.37% at $25.91

(Adds background in second and fifth paragraphs, updates share price)

By Tess Stynes and Angel Gonzalez

Marathon Oil Corp. (MRO) signed an agreement with Africa Oil Corp. (AOIFF, AOI.V) to jointly develop two onshore exploration areas in northwest Kenya, underscoring East Africa's increasing attractiveness for oil prospectors.

The country is not yet a crude oil producer, but companies such as Apache Corp. (APA), Total S.A. (TOT) and Anadarko Petroleum Corp. (APC) have struck exploration deals there in recent years, both onshore and offshore. Energy finds in neighboring Tanzania and Mozambique are making the region a new area of focus for international energy companies.

Houston-based Marathon and Africa Oil--a Canadian company with assets in Kenya, Ethiopia, Mali and Somalia--also agreed to jointly explore an additional area in Ethiopia.

Marathon agreed to an entry payment of $35 million, which includes prior expenditures, and also agreed to fund Africa Oil's share of joint venture expenditures--estimated at up to $43.5 million--over the next three years.

The deal includes a 50% working interest in the Block 9 area, in which Africa Oil will be the operator in the exploration phase. The agreement also includes a 15% interest in Block 12A, where Tullow Oil PLC (TWL.LN, TUWOY)--which has a 65% interest--is the operator. Africa Oil has a 20% interest.

Marathon Oil, which recently spun off its refining operations, is not new to Africa: it already has operations in Libya, Angola and Equatorial Guinea.

In May, Marathon reported that first-quarter earnings fell 58% from a year-earlier period that included contributions from its former refining and marketing business, missing analysts' expectations. The company expects to report its second-quarter financial results Aug. 1.

Shares were down 2.37% at $25.91.

Write to Angel Gonzalez at angel.gonzalez@dowjoens.com

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