Press

Marathon Oil Reports First Quarter 2018 Results

Posted by OilVoice Press - OilVoice

03-May-2018


High-Return U.S. Oil Production Up 9% Sequentially

HOUSTON , May 02, 2018 (GLOBE NEWSWIRE) -- Marathon Oil Corporation (NYSE:MRO) today reported first quarter 2018 net income of $356 million , or $0.42 per diluted share, which includes the impact of certain items not typically represented in analysts' earnings estimates and that would otherwise affect comparability of results. Adjusted net income was $154 million , or $0.18 per diluted share. Net operating cash flow was $649 million , or $707 million before changes in working capital.

Highlights

  • Total production averaged 398,000 net boed, excluding Libya ; U.S. production averaged 284,000 net boed and U.S. oil production averaged 164,000 bopd, both up 9% sequentially on a divestiture-adjusted basis
  • Eagle Ford maintained flat production of 104,000 net boed; 11 wells in Atascosa County had average 30-day IP rates of 1,615 boed (76% oil)
  • Bakken production increased to 74,000 net boed, up 7% sequentially; Arkin well in Hector set new basin Three Forks record with 3,040 bopd 30-day IP; June and Chauncey wells in West Myrmidon set new basin Middle Bakken records with 3,470 bopd average 30-day IP rates
  • Oklahoma production up 17% sequentially to 75,000 net boed; oil production up 25% sequentially; STACK leasehold drilling largely completed in first quarter
  • Northern Delaware production increased to 16,000 net boed; seven wells across Eddy and Lea Counties had average 30-day IP rates of 1,460 boed (69% oil)
  • Captured more than 250,000 net acres in multiple new plays in the last year, including a largely contiguous position in the emerging Louisiana Austin Chalk play at a cost of less than $900 per acre
  • Received $1.2 billion in proceeds from the Libya sale and the final Canadian oil sands payment
  • Raised 2018 annual resource play oil and boe production guidance to 25 - 30%, up from 20 - 25% previously, while maintaining the $2.3 billion 2018 development capital budget

"Our returns-focused investment program coupled with outstanding execution across our multi-basin portfolio drove production above the top end of our U.S. guidance in the first quarter. Continued strong performance in Bakken and Eagle Ford delivered significant free cash flow while enhancing inventory value in both the Hector area and Atascosa County . Delineation and appraisal activity continued in the Northern Delaware and Oklahoma as we transition to multi-well pad drilling in both assets," said Marathon Oil president and CEO Lee Tillman . "Critical to our long-term value creation and full-cycle returns, we captured future potential opportunities through low-cost exploration acreage additions, including a material position in the emerging Louisiana Austin Chalk play.

" Marathon Oil remains committed to financial discipline, and while we're increasing full year resource play guidance, our 2018 development capital budget is unchanged. We're on track to deliver a strong rate of change in our key performance metrics, including an annual increase of over 65 percent in corporate-level cash returns at current strip prices," he said.

Capital
First quarter development capital expenditures, before working capital, were $618 million , and are not ratable for the balance of 2018 due to higher working interest and non-operated pace relative to the remainder of the year. Net cash provided by continuing operations was $649 million during first quarter 2018, or $707 million before changes in working capital. The Company's 2018 development capital budget is still anticipated to be $2.3 billion .

Outside of the development capital budget, resource play leasing and exploration (REx) capital expenditures were $94 million in the first quarter, more than fully funded through divestiture proceeds. Though episodic in nature, the Company expects second quarter REx capital expenditures to be approximately $150 million .

Production Guidance
Marathon Oil expects second quarter 2018 U.S. production to average 280,000 to 290,000 net barrels of oil equivalent per day (boed). Within this guidance, the Company expects second quarter 2018 U.S. resource play production to average 270,000 to 280,000 net boed. Second quarter 2018 International production is expected to average 115,000 to 125,000 net boed.

For full-year 2018, the Company now expects annual resource play oil and barrel of oil equivalent (boe) growth of 25 - 30 percent, up from 20 - 25 percent previously, and is trending toward the high end of its 2018 guidance ranges for total Company oil and boe.

U.S. E&P
U.S. E&P production averaged 284,000 net boed for first quarter 2018, up 9 percent compared to the prior quarter and up 39 percent from the year-ago quarter on a divestiture-adjusted basis. First quarter production from the U.S. resource plays was 269,000 net boed, up from 249,000 net boed in the prior quarter. First quarter U.S. E&P unit production costs were $5.89 per boe and are expected to moderate through 2018 as the Company implements its plans to access additional infrastructure.

EAGLE FORD: Marathon Oil's Eagle Ford production averaged 104,000 net boed in the first quarter, compared to 105,000 net boed in the prior quarter. The Company brought 34 gross Company-operated wells to sales with average 30-day initial production (IP) rates of 1,750 boed (64% oil). Enhanced completion designs continued to deliver solid results outside of core Karnes County , where the four-well Carpenter Kellner pad and the four-well Guajillo West pad achieved average 30-day IP rates of 1,690 boed (78% oil) and 1,635 boed (73% oil), respectively. The Eagle Ford asset generated significant free cash flow in the quarter through a combination of well performance and oil realizations that averaged $1.50 above WTI due to strong LLS-based pricing.

BAKKEN: In first quarter 2018, Marathon Oil's Bakken production averaged 74,000 net boed, up 7 percent compared to 69,000 net boed in the prior quarter. The Company brought 11 gross Company-operated wells to sales, six of which were in core Hector with average 30-day IP rates of 2,600 boed (81% oil). The Arkin well in Hector set a new Williston Basin Three Forks record delivering a 30-day IP oil rate of 3,040 barrels of oil per day (bopd). The Company set two new basin Middle Bakken records in West Myrmidon with average 30-day IP rates of 3,470 bopd from the June and Chauncey wells. Two additional West Myrmidon wells that came online late in the quarter, the Mark Middle Bakken well and Wilbur Three Forks well, achieved 24-hour IP rates of 10,875 boed and 7,570 boed, respectively, and are not yet at 30 days of production. The Company continues to optimize completion designs to improve well productivity, increase capital efficiency and reduce costs while generating substantial free cash flow.

OKLAHOMA: Marathon Oil's Oklahoma production averaged 75,000 net boed during first quarter 2018, up 17 percent from 64,000 net boed in the prior quarter. Oil production was up 25 percent sequentially, primarily as a result of strong carry-in performance from the nine-well Tan infill that came online late in the fourth quarter. The Company brought 17 gross operated wells to sales primarily focused on Meramec leasehold activity in the STACK. This largely completes the STACK leasehold program for the year, and allows for the transition to pad drilling for the remainder of 2018. In the normally pressured STACK, improved drilling efficiencies and optimized completion designs resulted in completed well costs for first quarter standard-lateral Meramec wells averaging $4 million .

NORTHERN DELAWARE : Marathon Oil's Northern Delaware production averaged 16,000 net boed in first quarter 2018, up from 11,000 net boed in the prior quarter. The Company brought nine gross Company-operated wells to sales across the Malaga, Red Hills and Ranger areas in Eddy and Lea Counties, seven of which had average 30-day IP rates of 1,460 boed (69% oil). Two wells from the Cypress infill pilot came to sales ahead of schedule in the last week of the quarter. A two-well 3rd Bone Spring / Upper Wolfcamp pad in Red Hills achieved average 30-day IP rates of 1,830 boed (68% oil), and an Upper Wolfcamp well in Malaga had an average 30-day IP rate of 2,095 boed (69% oil). In the last six months, Marathon Oil has added 165 risked gross Company-operated locations with an average working interest of 65 percent through trades and a small bolt-on acquisition. The Company is currently benefiting from its Midland - Cushing basis swaps. Open positions include 10,000 bopd hedged at a discount of less than $1 to WTI for the second half of 2018 and all of 2019.

International E&P
International E&P production, excluding Libya , averaged 114,000 net boed for first quarter 2018, compared to 121,000 net boed in the prior quarter. The decrease reflects planned turnaround activity in EG that was completed in the quarter. First quarter 2018 International E&P unit production costs (excluding Libya ) averaged $5.37 per boe, up sequentially due to the timing of liftings in the U.K. and international production mix.

Corporate
Total liquidity as of March 31 was approximately $5 billion , which consisted of $1.6 billion in cash and cash equivalents and an undrawn revolving credit facility of $3.4 billion . On March 1 , the Company closed on the sale of its Libya subsidiary for $450 million and proceeds were received on the same day. Additionally, the final Canadian oil sands payment of $750 million was received.

For the remainder of 2018, the Company's open hedge positions include an average of 98,000 bopd at a weighted average floor price of $52.18 and a weighted average ceiling price of $57.11 , hedged through a combination of three-way collars and fixed price swaps, as of April 27.

The adjustments to net income from continuing operations for first quarter 2018 totaled $202 million before tax, primarily due to a $257 million gain from sale of the Libya subsidiary, partially offset by an unrealized loss of $43 million on commodity derivatives.

A slide deck and Quarterly Investor Packet will be posted to the Company's website following this release today, May 2 . On Thursday, May 3 , at 9:00 a.m. ET , the Company will conduct a question and answer webcast/call, which will include forward-looking information. The live webcast, replay and all related materials will be available at https://www.marathonoil.com/Investors.



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Marathon OilMarathon Oil CorporationResultsQ118e&pOilProductionUnited StatesUS

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