Marathon Oil Corporation (NYSE:MRO) reported a third quarter 2015 adjusted net loss of $138 million, or $0.20 per diluted share, excluding the impact of certain items not typically represented in analysts’ earnings estimates and that would otherwise affect comparability of results. The reported net loss was $749 million, or $1.11 per diluted share. Third quarter 2015 included $611 million ($949 million pre-tax) of non-cash charges comprised largely of losses and asset impairments resulting from lower forecasted commodity prices and changes in the Company’s conventional exploration strategy.
- Third quarter capital, investment and exploration program at approximately $623 million, down 7% from second quarter; full-year 2015 program $3.1 billion
- On track to achieve total Company and U.S. resource play production growth rates of 7% and 20%, respectively, year over year, with $200 million less capital
- Total Company net production from continuing operations (excluding Libya) averaged 434,000 net boed, up 6% over the year-ago quarter with OSM achieving record production of 57,000 net boed; U.S. resource play production of 212,000 net boed up 10% over year-ago quarter
- Total E&P production expense down 30% from year-ago quarter; reduced North America E&P production costs per boe 27% below year-ago quarter
- S. resource plays featured solid performance from the early development of upper Eagle Ford, encouraging results from the SCOOP Smith infill pilot and continued strong contribution from the Bakken’s West Myrmidon
- Closed non-core asset sales in East Texas, North Louisiana and Wilburton, Oklahoma for approximately $100 million; signed agreement for sale of East Africa exploration acreage
“In an environment where we expect oil prices to remain low for a longer period of time, Marathon Oil continues to take strong action to deliver meaningful cost reductions and efficiency gains, while we remain on target to achieve the high end of our original total Company production growth targets,” said Marathon Oil President and CEO Lee M. Tillman. “We’re maximizing capital allocation to the highest return opportunities in the U.S. resource plays, but with the right balance of high-confidence development activity and continued resource delineation that positions us for growth as we look through the current cycle. This quarter’s results were impacted by non-cash losses and impairments related to lower forecasted commodity prices and our continued strategic transition away from conventional exploration. Importantly, we remain focused on driving operational excellence, reducing production expenses and G&A costs, pursuing portfolio management and maintaining a strong balance sheet. Last week we announced a reduced quarterly dividend, which is expected to increase annual free cash flow by more than $425 million, and we lowered our 2015 capital, investment and exploration program to $3.1 billion. In addition, based on our current outlook and preliminary plan discussions, we would anticipate a total Company 2016 program of up to $2.2 billion, subject to Board approval, which would give us the flexibility to deliver 2016 annual average production in the U.S. resource plays flat to 2015 exit rate.”
North America E&P
North America Exploration and Production (E&P) production available for sale averaged 263,000 net barrels of oil equivalent per day (boed) for third quarter 2015, a 5 percent increase over the year-ago quarter and compared to 274,000 net boed for second quarter 2015. The decrease from the second quarter 2015 was primarily a result of lower Eagle Ford volumes and the disposition of East Texas, North Louisiana and Wilburton, Oklahomanatural gas assets, which closed in August. North America production costs were $7.43 per barrel of oil equivalent (boe), down 27 percent from the year-ago period. The Company expects full-year unit production costs to be at the low end of guidance of $7.50 to $8.50 per boe.
EAGLE FORD: In third quarter 2015, Marathon Oil’s production in the Eagle Ford averaged 128,000 net boed, a 9 percent increase above the year-ago quarter and compared to 135,000 net boed in the prior quarter. The production decrease compared to the previous quarter was principally due to timing of wells to sales weighted late in the quarter, lower than anticipated results from a step-out pad in Live Oak County and three Austin Chalk wells testing the western periphery of the play. During third quarter 2015 the Company brought 57 wells to sales, of which 11 were Austin Chalk, six upper Eagle Ford and 40 lower Eagle Ford, compared to 52 wells to sales in the previous quarter. Thirty-day initial production (IP) rates from the six upper Eagle Ford wells ranged from 1,050 to 1,480 net boed (57-76 percent liquids), supportive of the 2P resource additions announced in the third quarter. Efficiency gains in drilling and completions continued, as evidenced by wells drilled at an average rate of 2,000 feet per day, an 11 percent improvement over the previous quarter. With this improvement, the time to drill an Eagle Ford well spud-to-total depth dropped to 10 days. Even as drilling efficiency continues to improve, the Company is exceeding its technical objectives with a 98 percent success rate geo-steering into a typical 25-foot target.
OKLAHOMA RESOURCE BASINS: The Company’s unconventional Oklahoma production averaged 23,000 net boed during third quarter 2015, an increase of 21 percent over the year-ago quarter and compared to 24,000 net boed in the prior quarter. Marathon Oil brought online seven Company-operated SCOOP wells, of which one was an extended-reach lateral, and two Company-operated STACK Meramec wells. The Company-operated Smith infill pilot wells recently came online with 24-hour IP rates averaging 1,060 net boed (60 percent liquids) on 107-acre spacing (30-day rates are not yet available). The Company also spud its first operated Springer well during the third quarter and is in the process of completing the well.
BAKKEN: Marathon Oil averaged 61,000 net boed of production in the Bakken during third quarter 2015, a 9 percent increase above the year-ago quarter. Volumes were flat to the previous quarter with five wells brought to sales, all in East Myrmidon, down from 22 in the previous quarter. Production was driven by continued strong performance from the Doll pad wells in West Myrmidon, which came online in late June, as well as sustained improvement in production uptime.
GULF OF MEXICO: The outside-operated Shenandoah-4ST appraisal well on Walker Ridge Block 51 encountered more than 620 feet of net oil pay, extending the lowest known oil column downdip. Marathon Oil holds a 10 percent working interest in Shenandoah.
International E&P production available for sale from continuing operations (excluding Libya) averaged 114,000 net boed for third quarter 2015 compared to 112,000 net boed in the year-ago quarter and 108,000 net boed in the previous quarter. The increase over the second quarter was primarily a result of higher Equatorial Guinea volumes, partially offset by planned maintenance activities in the U.K. Proactive cost management efforts across the Company-operated assets continue to yield repeatable savings, and coupled with higher volumes are resulting in lower unit production costs of $5.53 per boe. The Company expects full-year unit production costs to be at the low end of guidance of $6.00 to $7.00 per boe (excluding Libya).
EQUATORIAL GUINEA: Production available for sale averaged 99,000 net boed in third quarter 2015 compared to 100,000 net boed in the year-ago quarter and 86,000 net boed in the previous quarter, which was impacted by planned maintenance. The Alba C21 development well came online with higher than expected liquids yield and, combined with a successful wire-line intervention program on five existing wells, resulted in a 4,000 net boed uplift in production. The Alba field compression project, designed to maintain the production plateau two additional years and extend field life up to eight years, achieved mechanical completion at the fabrication yard in the Netherlands during the third quarter and is on schedule to be operational in mid-2016.
U.K.: Production available for sale averaged 15,000 net boed in third quarter 2015, compared to 13,000 net boed in the year-ago quarter and 22,000 net boed in the previous quarter. Third quarter volumes were impacted by planned maintenance activities at the Company-operated Brae field and the non-operated Foinaven field. The Brae maintenance was completed on time and on budget. Maintenance work at the non-operated Foinaven field has taken longer than planned and continues to impact field production in the fourth quarter.
Oil Sands Mining
Oil Sands Mining (OSM) production available for sale for third quarter 2015 averaged 57,000 net boed compared to 47,000 net boed in the prior-year quarter and 25,000 net boed in second quarter 2015, which was impacted by an extensive turnaround at the Muskeg River Mine and the base upgrader. Record production in the third quarter was largely due to improved operational reliability and no planned maintenance. Increased cost focus combined with strong production volumes resulted in operating expense per synthetic barrel (before royalties) being down 30 percent from a year ago to $26, the lowest per unit cost performance by OSM with both mine sites operating.
Marathon Oil expects fourth quarter 2015 North America E&P production available for sale to average 244,000 to 257,000 net boed reflecting reduced completion work in the Bakken and the disposition of the East Texas, North Louisiana and Wilburton, Oklahoma natural gas assets which closed in the third quarter. The resource plays remain on track to achieve annual growth in available for sale volumes of 20 percent year over year. Fourth quarter International E&P production available for sale (excluding Libya) is expected to be within a range of 121,000 to 128,000 net boed, up from the third quarter as the full benefits of the Alba C21 development well and successful wire-line intervention program in Equatorial Guinea are realized and U.K.Brae fields return to normal operations, partially offset by the ongoing maintenance at the non-operated Foinaven field. Marathon Oil had no liftings inLibya during third quarter 2015. Considerable uncertainty remains around the timing of future production and sales levels from Libya, and Marathon Oilcontinues to exclude Libya volumes from its production forecasts. OSM synthetic crude oil production is expected to range from 40,000 to 45,000 net boed in the fourth quarter with planned maintenance at both mines expected to impact production.
The Company is tightening its full-year 2015 E&P production guidance range, resulting in a new range of 380,000 to 390,000 net boed. Full-year production guidance for OSM was narrowed to 40,000 to 45,000 net boed. Full-year 2015 guidance for the total Company production growth rate is 7 percent year over year, at the upper end of the previous range of 5 to 7 percent. (Original Source)
Shares of Marathon Oil Corporation closed today at $19.39, down $0.27 or 1.37%. MRO has a 1-year high of $35.02 and a 1-year low of $14.03. The stock’s 50-day moving average is $17.48 and its 200-day moving average is $22.01.
On the ratings front, Marathon has been the subject of a number of recent research reports. In a report issued on October 21, Barclays analyst Thomas Driscoll reiterated a Hold rating on MRO, with a price target of $18, which represents a potential downside of 7.2% from where the stock is currently trading. Separately, on September 14, Citigroup’s Robert Morris maintained a Hold rating on the stock and has a price target of $16.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Thomas Driscoll and Robert Morris have a total average return of 1.8% and 7.6% respectively. Driscoll has a success rate of 50.0% and is ranked #1453 out of 3824 analysts, while Morris has a success rate of 64.0% and is ranked #1115.
The street is mostly Neutral on MRO stock. Out of 7 analysts who cover the stock, 5 suggest a Hold rating and 2 recommend to Buy the stock. The 12-month average price target assigned to the stock is $20.50, which implies an upside of 5.7% from current levels.
Marathon Oil Corp is an energy company engaged in the exploration, production and marketing of liquid hydrocarbons and natural gas, production and marketing of products manufactured from natural gas and oil sands mining.