Marathon Oil Corporation (NYSE:MRO) reported a full-year 2015 adjusted net loss of $869 million, or $1.28 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 $2,204 million, or $3.26 per diluted share.
- Full-year 2015 capital program at $3 billion, $500 million below original budget
- Achieved 8% production growth from total Company continuing operations (excluding Libya) and 21% from U.S. resource plays year over year
- Decreased E&P production and total Company adjusted G&A expenses by more than $435 million, or 24%, year over year
- Completed 20% reduction in workforce to generate $160 million in annualized net savings
- Reduced quarterly dividend increasing annual free cash flow by more than $425 million
- Closed or announced non-core asset sales for approximately $315 million, excluding closing adjustments
- Organic reserve replacement of 157%, excluding revisions and dispositions, at $12 per boe drillbit finding and development cost
- Year-end liquidity of $4.2 billion comprised of $1.2 billion in cash and an undrawn $3 billion revolving credit facility
“We navigated a very challenging macro environment in 2015 by staying focused on the elements of the business within our control — disciplined capital allocation, reducing costs, capturing efficiencies and portfolio management. Our actions early in the cycle on production expenses and G&A reset our cost structure and positioned us to realize full year benefits in 2016,” said Marathon Oil President and CEO Lee Tillman. “Even with reduced activity levels and a $3 billion capital program that was 50 percent less than the prior year, we surpassed our total Company and resource play production targets.
“In the fourth quarter, our capital spend and production costs both came in better than expectations. Operational results were supported by a more than 20 percent increase in Oklahoma unconventional volumes while maintaining flat production levels in the Eagle Ford. More recently, we reached a major milestone in Equatorial Guinea with the successful installation of the jacket and topsides for the Alba field compression project, on schedule to start up by mid-year 2016,” Tillman said.
The Company reported a fourth quarter 2015 adjusted net loss of $323 million, or $0.48 per diluted share, and a net loss of $793 million, or $1.17 per diluted share.
Fourth Quarter 2015
- Fourth quarter capital program decreased to $564 million
- Total Company net production averaged 432,000 net boed, essentially flat with third quarter 2015
- U.S. resource play production averaged 214,000 net boed, up slightly over third quarter 2015, while maintaining flat sequential Eagle Ford production
- North America E&P production costs per boe reduced 28% below year-ago quarter
- Total Company adjusted G&A down 40% compared to year-ago quarter
- First Company-operated Springer oil well in Oklahoma SCOOP performing above expectations with 30-day IP rate greater than 1,000 boed (89% liquids)
- Closed sale of Gulf of Mexico properties
North America E&P
North America Exploration and Production (E&P) production available for sale averaged 260,000 net barrels of oil equivalent per day (boed) for fourth quarter 2015. On a divestiture-adjusted basis, it was up 2 percent over the year-ago quarter and essentially flat compared to third quarter 2015. Fourth quarter North America production costs were $6.91 per boe, down 28 percent from the year-ago period. Full-year unit production costs of $7.38 per boe were below guidance of $7.50 to $8.50 per boe.
EAGLE FORD: In fourth quarter 2015, Marathon Oil’s production in the Eagle Ford averaged 128,000 net boed, compared to 131,000 net boed in the year-ago quarter and flat to the prior quarter. The production decrease compared to the year-ago quarter was principally due to decreased drilling and completion activity resulting in fewer wells brought to sales. During fourth quarter 2015 the Company brought 76 gross (44 net) wells to sales, of which 25 were Austin Chalk, eight upper Eagle Ford and 43 lower Eagle Ford, compared to 57 gross (45 net) wells to sales in the previous quarter. Efficiency gains in drilling continued, with wells drilled at an average rate of 2,175 feet per day, resulting in spud-to-total depth of 9 days compared to 2,000 feet per day and 10 days spud-to-total depth in the previous quarter. The top-performing Eagle Ford rigs drilled two wells in excess of 3,100 feet per day.
OKLAHOMA RESOURCE BASINS: The Company’s unconventional Oklahoma production averaged 28,000 net boed during fourth quarter 2015, an increase of 40 percent over the year-ago quarter and up 22 percent over the prior quarter. The Company benefited from a full quarter of production from the Smith infill pilot in the SCOOP, which is performing in line with expectations. Marathon Oil brought online four gross Company-operated wells, of which two were in the SCOOP Woodford, one in the SCOOP Springer and one in the STACK Meramec. The Company’s first operated Springer oil well is performing above expectations with a 30-day IP rate of greater than 1,000 boed (89 percent liquids). The Company-operated Tyemax extended-lateral (XL) well in the SCOOP Woodford achieved a 30-day IP rate of 2,850 boed (34 percent liquids).
BAKKEN: Marathon Oil averaged 58,000 net boed of production in the Bakken during fourth quarter 2015, a 5 percent increase above the year-ago quarter and compared to 61,000 net boed in the prior quarter. Five gross wells in East Myrmidon were brought to sales, the same as the previous quarter. Additionally, the next phase of a large-scale water gathering system, expected to handle the majority of Marathon Oil’s produced water and reduce production costs, is more than 50 percent complete and on-schedule to start-up in the second half of 2016. The first phase began operating in fourth quarter 2015.
International E&P production available for sale from continuing operations (excluding Libya) averaged 123,000 net boed for fourth quarter 2015 compared to 126,000 net boed in the year-ago quarter and 114,000 net boed in the previous quarter. The sequential increase was primarily a result of higher fourth quarter production in Equatorial Guinea and lower third quarter volumes in the U.K. due to planned maintenance activities. Full-year unit production costs of $5.33 per boe (excluding Libya) were below guidance of $6.00 to $7.00 per boe.
EQUATORIAL GUINEA: Production available for sale averaged 104,000 net boed in fourth quarter 2015 compared to 106,000 net boed in the year-ago quarter and 99,000 net boed in the previous quarter. The Company benefited from a full quarter of impact from the Alba C21 development well and successful well intervention program. The jacket and topsides for the Alba field compression project were installed in January. Following completion of the planned onshore maintenance, the Alba field returned to full production rates in early February. Hook-up and commissioning activities on the Alba compression project are in progress and the new facilities are on schedule for a mid-2016 start-up.
U.K.: Production available for sale averaged 18,000 net boed in fourth quarter 2015, compared to 20,000 net boed in the year-ago quarter and 15,000 net boed in the previous quarter. Third quarter 2015 was impacted by planned maintenance activities. In late December, the Brae Alpha installation experienced a process pipe failure. Repairs are underway with resumption of full production expected in the second quarter.
Oil Sands Mining
Oil Sands Mining (OSM) production available for sale for fourth quarter 2015 averaged 49,000 net barrels per day (bbld) compared to 42,000 net bbld in the prior-year quarter and the record 57,000 net bbld in third quarter 2015. During the fourth quarter, planned maintenance at both mines was completed on time and on budget. Operating expense per synthetic barrel (before royalties) was $28.25, down 36 percent from the year-ago quarter largely as a result of higher reliability and associated production volumes, as well as a more favorable currency exchange rate.
During 2015, Marathon Oil added proved reserves of 247 million barrels of oil equivalent (boe) through drilling activity, downspacing and improved well performance, virtually all in North America E&P. Excluding revisions and dispositions, the organic reserve replacement ratio for the year was 157 percent with a drillbit finding and development (F&D) cost of $12 per boe. Including revisions but excluding dispositions, the Company’s reserve replacement ratio was 89 percent. Net proved reserves remain at approximately 2.2 billion boe at year-end 2015.
Corporate and Special Items
Net cash provided by continuing operations before changes in working capital was $278 million during fourth quarter 2015, and net cash provided by operating activities was $352 million. Additions to property, plant and equipment including accruals were $561 million in fourth quarter 2015, a 6 percent decrease from the previous quarter and down 66 percent from the year-ago quarter. For full-year 2015, net cash provided by continuing operations before changes in working capital was $1.68 billion, and net cash provided by operating activities was $1.57 billion. Total liquidity as of Dec. 31 was $4.2 billion, which consists of $1.2 billion in cash and cash equivalents and an undrawn $3 billion revolving credit facility.
Marathon Oil reduced E&P production expenses and total Company adjusted general and administrative expenses by $146 million for fourth quarter 2015 compared to the same quarter in 2014, and by $437 million for full-year 2015 compared to full-year 2014. These savings represent reductions of 31 percent and 24 percent, respectively. The Company had workforce reductions in 2015 which will result in annualized net savings of $160 million.
The Company closed on the sale of its Gulf of Mexico properties in the greater Ewing Bank area and non-operated Petronius field in December 2015, and on its non-operated Neptune field in February 2016 for combined transaction value of $205 million, before closing adjustments. The buyer assumed all future abandonment obligations for the acquired assets.
The adjustments to net loss for fourth quarter 2015 total $470 million ($498 million pre-tax) and primarily consist of: a goodwill impairment charge of $340 million ($340 million pre-tax) related to the North America E&P segment; an unproved property impairment of $218 million ($300 million pre-tax) relating to Canadian in-situ assets; and a gain on the sale of Gulf of Mexico assets of $146 million ($228 million pre-tax). For additional detail of adjustments related to special items, see attached tables.
The Company’s webcast commentary and associated slides related to Marathon Oil’s financial and operational review, as well as the Quarterly Investor Packet, will be posted to the Company’s website at http://ir.marathonoil.com and to its mobile app as soon as practicable following this release today, Feb. 17. The Company will conduct a question and answer webcast/call on Thursday, Feb. 18, at 9 a.m. EST. The webcast slides, associated commentary and answers to questions will include forward-looking information. To listen to the live webcast, visit the Marathon Oil website at http://www.marathonoil.com. The audio replay of the webcast will be posted by Feb. 19. (Original Source)
Shares of Marathon Oil are up nearly 4% in after-hours trading. MRO has a 1-year high of $31.53 and a 1-year low of $6.52. The stock’s 50-day moving average is $9.26 and its 200-day moving average is $14.88.
On the ratings front, Marathon Oil has been the subject of a number of recent research reports. In a report issued on January 28, Barclays analyst Thomas Driscoll maintained a Buy rating on MRO, with a price target of $9, which implies an upside of 21.5% from current levels. Separately, on January 21, Nomura’s Lloyd Byrne maintained a Buy rating on the stock and has a price target of $13.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Thomas Driscoll and Lloyd Byrne have a total average return of -0.9% and -21.3% respectively. Driscoll has a success rate of 44.2% and is ranked #2405 out of 3610 analysts, while Byrne has a success rate of 40.0% and is ranked #3252.
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.