Marathon Oil Corporation (NYSE:MRO) reported a third quarter 2016 net loss of $192 million, or $0.23 per diluted share. The net loss includes the impact of certain items not typically represented in analysts’ earnings estimates and that would otherwise affect comparability of results. The adjusted net loss for the quarter was $97 million or $0.11 per diluted share.
- Third quarter total Company production averaged 402,000 net boed, above the top end of guidance and up 5% sequentially
- Oklahoma Resource Basins’ production up more than 50% sequentially and nearly 80% over year-ago quarter
- Strong well results across all three resource plays, highlighted by: STACK volatile oil well 30-day rate of 2,845 boed (69% oil); Bakken Three Forks well 30-day rate of 2,635 boed (80% oil); Lower Eagle Ford well 30-day rate of 2,285 boed (81% oil)
- 8% sequential production increase in Equatorial Guinea driven by Alba B3 compression project brought online in early July
- Production costs reduced sequentially more than 10% for North America E&P and nearly 20% for International E&P (excluding Libya)
- Closed sale of non-operated CO2 and waterflood assets in West Texas and New Mexico for $235 million; more than $1.5 billion in non-core asset sales announced or closed since August 2015
- 2016 capital program remains at $1.3 billion including planned 50% increase in rig activity by year end
“Strong execution across our entire business led to third quarter production above the top end of our guidance and cash flow neutrality,” said Marathon Oil President and CEO Lee Tillman. “We’re increasing our rig count by 50 percent in the fourth quarter while remaining within our existing $1.3 billion capital program. This acceleration will have us well positioned to resume sequential production growth in the resource plays by the second half of 2017. Our planning process continues, but the preliminary five-year view for the resource plays supports compounded annual growth rate of 15 to 20 percent within cash flows at flat $55 WTI.”
North America E&P
North America Exploration and Production (E&P) production available for sale averaged 216,000 net barrels of oil equivalent per day (boed) for third quarter 2016 compared to 224,000 net boed in second quarter 2016. On a divestiture-adjusted basis, production was up 3 percent over the prior quarter and down 7 percent from the year-ago period. Third quarter North America production costs were 12 percent lower than the previous quarter and 37 percent lower than the year-ago period. Unit production costs were $5.70 per barrel of oil equivalent (boe), down 9 percent and 23 percent for the previous and year-ago quarters, respectively.
OKLAHOMA RESOURCE BASINS: The Company’s unconventional Oklahoma production averaged 41,000 net boed during third quarter 2016, an increase of 52 percent compared to 27,000 net boed in the prior quarter and up 78 percent compared to 23,000 net boed in the year-ago quarter. During third quarter 2016, Marathon Oil brought online 10 gross Company-operated STACK Meramec wells and two SCOOP Woodford wells. The Marjorie and Lloyd volatile oil wells, both extended lateral (XL) Meramec wells in eastern Blaine County, achieved 30-day production rates of 2,845 boed (69 percent oil) and 2,010 boed (73 percent oil), respectively. Both wells were completed with 2,900 pounds of proppant per lateral foot. The Firestone well, a standard lateral black oil well in Kingfisher County, achieved a 30-day production rate of 1,810 boed (47 percent oil). In Canadian County, the Hrdy single lateral well had a 30-day rate of 1,870 boed (56 percent oil). The Company is further increasing activity from four to five rigs in the fourth quarter, with activity focused in the STACK.
EAGLE FORD: In third quarter 2016, Marathon Oil’s production in the Eagle Ford averaged 97,000 net boed, compared to 109,000 net boed in the prior quarter and 128,000 net boed in the year-ago quarter. The sequential production decrease was in line with expectations due to base declines and activity levels. During third quarter 2016, the Company brought 36 gross (24 net) operated wells to sales, of which 20 were lower Eagle Ford, 15 upper Eagle Ford and one Austin Chalk. The unbounded Hausmann Lower Eagle Ford oil well, completed with a more intense stimulation and 200-foot stage spacing, averaged 2,285 boed (81 percent oil) over 30 days. The Bailey Retzloff 508 Upper Eagle Ford condensate well achieved a 30-day rate of 2,345 boed (50 percent oil). Third quarter completed well costs were below $4 million, down approximately 20 percent from the year-ago quarter. The Company expects to increase activity from four to six rigs in the fourth quarter.
BAKKEN: Marathon Oil averaged 54,000 net boed of production in the Bakken during third quarter 2016, compared to 53,000 net boed in the prior quarter and 61,000 net boed in the year-ago quarter as strong well productivity from the Clarks Creek pad and high reliability continued supporting the base production. Three gross wells in East Myrmidon were brought to sales in the third quarter, all performing at or above expectations with completions ranging from 600 to 1,500 pounds per lateral foot of proppant and 45 to 50 stages per well. The Rufus well in the first bench of the Three Forks achieved a 30-day production rate of 2,635 boed (80 percent oil), and the Hannah Three Forks first bench well achieved 2,100 boed (80 percent oil). Additionally, the Maggie Middle Bakken well achieved 2,190 boed (80 percent oil) over 30 days. Completed well costs averaged below $6 million per well. The Company plans to return to drilling in the Bakken with one rig to be added in the fourth quarter.
International E&P production available for sale (excluding Libya) averaged 128,000 net boed for third quarter 2016, an increase of 7 percent compared to the prior quarter and up 12 percent compared to the year-ago quarter. Third quarter 2016 production benefited from the Alba B3 compression project in Equatorial Guinea, which came online in early July. Equatorial Guinea production available for sale averaged 110,000 net boed in third quarter 2016 compared to 102,000 net boed in the previous quarter and 99,000 net boed in the year-ago quarter. U.K. production available for sale averaged 18,000 net boed in third quarter 2016, flat compared to the previous quarter and up compared to 15,000 net boed in the year-ago quarter.
Third quarter International E&P production costs (excluding Libya) were 19 percent lower than the previous quarter and 43 percent below the year-ago quarter. Unit production costs (excluding Libya) were $3.31 per boe, down 24 percent and 46 percent for the previous and year-ago quarters, respectively.
Oil Sands Mining
Oil Sands Mining (OSM) production available for sale for third quarter 2016 averaged 58,000 net barrels per day (bbld) compared to 40,000 net bbld in the prior quarter and 57,000 net bbld in the year-ago quarter. Record production in third quarter 2016 was due to strong reliability at the mines and upgrader and less downtime compared to second quarter 2016 when wildfires caused disruptions. Operating expense per synthetic barrel (before royalties) was $20.69, 20 percent lower than the year-ago quarter due primarily to cost reduction efforts. It was the lowest per unit cost performance by OSM to date.
Marathon Oil expects fourth quarter 2016 North America E&P production available for sale to average 205,000 to 215,000 net boed. Fourth quarter International E&P production available for sale (excluding Libya) is expected to be within a range of 120,000 to 130,000 net boed. While force majeure was lifted in September at the Es Sider terminal in Libya, Marathon Oil continues to exclude Libya volumes from its production forecasts. OSM synthetic crude oil production is expected to range from 40,000 to 45,000 net bbld.
The Company is raising the low end of its full-year 2016 E&P production guidance range, resulting in a new range of 335,000 to 345,000 net boed. Full-year production guidance for OSM was narrowed to 45,000 to 50,000 net bbld.
Corporate and Special Items
Net cash provided by operating activities was $366 million during third quarter 2016, and net cash provided by operations before changes in working capital was $288 million. Cash additions to property, plant and equipment were $230 million in third quarter 2016. Total liquidity as of September 30 was $5.3 billion, which consists of $2 billion in cash and cash equivalents and an undrawn revolving credit facility of $3.3 billion.
In late October, the Company closed on the sale of certain non-operated CO2 and waterflood assets in West Texas and New Mexico for $235 million. Since August 2015, Marathon Oil has announced or closed non-core asset sales in excess of $1.5 billion. The Company is on track to close the remaining portion of the Wyoming asset sale by year-end.
The adjustments to net loss for third quarter 2016 total $148 million before tax and largely consist of: a Gulf of Mexico rig termination payment of $113 million and impairments to proved property of $47 million, partially offset by a net gain on the sale of assets of $38 million and an unrealized gain on commodity derivatives of $25 million. (Original Source)
Shares of Marathon Oil closed today at $12.78, down $0.49 or -3.69%. MRO has a 1-year high of $19.95 and a 1-year low of $6.52. The stock’s 50-day moving average is $14.88 and its 200-day moving average is $14.30.
On the ratings front, MRO has been the subject of a number of recent research reports. In a report issued on October 11, Jefferies’ analyst Jason Gammel reiterated a Buy rating on MRO, with a price target of $18, which represents a potential upside of 41% from where the stock is currently trading. Separately, on October 3, Nomura’s Lloyd Byrne reiterated a Buy rating on the stock and has a price target of $15.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Jason Gammel and Lloyd Byrne have a yearly average loss of -0.5% and a return of 9.9% respectively. Gammel has a success rate of 57% and is ranked #2673 out of 4173 analysts, while Byrne has a success rate of 63% and is ranked #454.
Overall, 4 research analysts have assigned a Hold rating and 4 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $17.00 which is 33% above where the stock opened today.
Marathon Oil Corp. engages in the exploration, production, and marketing of liquid hydrocarbons and natural gas. It operates through the following segments: North America E&P, International E&P, and Oil Sands Mining. The North America E&P segment engages in the explores for, produces, and markets crude oil and condensate, natural gas liquids (NGL), and natural gas in the United States. The International E&P segment involves exploration, production, and marketing of crude oil and condensate, NGL and natural gas outside of North America; and production and marketing of products manufactured from natural gas such as liquefied natural gas and methanol in Equatorial Guinea. The Oil Sands segment includes mining, extraction, and transport of bitumen from oil sands deposits in Alberta, Canada, and the upgrade of bitumen to produce and market synthetic crude oil and vacuum gas oil.