- Low-cost, high-yield acreage should help the company weather production and budget constraints.
- Eagle Ford’s proximity to nearby refineries and its crude price discount will result in high margins for the company.
- Austin Chalk formations and Bakken acreage should act as a safeguard against ongoing low crude prices.
Marathon Oil Follows Others And Cuts, Has Austin Chalk For Future Growth
- Marathon Oil Corporation is following other E&P players by reducing spending.
- By cutting exploration spending and focusing on shale, Marathon still sees its production base growing by high-single digits next year.
- When Marathon does need to discover additional resources to support its growth ambitions, it has already delineated 18,000 net acres in the Austin Chalk.
Cost Advantage Will Allow Marathon To Do Well In The Poor Market Conditions
- The company has assets in some of the highest yielding areas in the U.S.
- Focus on low-cost methods will allow the company to remain profitable even at low crude prices.
- Marathon's drilling technology gives it an advantage compared to its peers and the company is able to grow production at a lower cost.
- Marathon recently announced that it added another 520 million BOE to its 2P reserve base.
- The Oklahoma Resource Basins added 310 million BOE to Marathon's growth runway, and exploration efforts could uncover another 490 million BOE.
- Extended laterals and successful wells targeting the Springer shales are an instrumental part of Marathon's plan to reward shareholders.
- Continental Resources has discovered 127 million BOE in the Springer shales so far on 46,000 net acres, with 72,000 net acres yet to be explored.
- The industry's success in the Springer formation points towards plenty of upside for Marathon.
The SCOOP On Marathon's Massive Oklahoma Resource Upgrade
- Marathon Oil recently increased its 2P reserves in Oklahoma by a whopping 310 million boe.
- 2P reserves in Oklahoma are now 1 billion+ boe.
- Oklahoma is strong catalyst going forward - joining the Eagle Ford & Bakken.
- Marathon appears to be on track to become very "EOG like" over the next year or two.
- As a result, MRO could gain 50% over the next 18-24 months. It is a STRONG BUY.
Is Marathon Well Positioned To Expand Its Bottom Line?
- The industry prospects for Marathon Oil are highly favorable as the demand for liquid hydrocarbons is surging and the prices of hydrocarbons and natural gas are expected to rise.
- Marathon’s total production level is projected to grow at a CAGR of 8% to 10% up until 2017 enabling the company to meet the increasing global demand for liquid hydrocarbons.
- These factors would allow the top and bottom lines to display noticeable growth.
- The reduction in development costs would add further growth and enhance the company’s net earnings and operating cash flows.
Downspacing Allows Marathon Oil To Pump Out More Crude, A Win For Investors
- Marathon is boosting its reserve base by targeting different horizons in the Eagle Ford and Bakken/Three-Forks plays.
- Downspacing efforts in the Eagle Ford are pushing wells closer together, boosting Marathon's drilling inventory.
- There is room for upside in its 40-acre Eagle Ford downspacing program through higher recovery rates.
- Downspacing is working well in the Bakken/Three-Forks, and Marathon is pushing its efforts even further.
- Kodiak Oil & Gas has gotten a pretty good idea of how much value downspacing creates.
Ask The Austin Chalk Or Three-Forks, Marathon Oil's Shale Growth Story Is Only Just BeginningCallum Turcan • Aug. 6, 2014
- Marathon is focused on three high growth shale plays, the Eagle Ford, the Bakken/Three-Forks, and the Oklahoma Resources Basin.
- Three wells came online this quarter targeting the Austin Chalk, with very strong production results.
- The Austin Chalk could be the next big thing in the Eagle Ford as Marathon delineates part of its acreage.
- Targeting the second bench of the Three-Forks and then the third could push Marathon's reserve base in the Bakken up to 1 billion BOE and beyond.
- Better drilling techniques will make the Bakken/Three-Forks produce even higher returns.
Marathon Oil: Staying Bullish As The Company Hikes Its Dividend
- On Wednesday, July 30, MRO announced it would be increasing its quarterly dividend by 11.1%.
- MRO's upcoming earnings could exceed Street estimates if the company can demonstrate increases in both its cash flow from operations and its net income.
- Trend behavior could improve during the second half of the year, especially if MRO can meet and/or exceed analysts' earnings expectations for the upcoming quarter.
- With the sale of its Norwegian assets, Marathon Oil will be spending a majority of its time and resources on its most lucrative assets.
- The company expects to invest approximately $3.6 billion of its $5.9 billion capital budget on its U.S. resources.
- The higher capital expenditure will result in an increase in Marathon's production by 20% in the coming years.
- The Bakken region is expected to deliver 15-20 years of inventory at its current rig levels. Marathon increased its rig activity in the Bakken region by 20 percent.
- The company is making an effort to restructure its portfolio by selling high political-risk assets abroad and concentrating more on its North American properties.
Marathon Oil: Focusing More On Unconventional Plays
- To streamline its portfolio of assets, Marathon Oil is divesting its overseas activities and is focusing more on domestic activities.
- The Oklahoma resource play is one of the promising unconventional plays, which will provide an upside to the company's total production.
- The longer lateral wells in the company's SCOOP formation and lower initial decline rate will help the company to sustain its long-term production performance.
- The addition of working interest in the Rift basin could be beneficial for strengthening its financial performance.
Marathon Oil - Attractive On Dips Despite 'Rushed' Norwegian Asset Sale
- Marathon completes another divestment, selling its Norwegian assets.
- The deal tag is a bit disappointing; investors act reserved.
- However, I remain a buyer on dips, as management is committed to creating shareholder value.
- Marathon Oil has produced strong performance for investors since it conducted the spin-off of MPC in 2011.
- However, past performance is not a predictor of the future, so understanding the valuation currently embedded in the stock is of paramount importance for investors.
- Marathon Oil appears to be attractively priced based on relative and intrinsic valuation analyses.
Marathon Oil - Strong Domestic Unconventional Growth And Increased Shareholder Focus Drives ValueThe Value Investor • May. 12, 2014
- Marathon Oil is showing impressive growth in its US unconventional plays.
- North Sea divestment proceeds to be used to repurchase share.
- Growth story with focus on shareholder value should bode well for long term shareholders.
- Marathon announced it would begin accepting bids for divestment of its North Sea business during 2Q of 2014.The proceeds will most likely be utilized in share repurchases.
- The company increased its rig activity in all of the major resource plays (Eagle Ford, Bakken and Woodford) by allocating prioritized capital budget.
- The increased activity will result in resource play production growth of 30% during 2014 while for the long term production is expected to grow at a CAGR of 25%.
- Argus reiterated a price target of $42 for Marathon reflecting an upside potential of 22 percent from the current price target of 34.47.
Eagle Ford Shale: Economic Side Effects Of Downspacing
Wed, Jan. 21, 3:59 PM
- Credit Suisse thinks it is still too early to buy E&P equities but the picture should brighten by late in Q1, when the firm suggests the time could be right to make a play for the strong balance sheets offered by the likes of Anadarko Petroleum (NYSE:APC), Devon Energy (NYSE:DVN), EOG Resources (NYSE:EOG), Marathon Oil (NYSE:MRO) and Pioneer Natural Resources (NYSE:PXD).
- E&P stocks historically have been highly anticipatory, the firm says, with the stocks moving ahead of crude oil, adding that the key leading indicator of U.S. drilling and completion activity is U.S. drilling permits.
Thu, Jan. 15, 10:25 AM
- North Dakota oil production rose to a new record even as energy companies drilled fewer wells and the rig count dropped to a near five-year low.
- The state's oil output hit a record 1.19M bbl/day in November, the most recent month available, according to data released yesterday by North Dakota’s Department of Mineral Resources.
- Despite the new record, the head of the department warned the state’s crude production will peak and decline later this year if oil prices don’t rebound; the current price of North Dakota sweet crude is ~$29.25/bbl, the lowest since Dec. 2008.
- The latest drilling rig count is 158, the lowest in nearly five years and down from a high of 218 rigs in 2012, but the department says production may not start to drop until the rig count falls to 130 or lower.
- Gregor McDonald argues that the North Dakota data confirming that Bakken drilling activity has slowed meaningfully has sparked the snapback rally in crude oil prices.
- Top Bakken producers: CLR, EOG, WLL, HES, XOM, OAS, NOG, EOX, MRO
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, UWTI, USL, DWTI, DNO, SZO, OLO, TWTI, OLEM
Wed, Jan. 14, 2:35 PM
- Barclays downgrades the large-cap E&P sector to Negative from Neutral and the small- and mid-cap E&P group to Negative from Positive, arguing that downside risk outweigh potential gains even if oil prices recover.
- Equity investors are pricing in WTI crude assumptions of close to $75/bbl in 2016 compared to current strip prices of ~$57, Barclays says, also noting that an abundance of relatively cheap oil supply from U.S. producers could further delay a price recovery.
- Among specific names, the firm downgrades CHK, SD, REN and HK to Underweight; DVN, CLR, KOS, MRO, RSPP and WLL are cut to equal weight.
- At the same time, Barclays picked a few favorites, upgrading Range Resources (NYSE:RRC) to Overweight from Equal Weight, and maintained Overweight ratings on large-cap E&P companies CNQ, EOG and NBL; among small- and mid-cap E&P names, the firm favors AR, CXO and XEC.
- ETFs: XOP, IEO, PXE
Mon, Jan. 12, 7:22 PM
- The number of drilling rigs operating in North Dakota's oil fields has dropped to 159, the lowest level since November 2010.
- The state lost eight rigs overnight, according to state data, a steep one-day drop not seen for years in the second-ranked U.S. oil producer.
- The drop comes after Continental Resources (NYSE:CLR), Oasis Petroleum (NYSE:OAS) and other companies announced capital spending cuts for 2015, admitting they planned to use fewer rigs this year.
- Other major North Dakota producers include EOG, WLL, HES, XOM, NOG, EOX and MRO.
Fri, Jan. 9, 10:56 AM
- North Dakota needs an oil price of $55/bbl and a fleet of at least 140 rigs to sustain production at the current level of 1.2M bbl/day, according to a presentation from the state's chief mineral resources regulator.
- Breakeven rates for new wells range from $29 in Dunn county and $30 in McKenzie to $36 in Williams and $41 in Mountrail; these four counties account for 90% of drilling in the state.
- The number of rigs operating in the state already has fallen to 165, down from 191 in October.
- The projections confirm North Dakota's oil output will start to fall by year's end unless prices rise from current depressed levels.
- Top Bakken producers: CLR, EOG, WLL, HES, XOM, OAS, NOG, EOX, MRO
Thu, Jan. 8, 3:29 PM
- News reports about crude oil futures prices plunging through $50/bbl have been plentiful but many U.S. physical crude producers are receiving far less and would be thrilled if they could get $50, Reuters' John Kemp writes.
- Case in point: Prices received by oil producers in North Dakota's Williston Basin have averaged less than $34/bbl so far this month, according to Plains Marketing, falling by almost two-thirds since June when Plains posted an average price of nearly $92/bbl for Williston Sweet.
- The recent decline has been almost as rapid and brutal as 2008-09 when Williston prices crashed from $116 to less than $17.
- Kemp says past experience suggests extreme prices tend be relatively short-lived phenomena and followed by at least a partial correction, and thinks some sort of rebound is likely this time around in the next 2-3 months.
- Top Bakken producers: CLR, EOG, WLL, HES, XOM, OAS, NOG, EOX, MRO.
Tue, Jan. 6, 6:28 PM
- Thomson Reuters StarMine data ranks the energy sector as having the worst analyst sentiment, using a model that lists equities by aggregating metrics that include changes in sell-side estimates for company earnings and revenue.
- Chevron (NYSE:CVX) registered the lower score, with analysts lowering estimates more than for 99% of companies; six different analysts have lowered Q4 EPS expectations by an average of 14.3% in the past month.
- Expected Q4 earnings growth in the energy sector is at -19.8%, according to Thomson Reuters data, down from a 6.4% growth expectation on Oct. 1, with Q1 looking even worse at -32.2%.
- Marathon Oil (NYSE:MRO), HollyFrontier (NYSE:HFC) and QEP Resources (NYSE:QEP) are among the other handful of energy companies with the lowest possible score.
Mon, Jan. 5, 12:18 PM
- Energy stocks severely underperform the broader market, with the sector -4.2% vs. the S&P 500's -1.4%, as U.S. oil prices briefly slip below $50/bbl for the first time since April 2009; Nymex crude recently was -4.4% at $50.37, while Brent crude -5.9% at $53.08.
- Among the day's biggest losers: DNR -9%, RIG -7.6%, NBR -4.8%, CHK -5.9%, SDRL -9.1%, SD -12.3%, NOV -5.9%, PSX -6.2%, APA -5.9%, DVN -4.4%, EOG -6%, SU -5.2%, OXY -4.2%, APC -8.7%, PWE -9%, ECA -5.5%, MRO -5.3%.
- Global oil majors, which have been seen as less vulnerable to falling oil prices, are posting big losses: XOM -2.7%, COP -4.5%, CVX -3.8%, BP -5.8%, RDS.A -4.6%, TOT -6.5%.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, XOP, ERY, FCG, DIG, PBW, BNO, GASL, DTO, DBO, DUG, IYE, XES, IEO, QCLN, IEZ, UWTI, PXE, USL, PXI, FENY, DWTI, PXJ, DNO, PSCE, RYE, SZO, PUW, FXN, OLO, DDG, HECO, TWTI, OLEM
Fri, Jan. 2, 11:57 AM
- Marathon Oil (MRO +0.5%) and OMV (OTC:OMVJF) were the big winners as Croatia's government awarded 10 licenses for offshore oil exploration and drilling in the Adriatic Sea in its first round of bidding.
- The government sees total investments by the groups during the five-year-long exploration phase totaling $630M.
- With estimated crude and gas reserves of as much as 3B boe in Croatian waters in the Mediterranean - among the highest mix of underwater energy deposits in the European Union - the government hopes potential deposits worth billions of dollars may turn the tourism-centered economy into a regional energy heavyweight.
Dec. 23, 2014, 4:42 PM
- Marathon Oil (NYSE:MRO) has evacuated non-essential workers from a pair of production platforms at the Brae complex in the North Sea following a Monday power outage.
- BBC reported earlier that ~75 workers were transferred to shore from the Brae Alpha and Brae Bravo platforms, but ~170 people remained.
Dec. 17, 2014, 5:35 PM
- Marathon Oil (NYSE:MRO) says it expects a 2015 capital spending budget of $4.3B-$4.5B, or ~20% below 2014 levels, adding that it needs extra time to finalize the budget given continuing changes in oil prices and the expected impact on oilfield service costs.
- MRO says the capital program will reflect a significant weighting to its high return investment opportunities in its U.S. resource plays and lower exploration spending, with total 2015 production growth (excluding Libya) anticipated in the high single digits.
Dec. 9, 2014, 6:20 PM
- North Dakota issues strict new oil standards that will require energy companies operating in the state to strip explosive gases from crude oil that shows a high vapor pressure reading, in an effort to make crude-by-rail transport safer.
- Under the new mandate, North Dakota oil can’t be transported unless it has a vapor pressure reading of 13.7 lbs./sq. in. or lower.
- The rule, which will take effect on April 1, 2015, is the first major move by regulators to address the role of gaseous, volatile crude oil in railroad accidents which have been linked to several fiery explosions, including one last year in Quebec that killed 47 people.
- Top Bakken producers: CLR, EOG, KOG, WLL, HES, XOM, OAS, NOG, EOX, MRO.
Dec. 5, 2014, 5:38 PM
- The Eagle Ford shale formation in south Texas produced its billionth barrel of oil some time last month, according to analysts at research firm Wood Mackenzie.
- Eagle Ford now accounts for 16% of total U.S. oil production, and the firm forecasts E&P spending of $30.8B in the region next year, ~22% of the total $139.3B expected in U.S. onshore spending.
- Eagle Ford is widely considered the most profitable U.S. shale field, and many analysts speculate the break-even price for production to remain profitable is ~$50/bbl in much of the play.
- Top Eagle Ford producers include EOG, CHK, COP, MRO, BHP, APC, APA, BP, COG, CRZO, CWEI, CRK, XOM, GDP, HES, MTDR, MUR, NFX, PVA, PXD, ROSE, RDS.A, RDS.B, SN, SM, STO, SFY, TLM, ZAZA
Dec. 2, 2014, 3:13 PM
- Apache (APA -1%), Bill Barrett (BBG -5.6%) and Laredo Petroleum (LPI -4.9%) are downgraded to Neutral from Buy at Mizuho, as the firm lowers its crude oil price deck and views OPEC's decision not to cut production as a structural shift in crude oil markets.
- Although the current excess supply/weak demand situation will be resolved gradually, market fundamentals will increasingly drive crude prices in a ~$70/bbl world, the firm says; in the E&P space, it prefers APC, MRO, FANG, RSPP and RICE.
Dec. 2, 2014, 2:48 PM
- Energy stocks (XLE +1.4%) are posting the day's largest gains among S&P sectors, rebounding from recent losses even as Nymex crude oil fell another $2.05 to $66.97/bbl.
- Refiners Marathon Petroleum (MPC +4%) and Valero (VLO +4.1%) and pipeline operator Williams Cos. (WMB +1.5%) are among the top gainers, while losers include most oil services companies such as Halliburton (HAL -2.2%) and rig operator Transocean (RIG -3.7%).
- Anadarko Petroleum (APC +1.6%), Cimarex Energy (XEC +1%), Devon Energy (DVN +0.7%), EOG Resources (EOG +3.8%) and Marathon Oil (MRO +3.5%) were selected top “safe haven” picks for analysts at Tudor Pickering Holt, which said they are “liquid names with high-quality assets and healthy balance sheets."
Dec. 1, 2014, 11:58 AM
- Marathon Oil (MRO -1.7%) says it discovered significant amounts of oil and natural gas in the Kurdistan region of Iraq.
- A drillstem testing program at the Jisik-1 exploration well yielded a sustained flow rate of 6,100 bbl/day of oil, and multiple non-associated gas zones flowed at a combined rate of 10M-15M cf/day.
- MRO is operator of the Harir block with a 45% stake, while Total (TOT +0.4%) owns 35% and the Kurdistan Regional Government holds 20%.
MRO vs. ETF Alternatives
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.
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