Marathon Oil Expands in Eagle Ford, Bakken, Norway in First-Quarter 2014, Expects $5.6 Billion Capex for Year

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Researched by Industrial Info Resources (Sugar Land, Texas)--Oil and gas giant Marathon Oil Company (NYSE:MRO) (Houston, Texas) reported solid profits for first-quarter 2014, as the company continued to boost production in its three North American resources plays and benefited from the sale of property in Angola. Net income was reported to be $1.15 billion, compared with only $383 million in first-quarter 2013.

Marathon saw an increase in its product available for sale in North America following growth in all three of its resource plays. It also saw a $378 million drop in exploration expenses, given hefty property impairment in first-quarter 2013. Production increased 33% in the Eagle Ford Shale, 16% in the Bakken, and 15% in Oklahoma resource basins. Much of the quarterly increase in net income was attributed to Marathon's sale of its interests in Angola Blocks 31 and 32, which netted $576 million after-tax.

Total revenues were reported to be $3.53 billion, a 12.21% decrease from the same period last year. The quarter's amount of product available for sale was reported to be 448 million barrels of oil equivalent per day, compared with 516 million barrels in first-quarter 2013. The total suffered from a 44,000-barrel drop in Libyan production amid labor strikes at the Es Sider terminal; a 14,000-barrel decline attributed to weaker reliability from assets that Marathon does not operate itself; and a 6,000-barrel drop attributed to harsher-than-expected winter weather in North America. The company also saw extended, unplanned downtime at the Foinaven field off the northern shore of Scotland and the AMPCO methanol plant in Equatorial Guinea.

Capital expenditures were reported to be $1.15 billion for the quarter, compared with $1.27 billion in first-quarter 2013.

Industrial Info is tracking more than $10.6 billion in active projects involving Marathon, including the $398.4 million installation of the Boyla pipeline system in Norway's North Sea. The project involves the fabrication and reeled installation of a pipe-in-pipe production flowline, a plastic-lined water injection flowline, and a gas lift flowline, as well as the installation of equipment such as rigid spools, flexible jumpers, umbilicals, tie-in by divers, trenching, rockdumping and ready-for-operation activities. The Boyla field is expected to have a capacity of 150,000 barrels per day.

"On a pro-forma basis, the North Sea businesses contribute about 20% of projected 2014 cash flows," said Lee Tillman, the president and chief executive officer of Marathon, in a conference call. "Obviously, we're watching the cash flows very carefully, but it's important to also recognize that both the Eagle Ford and the Bakken will be going 'cash flow positive' at current activity levels in 2015. So we remain confident in our outlook and our ability to fund our investment program."

Marathon executives say they expect capital expenditures for full-year 2014 to be about $5.67 billion. Total production available for sale is expected to average between 405 million and 435 million barrels of oil equivalent per day. The company plans to ramp up drilling in its three U.S. resource plays about 30% over last year, continuing to strengthen the amount of production available for sale in the North American E&P segment.

Marathon recently brought online an appraisal well in the Austin Chalk area of the Eagle Ford Shale, which is expected to produce 1,600 barrels of oil equivalent per day in its first 30 days. In the Gulf of Mexico, three new deepwater wells are expected to spud in the second and third quarters in areas where Marathon has working interests. In the Bakken Shale, the company recently expanded its presence south into the Hector area and is testing eight new wells.

"In 2013, our task at hand was determining the viability of the Austin Chald and the upper Eagle Ford, and for the areas where we have wells, we have fully demonstrated that viability," Tillman said in the conference call. "2014 is geared toward attempting to extend that viability across our acreage position."

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