OREANDA-NEWS. Marathon Oil Corporation (NYSE:MRO) today reported full-year
2014 adjusted net income from continuing operations of
\$1.16
billion, or
\$1.70 per diluted share, and adjusted net income of
\$1.729 billion, or
\$2.53 per diluted share, excluding the impact of
certain items not typically represented in analysts' earnings
estimates and that would otherwise affect comparability of results.
Reported income from continuing operations for full-year 2014 was
\$969 million, or
\$1.42 per diluted share, and reported net income
was
\$3.046 billion, or
\$4.46 per diluted share.
Full-year 2014 Highlights
• Achieved 35% production growth from U.S. resource plays
year over year with average net production of 181,000 boed;
Eagle Ford, Bakken and Oklahoma Resource Basins up 38%, 31% and
29%, respectively
• Total Company production available for sale from
continuing operations (excluding Libya) up 8% year over year
• Grew U.S. unconventional net 2P resource to 3 billion
boe, up more than 20% over year-end 2013
• Proved reserve replacement of 183%, excluding
dispositions, at approximately \$20 per boe finding &
development cost
• Recorded 97% average operational availability for
Company-operated assets
• Closed Norway and Angola sales for aggregate cash
proceeds of more than \$4 billion
• Completed \$1 billion in share repurchases in the first
half of 2014
• Increased quarterly dividend in the second quarter by
11% to \$0.21 per share
• Year-end liquidity of \$4.9 billion comprised of \$2.4
billion in cash and \$2.5 billion available through a committed
multi-year credit facility
The Company reported a fourth quarter 2014 adjusted loss from
continuing operations of \$89 million, or \$0.13 per diluted share,
and adjusted net loss of \$2 million. Reported loss from continuing
operations for fourth quarter 2014 was \$93 million, or \$0.14 per
diluted share, and reported net income was \$926 million, or \$1.37
per diluted share.
Fourth Quarter Operational Highlights
• U.S. resource plays averaged net production of 206,000
boed, up 43% from the year-ago quarter and 7% higher than third
quarter 2014
? Record 98 gross operated Eagle Ford
wells to sales, up 13% over third quarter
? 11 Austin
Chalk and initial four Upper Eagle Ford wells to sales
? Bakken production increased 38%
over year-ago quarter
? 17 gross
operated Bakken wells to sales, of which 15 piloted enhanced
completions
? Enhanced
completion designs achieving promising results with 42 of 55 tests
online
? 18 pilot
completion wells averaging greater than 30% uplift in cumulative
production over the first 60 days
? Four gross operated SCOOP
wells to sales in the Oklahoma Resource Basins, including one
extended-reach lateral (XL) with 30-day initial
production (IP) rate of 1,065 boed (63% crude oil/condensate, 21%
NGLs)
? Executed agreements for
additional 10,000 net acres in the SCOOP; approximately 70% of
acreage in Oklahoma held by production as of year end
• Recorded 98% average operational availability for
Company-operated assets
• Two U.K. South Brae infill wells delivering production
rates well above pre-drill estimates
"Marathon Oil delivered against our performance commitments in
2014, increasing production by 35 percent in our three
highest-value resource plays, successfully marketing our Norway and
Angola assets, and executing share repurchases in the first half of
the year worth \$1 billion," Marathon Oil President and CEO
Lee M.
Tillman said. "Overall we recorded 97 percent operational
availability for Company-operated assets during the year.
Additionally, our proved reserve replacement was 183 percent at a
competitive finding and development cost. Our North America E&P
operations added net proved reserves of 288 million boe -- mainly
due to downspacing, drilling activity and improved well performance
-- amounting to a 37 percent increase over the prior year's ending
balance.
"The second half of 2014 brought a rapid correction in commodity
prices and our fourth quarter North America crude oil and
condensate realizations were down 26 percent sequentially," Tillman
added. "Though our U.S. resource plays generate competitive returns
at current pricing, we're taking action to materially reduce our
2015 capital program relative to 2014 to protect our financial
flexibility. Marathon Oil is well prepared -- we re-shaped our
portfolio to concentrate on higher margin, higher return
opportunities and have the optionality to adjust our short-cycle
investments in line with commodity volatility.
"We are not opportunity limited and in fact, the current
environment simply serves to underscore the importance of
subsurface quality and execution at scale -- advantages that are
common to our positions in the Eagle Ford, Bakken and Oklahoma
Resource Basins. Our deep, multi-year drilling inventory is robust
across a broad range of pricing scenarios and positions us strongly
for a commodity price recovery. In the interim, we intend to pursue
all options to expand our margins during this period of uncertainty
-- capital efficiency, investment high grading, early capture of
service cost reductions, expense management and operational
reliability.
"Though we have rightly focused on prudent near-term actions,
Marathon Oil has laid the groundwork for the future by growing our
U.S. unconventional net 2P resource by 20 percent in 2014. Our
asset teams continue to aggressively test downspacing, completion
designs, co-development and new horizons which offer the potential
to add further to our 3 billion barrels of oil equivalent of net 2P
unconventional resource," Tillman said.
| |
Three Months
Ended |
Year Ended |
| |
Dec. 31 |
Dec. 31 |
Dec. 31 |
Dec. 31 |
| (In millions, except per diluted
share data) |
2014 (a) |
2013 (a) |
2014 (a) |
2013 (a) |
| Adjusted income (loss) from
continuing operations (b) |
\$(89) |
\$179 |
\$1,160 |
\$1,052 |
| Adjustments for special items (net of
taxes): |
|
|
|
|
| Net gain (loss) on dispositions |
0 |
(11) |
(58) |
(20) |
| Impairments |
0 |
(29) |
(70) |
(39) |
| Pension settlement |
(4) |
(9) |
(63) |
(29) |
| Unrealized loss on crude oil derivative
instruments |
0 |
6 |
0 |
(33) |
| Income (loss) from
continuing operations |
\$(93) |
\$136 |
\$969 |
\$931 |
| Per diluted share: |
|
|
|
|
| Adjusted income (loss)
from continuing operations (b) |
\$(0.13) |
\$0.26 |
\$1.70 |
\$1.48 |
| Income (loss) from
continuing operations |
\$(0.14) |
\$0.20 |
\$1.42 |
\$1.31 |
| Adjusted net income (loss)
(b) |
\$(2) |
\$418 |
\$1,729 |
\$1,874 |
| Adjustments for special items (net of
taxes): |
|
|
|
|
| Net gain (loss) on dispositions |
932 |
(11) |
1,450 |
(20) |
| Impairments |
0 |
(29) |
(70) |
(39) |
| Pension settlement |
(4) |
(9) |
(63) |
(29) |
| Unrealized gain (loss) on crude oil
derivative instruments |
0 |
6 |
0 |
(33) |
| Net income |
\$926 |
\$375 |
\$3,046 |
\$1,753 |
| Per diluted share: |
|
|
|
|
| Adjusted net income
(b) |
\$0.00 |
\$0.60 |
\$2.53 |
\$2.64 |
| Net income |
\$1.37 |
\$0.54 |
\$4.46 |
\$2.47 |
| Exploration expenses |
|
|
|
|
| Unproved property impairments |
\$166 |
\$115 |
\$306 |
\$572 |
| Dry well costs |
237 |
52 |
317 |
148 |
| Geological and geophysical |
58 |
36 |
85 |
80 |
| Other |
18 |
23 |
85 |
91 |
| Total exploration
expenses |
\$479 |
\$226 |
\$793 |
\$891 |
| Cash flows |
|
|
|
|
| Net cash provided by continuing operations
before changes in working capital (b) |
\$768 |
\$934 |
\$4,661 |
\$4,398 |
| Changes in working capital for continuing
operations |
492 |
154 |
75 |
(10) |
| Total net cash provided by continuing
operations |
1,260 |
1,088 |
4,736 |
4,388 |
| Net cash provided by discontinued
operations |
(105) |
141 |
751 |
882 |
| Net cash provided by operating
activities |
\$1,155 |
\$1,229 |
\$5,487 |
\$5,270 |
(a) The Company closed on the sale of its Angola assets in first
quarter 2014 and its Norway business in fourth quarter 2014.The Angola and Norway businesses are reflected as discontinued
operations in all periods presented.
(b) Non-GAAP financial measure. See "Non-GAAP Measures" below
for further discussion.
Reserves
Driven by strong reserves growth in the Company's U.S. resource
plays, Marathon Oil's total net proved reserves were approximately
2.2 billion barrels of oil equivalent (boe) at the end of 2014, an
increase of 6 percent over the prior year for continuing
operations. The net proved reserve base is 80 percent liquids and
67 percent proved developed. The Company's reserve replacement
ratio, excluding dispositions, was 183 percent, with 305 million
boe of net proved reserves added during 2014. Including the
divestitures of Angola and Norway businesses, the Company
maintained positive overall reserve growth and a reserve
replacement ratio of 116 percent. The Company's finding and
development cost was approximately \$20 per boe.
Net additions, including acquisitions, were driven primarily by
U.S. resource play activity in the Eagle Ford, Bakken and Oklahoma
Resource Basins. In 2014, North America E&P operations added
296 million boe, amounting to an increase of 38 percent over the
prior year's ending balance, mainly due to downspacing, drilling
activity and improved well performance.
Marathon Oil added a total of 237 million barrels of net proved
liquids [crude oil and condensate (C&C), natural gas liquids
(NGLs) and synthetic crude oil (SCO)] reserves, resulting in a
total liquids reserve replacement ratio, excluding dispositions, of
235 percent related to continuing operations.
| Estimated Net Proved
Reserves |
| |
North America
E&P |
International
E&P |
OSM |
Subtotal Cont.
Ops |
Disc. Ops |
Total |
| |
Total (mmboe) |
Total (mmboe) |
SCO (mmbbl) |
(mmboe) |
(mmboe) |
(mmboe) |
| As of Dec. 31, 2013 |
787 |
598 |
680 |
2,065 |
106 |
2,171 |
| Additions |
252 |
15 |
0 |
267 |
3 |
270 |
| Revisions |
36 |
(3) |
(55) |
(22) |
11 |
(11) |
| Acquisitions |
8 |
0 |
38 |
46 |
0 |
46 |
| Dispositions |
(10) |
0 |
0 |
(10) |
(101) |
(111) |
| Production |
(87) |
(46) |
(15) |
(148) |
(19) |
(167) |
| As of Dec. 31,
2014 |
986 |
564 |
648 |
2,198 |
0 |
2,198 |
Reserve Replacement Ratio
(including acquisitions & dispositions)
|
|
|
|
116% |
Reserve Replacement Ratio
(excluding dispositions)
|
|
|
|
183% |
For the three-year period ended Dec. 31, 2014, Marathon Oil
added net proved reserves of slightly more than 1 billion boe,
excluding dispositions, resulting in a three-year average reserve
replacement ratio of 201 percent.
Sales and Production Volumes
Total Company sales volumes from continuing operations
(excluding Libya) averaged 442,000 net barrels of oil equivalent
per day (boed) during fourth quarter 2014 and 408,000 net boed for
full-year 2014, compared to 379,000 net boed for fourth quarter
2013 and 376,000 net boed for full-year 2013.
| |
Three Months
Ended |
Year Ended |
| |
Dec. 31 |
Dec. 31 |
Dec. 31 |
Dec. 31 |
| (mboed) |
2014 |
2013 |
2014 |
2013 |
| Net Sales Volumes |
|
|
|
|
| North America E&P |
262 |
206 |
238 |
201 |
| International E&P excluding Libya (a) and
Disc Ops (b) |
125 |
122 |
120 |
127 |
| Combined North America & International
E&P, excluding Libya (a) and Disc Ops (b) |
387 |
328 |
358 |
328 |
| Oil Sands Mining (c) |
55 |
51 |
50 |
48 |
| Total Continuing Operations excluding
Libya |
442 |
379 |
408 |
376 |
| Discontinued Operations (Norway) |
10 |
73 |
52 |
79 |
| Discontinued Operations (Angola) |
0 |
11 |
2 |
10 |
| Total Company excluding Libya |
452 |
463 |
462 |
465 |
| Libya |
22 |
1 |
7 |
28 |
| Total |
474 |
464 |
469 |
493 |
(a) Libya is excluded because of uncertainty around future
production and sales levels.
(b) Angola and Norway are reflected as discontinued operations
(Disc Ops).
(c) Includes blendstocks.
Total Company production available for sale from continuing
operations (excluding Libya) averaged 399,000 net boed for
full-year 2014 compared to 371,000 net boed for 2013, an 8 percent
increase year-over-year. The difference between production volumes
available for sale and recorded sales for exploration and
production (E&P) volumes was primarily due to the timing of
international liftings.
| |
Three Months
Ended |
Year Ended |
| |
Dec. 31 |
Dec. 31 |
Dec. 31 |
Dec. 31 |
| (mboed) |
2014 |
2013 |
2014 |
2013 |
| Net Production Available for
Sale |
|
|
|
|
| North America E&P |
262 |
206 |
238 |
201 |
| International E&P excluding Libya (a) and
Disc Ops (b) |
126 |
129 |
120 |
128 |
Combined North America & International
E&P, excluding Libya (a) and Disc Ops (b)
|
388 |
335 |
358 |
329 |
| Oil Sands Mining (c) |
42 |
46 |
41 |
42 |
| Total Continuing Operations excluding
Libya |
430 |
381 |
399 |
371 |
| Discontinued Operations (Norway) |
9 |
77 |
51 |
79 |
| Discontinued Operations (Angola) |
0 |
11 |
2 |
9 |
| Total Company excluding Libya |
439 |
469 |
452 |
459 |
| Libya |
22 |
2 |
8 |
28 |
| Total |
461 |
471 |
460 |
487 |
(a) Libya is excluded because of uncertainty around future
production and sales levels.
(b) Angola and Norway are reflected as Disc Ops.
(c) Upgraded bitumen excluding blendstocks.
Fourth quarter 2014 production available for sale from
continuing operations (excluding Libya) averaged 430,000 net boed,
compared to fourth quarter 2013 average of 381,000 net boed, a 13
percent increase over the prior year quarter. The increase was
driven by North America E&P's continued growth in the U.S.
resource plays, which was up 43 percent compared to the year-ago
quarter.
International E&P production available for sale from
continuing operations (excluding Libya) for fourth quarter 2014 was
lower compared to fourth quarter 2013, reflecting natural decline
in Equatorial Guinea and significant planned and unplanned
maintenance at the outside-operated Foinaven oil field.
Oil Sands Mining (OSM) production available for sale for fourth
quarter 2014 was down 10 percent, primarily a result of planned
maintenance at the Muskeg River and Jackpine mines, compared to
fourth quarter 2013.
In Libya, Marathon Oil had four liftings in early fourth quarter
2014. In December, Libya'sNational Oil Corporation declared force
majeure at the Es Sider terminal, as disruptions from civil unrest
continue. Considerable uncertainty remains around future timing of
production and sales levels, and Marathon Oil continues to exclude
production from Libya in its production forecasts.
The Company's first quarter and full-year 2015 production
guidance, as shown in the table below, is reflective of the
Company's 2015 capital, investment and exploration budget of \$3.5
billion. The full-year guidance reflects a total Company (excluding
Libya) growth rate of 5 to 7 percent year over year. The Company's
capital budget and 2015 guidance is further outlined in a separate
news release issued today, Feb. 18, 2015.
| |
Guidance (a) |
Guidance (a) |
| |
1Q |
Full-Year |
| (mboed) |
2015 |
2015 |
| Net Production Available for
Sale |
|
|
| North America E&P |
268-279 |
|
| International E&P excluding Libya
(b) |
107-116 |
|
| Combined North America & International
E&P, excluding Libya (b) |
375-395 |
370-390 |
| Oil Sands Mining (c) |
40-45 |
35-45 |
(a) This guidance excludes the effect of acquisitions or
dispositions not previously announced.
(b) Libya is excluded because of uncertainty around future
production and sales levels.
(c) Upgraded bitumen excluding blendstocks.
Segment Results
Total segment income/loss from continuing operations was a loss
of \$39 million in fourth quarter 2014 and income of \$1.5 billion
for the full-year 2014, compared to income of \$290 million in
fourth quarter 2013 and \$1.49 billion for full-year 2013.
| |
Three Months
Ended |
Year Ended |
| |
Dec. 31 |
Dec. 31 |
Dec. 31 |
Dec. 31 |
| (In millions) |
2014 |
2013 |
2014 |
2013 |
| Segment Income (Loss) |
|
|
|
|
| North America E&P |
\$(143) |
\$125 |
\$693 |
\$529 |
| International E&P (a) |
81 |
123 |
568 |
758 |
| Oil Sands Mining |
23 |
42 |
235 |
206 |
| Segment Income (Loss)
(b) |
\$(39) |
\$290 |
\$1,496 |
\$1,493 |
(a) The Company closed on the sale of its Angola assets in first
quarter 2014 and its Norway business in fourth quarter 2014.The Angola and Norway businesses are reflected as discontinued
operations in all periods presented.
(b) See Supplemental Statistics below for a reconciliation of
segment income (loss) to net income.
North America E&P
The North America E&P segment reported a loss of \$143
million in fourth quarter 2014 compared to income of \$125 million
in fourth quarter 2013. The decrease was primarily due to lower
crude oil price realizations combined with higher exploration
expenses, partially offset by higher net sales volumes from the
U.S. resource plays. North America exploration expense in fourth
quarter 2014 included dry well costs of \$211 million (pre-tax) and
total unproved property impairments of \$166 million (pre-tax)
onshore U.S. and Gulf of Mexico. Costs related to the
Company-operated Key Largo, and outside-operated Perseus and second
Shenandoah appraisal well in the Gulf of Mexico were included in
exploration expense during the quarter.
The North America E&P segment income for the full-year 2014
was \$693 million compared to \$529 million for 2013. The
increase in 2014 was primarily due to higher net sales volumes from
the U.S. resource plays and lower exploration expenses, partially
offset by lower average price realizations.
Production in the Eagle Ford, Bakken and Oklahoma Resource
Basins combined to average 206,000 net boed during fourth quarter
2014, up 43 percent from the year-ago quarter and 7 percent higher
than third quarter 2014. For full-year 2014, the resource plays
increased production 35 percent year over year, averaging 181,000
net boed during the year, compared with 134,000 net boed in
2013.
EAGLE FORD: In fourth quarter 2014 Marathon Oil's production in
the Eagle Ford averaged 131,000 net boed, a 46 percent increase
over the year-ago quarter and 12 percent over the previous quarter.
Approximately 65 percent of fourth quarter net production was crude
oil/condensate, 17 percent was NGLs and 18 percent was natural gas.
Marathon Oil reached total depth on 96 gross operated wells and
brought a record 98 gross operated wells to sales in the fourth
quarter, compared to 93 and 87 gross wells, respectively, in third
quarter 2014. Marathon Oil's average time to drill an Eagle Ford
well in fourth quarter 2014, spud-to-total depth, improved to 12
days. The Company's high-density pad drilling continues to average
four wells per pad.
Included with the Eagle Ford well counts noted above, the
Company brought online 11 gross operated
Austin Chalk wells. For
the year 2014, the Company brought to sales a total of 22 gross
operated
Austin Chalk wells that delineated 18,000 net acres, and
14 additional
Austin Chalk wells are currently being drilled,
completed or awaiting first production. The first four Upper Eagle
Ford wells were brought online late in the fourth quarter, and the
Company spud its first four-well "stack-and-frack" pilot with
Austin Chalk, Upper Eagle Ford and two Lower Eagle Ford wells.
BAKKEN: Marathon Oil averaged 55,000 net boed of production in
the Bakken during fourth quarter 2014, an increase of 38 percent
over the year-ago average and flat compared to the previous quarter
as a result of increased density pad drilling and the timing of
bringing wells to sales. The Company's Bakken production averaged
88 percent crude oil, 6 percent NGLs and 6 percent natural gas. The
Company reached total depth on 23 gross operated wells and brought
17 gross operated wells to sales in the fourth quarter, compared to
25 gross wells reaching total depth and 19 brought to sales in
third quarter 2014. The Company's time to drill a Bakken well,
spud-to-total depth, averaged 16 days in the fourth quarter.
The Bakken enhanced completion design pilot program is achieving
promising early results with 42 of the 55 tests online at year end.
The initial results, based on 18 wells, are showing greater than 30
percent improvement in cumulative production after 60 days,
compared to direct offset performance. The Company has recently
finished drilling two high-density spacing pilots (six wells per
horizon) that are awaiting completion, with a third currently
drilling.
OKLAHOMA RESOURCE BASINS: The Company's unconventional Oklahoma
production averaged 20,000 net boed during fourth quarter 2014, an
increase of 43 percent over the year-ago average and up 5 percent
compared to the previous quarter. Approximately 45 percent of
fourth quarter 2014 net production was liquids and 55 percent was
natural gas. During the fourth quarter, the Company reached total
depth on four gross operated wells and brought four gross operated
wells to sales, all in the South Central Oklahoma Oil Province
(SCOOP). Of the wells, one was an extended-reach lateral (XL) well
drilled in the updip, highly liquids-rich area of the SCOOP, with a
30-day IP rate of 1,065 boed (63 percent crude oil/condensate, 21
percent NGLs). Marathon Oil executed agreements for an additional
10,000 net acres in the SCOOP, including acres with Springer
potential.
International E&P
International E&P segment income was \$81 million in fourth
quarter 2014, compared to segment income of \$123 million in fourth
quarter 2013. Exploration expense included dry well costs for the
Sodalita West in Equatorial Guinea. For full-year 2014,
International E&P segment income was \$568 million compared to
\$758 million in 2013. The decrease in 2014 is primarily due to
lower liquid hydrocarbon price realizations, lower sales volumes,
and higher other operating expenses.
EQUATORIAL GUINEA: Production available for sale averaged
106,000 net boed in fourth quarter 2014, compared to 109,000 net
boed in the year-ago quarter and 100,000 net boed in the previous
quarter.
U.K.: Production available for sale averaged 20,000 net boed in
fourth quarter 2014, relatively flat compared to fourth quarter
2013, despite natural decline within the Brae fields. Production
was up more than 50 percent over the previous quarter, largely due
to third quarter planned maintenance activity and two South Brae
infill wells brought online late in the third quarter with initial
production rates above pre-drill estimates.
KURDISTAN REGION OF IRAQ: In December, Marathon Oil announced
the Jisik-1 exploration well had discovered multiple stacked oil
and natural gas producing zones on the Company-operated Harir
Block. A drill-stem testing program yielded a sustained flow rate
of 6,100 barrels per day of oil, and multiple non-associated gas
zones flowed at a combined rate of approximately 10-15 million
cubic feet per day, without stimulation, together with associated
condensate, all of which were equipment constrained. The well has
been suspended for potential future use as a producing well.
Additionally, the Mirawa-2 appraisal well was spud in December and
is expected to reach total depth in the second quarter. Marathon
Oil holds a 45 percent working interest in the Harir Block.
On the outside-operated Sarsang block, the East Swara Tika-1
exploration well is being sidetracked up-dip. Discussions are
ongoing with the Ministry of Natural Resources to finalize the
Swara Tika field development plan. Marathon Oil holds a 20 percent
working interest in the Sarsang Block.
GABON: In early November, the Company began acquisition of 3D
seismic on the Company-operated Tchicuate Block in Gabon. The
seismic program is expected to be completed in the second quarter,
and processing will occur through the remainder of the year.
CROATIA: Marathon Oil was awarded, as part of a consortium,
seven blocks located offshore in the Adriatic Sea, subject to
negotiation of a production sharing contract (PSC) with the
Croatian Government. Marathon Oil has a 60 percent interest and
operatorship in the consortium.
Oil Sands Mining
The OSM segment reported income of \$23 million for fourth
quarter 2014, compared to \$42 million in fourth quarter 2013. The
decrease was primarily a result of lower price realizations
partially offset by higher net sales volumes. The OSM segment
reported full-year 2014 income of \$235 million compared to \$206
million for 2013. The increase was primarily a result of higher
operating expenses in the prior year.
Corporate and Special Items
Included in the adjustments to net income for fourth quarter
2014 was a net \$932 million after-tax gain related to discontinued
operations. The Company also recorded an after-tax settlement
charge of \$4 million (\$6 million pre-tax) in connection with its
U.S. pension plans.
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