Marathon to ramp up US resource play activity

Marathon Oil Corp. plans to accelerate its US resource play activity and market its North Sea assets in 2014, the company said at its analyst day in New York.

More than $3.6 billion of the company’s 2014 $5.9 billion capital, investment, and exploration budget will be allocated to resource plays as the company expects more than 30% growth from 2013 in production in the Eagle Ford, Bakken, and Oklahoma Woodford.

The 60% rate of distribution reflects the company’s past goals of increasing activity in domestic unconventional plays (OGJ Online, Dec. 12, 2011).

Eagle Ford will see an infusion of $2.3 billion as 250-260 net wells will be drilled in 2014. The total includes $225 million for central batteries and pipeline construction. A 20% jump in rig activity is expected.

Bakken will receive $1 billion along with 80-90 net wells drilled while the company also plans to recomplete 20-24 existing net wells. It too will see a 20% lift in rig activity.

Woodford spending will reach $236 million with 17-23 net wells drilled and a 100% increase in rig activity.

Production growth in 2014, excluding Alaska and Libya, is expected to reach 10%.

“This increased activity underpins our confidence in delivering approximately 4% year-on-year growth in overall 2014 volumes, excluding Alaska, Angola, and Libya,” said Lee Tillman, Marathon’s president and chief executive officer (OGJ Online, June 13, 2013).

Divestitures

Marathon plans to expand its remaining share repurchase authorization to $2.5 billion, including a $500 million share repurchase from the sale of its interest in Angola Block 31.

The company further intends to market its North Sea assets following $3.5 billion in noncore asset divestitures, which exceeded the company’s target of $1.5-3 billion.

“Our plan to market our assets in the UK and Norway provides an option to simplify and concentrate our portfolio while increasing our growth rate and accelerating cash flows,” Tillman said, adding, “This, in turn, presents an opportunity to redeploy capital for long-term value creation for our shareholders.”

The $3.5 billion total was achieved with the September sale of 10% interest in offshore Angola Block 32 to Sonangol EP for $590 million, which followed the sale of 10% interest in Angola Block 31 to Sinopec Group for $1.5 billion (OGJ Online, Sept. 10, 2013).

The company expects 2014 net production available for sale from the combined North America and international exploration and production segments, excluding Libya, to average 405,000-435,000 boe/d.

From its oil sands mining segment, for which it has budgeted $294 million, the company expects production of 40,000-50,000 net b/d of synthetic crude.

The budget includes funds for numerous smaller projects that represent sustaining capital. Marathon holds a 20% outside-operated interest in the Athabasca oil sands project. Negotiations undertaken in May by Marathon to sell its interest in Athabasca ended without reaching an agreement (OGJ Online, May 28, 2013).

The company said it plans to spend $1.4 billion on its conventional North America and international exploration and production assets to provide stable production, income, and cash flow. Those assets include production operations in Norway, the Gulf of Mexico, US conventional oil and gas plays, Equatorial Guinea, the UK, Libya, and developments in the Kurdistan Region of Iraq.

Marathon also intends to spend $529 million selectively investing in a risk-balanced exploration program. Activity will include conducting seismic surveys and drilling 2-3 net wells (8-10 gross, of which 2 wells are company-operated) across the deepwater Gulf of Mexico, Ethiopia, Kenya, Gabon, and the Kurdistan Region of Iraq.

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