Marathon revises down budget by 20%

Marathon Oil Corp., Houston, has reduced its capital, investment, and exploration budget for 2015 by another 20% to $3.5 billion.

Marathon Oil Corp., Houston, has reduced its capital, investment, and exploration budget for 2015 by another 20% to $3.5 billion.

The company initially reported a $4.3-4.5 billion budget for the year in December, representing at the time a 20% decline from its 2014 budget (OGJ Online, Dec. 18, 2014).

For full-year 2014, Marathon reported adjusted net income from continuing operations of $1.16 billion and adjusted net income of $1.729 billion. Reported income from continuing operations was $969 million, and reported net income was $3.046 billion.

“With continued uncertainty in commodity pricing, Marathon Oil has taken decisive action to protect our optionality and position us to be a stronger E&P in the long term,” commented Lee Tillman, Marathon Oil president and chief executive officer.

North American focus

The company plans to allocate $2.4 billion of its budget on assets in the Eagle Ford and Bakken shales and Oklahoma resource basins.

More than $1.4 billion in capital spending is earmarked for the Eagle Ford, where the rig count is expected to drop from 18 in late 2014 to 10 by the end of the second quarter. About 141-152 wells net are expected to be drilled. Included is $1 billion for drilling and completions.

Marathon plans to spend $760 million in the Bakken, where drilling activity will be reduced from seven rigs at yearend 2014 to two rigs by the end of the first quarter. Around 42-53 wells net are expected to be drilled. Included is $550 million for drilling, completions, and recompletions.

Spending of $226 million is targeted for the Oklahoma Resource basins, which will also be down to two rigs by the end of the first quarter. Around 17-20 wells net are expected to be drilled. Included is spending of $200 million for drilling and completions.

Marathon expects its resource plays to achieve production growth of 20% year-over-year in 2015.

E&P plans

Marathon has decreased exploration spending to $232 million on a targeted exploration program, down more than 50% compared with 2014 levels.

In the Gulf of Mexico, the company expects to drill one company-operated well and participate in a nonoperated appraisal well at Shenandoah. Seismic surveys are planned in Gabon and Ethiopia.

The company plans to spend $429 million on its international assets, primarily in Equatorial Guinea, the UK, and the Kurdistan Region of Iraq, where Marathon Oil KDV BV made an oil and gas discovery with its Jisik-1 exploration well in December (OGJ Online, Dec. 1, 2014).

In Canada, Marathon expects to incur $95 million of costs for sustaining capital projects in its oil sands mining (OSM) segment, most of which will be offset by a carbon sequestration credit, resulting in reportable capital expenditures of $21 million.

The company holds 20% outside-operated interest in the Athabasca oil sands project, which the company previously negotiated to sell without reaching an agreement (OGJ Online, May 28, 2013).

A total production growth rate—excluding Libya—of 5-7% year-over-year is anticipated. Marathon forecasts 370,000-390,000 net boe/d for production available for sale from the combined North America E&P and International E&P segments—excluding Libya—and 35,000-45,000 net b/d of synthetic crude oil for the OSM segment.

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