Marathon Oil Reports Second Quarter 2023 Results
Over
- Continued delivery on commitment to return at least
40% of adjusted CFO to shareholders - Returned
to shareholders during second quarter, an approximate$434 million 10% increase from first quarter 2023 shareholder distributions; second quarter return of capital included of share repurchases and$372 million base dividend$62 million - Achieved first half 2023 shareholder distributions of
, including over$831 million of share repurchases; represents$700 million 40% of adjusted CFO - Executed
of total share repurchases over trailing 7 quarters, driving a$4.2 billion 24% reduction in outstanding share count and significant growth in all per-share metrics - Achieved strong second quarter financial and operational results with no changes to full-year production or capital spending guidance ranges
- Generated second quarter FCF of
and adjusted FCF of$442 million $531 million - Delivered sequential increase in total second quarter production to 399,000 net barrels of oil equivalent per day (boed) and 189,000 net barrels of oil per day (bopd)
- Company's full year 2023 total Company oil equivalent production is trending above the midpoint of the annual guidance range
"Second quarter adds to our track record of consistent execution against our well-established Framework for Success" said Chairman, President, and CEO Lee Tillman. "We built on our return of capital leadership, increasing shareholder distributions to over
Return of Capital
Marathon Oil's percentage of CFO framework provides clear visibility to significant return of capital to equity investors, ensuring the shareholder gets the first call on cash flow generation and protecting shareholder distributions from capital inflation. In a
During second quarter, Marathon Oil returned
Since significantly increasing return of capital to equity investors in fourth quarter 2021 under its current Return of Capital Framework, Marathon Oil has returned
2Q23 Financials
CASH FLOW AND CAPEX: Net cash provided by operations was
BALANCE SHEET AND LIQUIDITY: Marathon Oil ended second quarter with
ADJUSTMENTS TO NET INCOME: The adjustments to net income for second quarter increased net income by
2Q23 Operations
Marathon Oil's second quarter Eagle Ford production averaged 156,000 net boed, including 81,000 net bopd, with 49 gross Company-operated wells to sales. Bakken production averaged 109,000 net boed, including 68,000 net bopd, with 23 gross Company-operated wells to sales.
INTERNATIONAL: E.G. production averaged 43,000 net boed for second quarter 2023, including 8,000 net bopd. Unit production costs averaged
2023 Guidance
Marathon Oil's originally provided 2023 production guidance ranges remain unchanged with the Company's full year 2023 total Company oil equivalent production trending above the midpoint of guidance. Third quarter total Company oil and oil equivalent production are both expected to be at or above the high end of the annual guidance ranges. No change to the Company's 2023 capital spending guidance range of
The Company's 2023 business plan continues to benchmark at the top of its high-quality E&P peer group, as measured by expected shareholder distribution yield; FCF yield and FCF efficiency; capital efficiency; FCF breakeven; and growth in production per-share.
A slide deck and Quarterly Investor Packet will be posted to the Company's website following this release. On Thursday, August 3, at 9 a.m. ET, the Company will conduct a question-and-answer webcast/call, which will include forward-looking information. The live webcast, replay and all related materials will be available at https://ir.marathonoil.com/.
About Marathon Oil
Marathon Oil (NYSE: MRO) is an independent oil and gas exploration and production (E&P) company focused on four of the most competitive resource plays in the
Media Relations Contact:
Karina Brooks: 713-296-2191
Investor Relations Contacts:
Guy Baber: 713-296-1892
John Reid: 713-296-4380
Non-GAAP Measures
In analyzing and planning for its business, Marathon Oil supplements its use of GAAP financial measures with non-GAAP financial measures, including adjusted net income (loss), adjusted net income (loss) per share, net cash provided by operating activities before changes in working capital (adjusted CFO), free cash flow, adjusted free cash flow, capital expenditures (accrued) and reinvestment rate.
Our presentation of adjusted net income (loss) and adjusted net income (loss) per share is a non-GAAP measure. Adjusted net income (loss) is defined as net income (loss) adjusted for gains or losses on dispositions, impairments of proved and certain unproved properties, changes in our valuation allowance, unrealized derivative gains or losses on commodity and interest rate derivative instruments, effects of pension settlements and curtailments and other items that could be considered "non-operating" or "non-core" in nature. Management believes this is useful to investors as another tool to meaningfully represent our operating performance and to compare Marathon to certain competitors. Adjusted net income (loss) and adjusted net income (loss) per share should not be considered in isolation or as an alternative to, or more meaningful than, net income (loss) or net income (loss) per share as determined in accordance with
Our presentation of adjusted CFO is defined as net cash provided by operating activities adjusted for changes in working capital and is a non-GAAP measure. Management believes this is useful to investors as an indicator of Marathon's ability to generate cash quarterly or year-to-date by eliminating differences caused by the timing of certain working capital items. Adjusted CFO should not be considered in isolation or as an alternative to, or more meaningful than, net cash provided by operating activities as determined in accordance with
Our presentation of free cash flow is a non-GAAP measure. Free cash flow is defined as net cash provided by operating activities and cash additions to property, plant and equipment. Management believes this is useful to investors as a measure of Marathon's ability to fund its capital expenditure programs, service debt, and fund other distributions to stockholders. Free cash flow should not be considered in isolation or as an alternative to, or more meaningful than, net cash provided by operating activities as determined in accordance with
Our presentation of adjusted free cash flow is a non-GAAP measure. Adjusted free cash flow before dividend ("adjusted free cash flow") is defined as adjusted CFO, capital expenditures (accrued), and EG return of capital and other financing. Management believes this is useful to investors as a measure of Marathon's ability to fund its capital expenditure programs, service debt, and fund other distributions to stockholders. Adjusted free cash flow should not be considered in isolation or as an alternative to, or more meaningful than, net cash provided by operating activities as determined in accordance with
Our presentation of capital expenditures (accrued) is a non-GAAP measure. Capital expenditures (accrued) is defined as cash additions to property, plant and equipment adjusted for the change in capital accrual and additions to other assets. Management believes this is useful to investors as an indicator of Marathon's commitment to capital expenditure discipline by eliminating differences caused by the timing of capital accrual and other items. Capital expenditures (accrued) should not be considered in isolation or as an alternative to, or more meaningful than, cash additions to property, plant and equipment as determined in accordance with
Our presentation of reinvestment rate is a non-GAAP measure. The reinvestment rate in the context of adjusted free cash flow is defined as capital expenditures (accrued) divided by adjusted CFO. The reinvestment rate in the context of free cash flow is defined as cash additions to property, plant and equipment divided by net cash provided by operating activities. Management believes the reinvestment rate is useful to investors to demonstrate the Company's commitment to generating cash for use towards investor-friendly purposes (which includes balance sheet enhancement, base dividend and other return of capital).
These non-GAAP financial measures reflect an additional way of viewing aspects of the business that, when viewed with GAAP results may provide a more complete understanding of factors and trends affecting the business and are a useful tool to help management and investors make informed decisions about Marathon Oil's financial and operating performance. These measures should not be considered in isolation or as an alternative to their most directly comparable GAAP financial measures. A reconciliation to their most directly comparable GAAP financial measures can be found in our investor package on our website at https://ir.marathonoil.com/ and in the tables below. Marathon Oil strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure.
Forward-looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, including without limitation statements regarding: the Company's future capital budgets and allocations; future performance (both absolute and relative); expected free cash flow; reinvestment rates; returns to investors (including dividends and share repurchases, and the timing thereof); business strategy; capital expenditure guidance; production guidance; E.G. equity method income guidance; future E.G. earnings, cash flow and cash dividends (and the timing thereof); expected shareholder distribution yield; FCF yield and FCF efficiency; capital efficiency; FCF breakeven; growth in production per-share and other statements regarding management's plans and objectives for future operations, are forward-looking statements. Words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "future," "guidance," "intend," "may," "outlook," "plan," "positioned," "project," "seek," "should," "target," "will," "would," or similar words may be used to identify forward-looking statements; however, the absence of these words does not mean that the statements are not forward-looking. While the Company believes its assumptions concerning future events are reasonable, a number of factors could cause actual results to differ materially from those projected, including, but not limited to: conditions in the oil and gas industry, including supply/demand levels for crude oil and condensate, NGLs and natural gas and the resulting impact on price; changes in expected reserve or production levels; changes in political or economic conditions in the
Consolidated Statements of Income (Unaudited) | Three Months Ended | ||
Jun. 30 | Mar. 31 | Jun. 30 | |
(In millions, except per share data) | 2023 | 2023 | 2022 |
Revenues and other income: | |||
Revenues from contracts with customers | $ 1,484 | $ 1,567 | $ 2,168 |
Net gain (loss) on commodity derivatives | 3 | 15 | (27) |
Income from equity method investments | 22 | 80 | 152 |
Net gain (loss) on disposal of assets | — | 5 | (1) |
Other income | 4 | 13 | 11 |
Total revenues and other income | 1,513 | 1,680 | 2,303 |
Costs and expenses: | |||
Production | 214 | 201 | 164 |
Shipping, handling and other operating | 161 | 162 | 191 |
Exploration | 11 | 15 | 8 |
Depreciation, depletion and amortization | 559 | 520 | 436 |
Impairments | — | — | 2 |
Taxes other than income | 43 | 95 | 140 |
General and administrative | 71 | 82 | 68 |
Total costs and expenses | 1,059 | 1,075 | 1,009 |
Income from operations | 454 | 605 | 1,294 |
Net interest and other | (92) | (82) | (54) |
Other net periodic benefit credits | 3 | 3 | 5 |
Income before income taxes | $ 365 | $ 526 | $ 1,245 |
Provision for income taxes | 78 | 109 | 279 |
Net income | $ 287 | $ 417 | $ 966 |
Adjusted Net Income | |||
Net income | $ 287 | $ 417 | $ 966 |
Adjustments for special items (pre-tax): | |||
Net (gain) loss on disposal of assets | — | (5) | 1 |
Proved property impairments | — | — | 2 |
Exploratory dry well costs, unproved property impairments and other | 5 | 10 | — |
Pension settlement | — | 1 | — |
Unrealized (gain) loss on commodity derivatives | 4 | (2) | (43) |
Unrealized loss on interest rate swaps | — | — | 1 |
Acquisition transaction costs | — | 1 | — |
Other | 1 | (1) | (2) |
Provision (benefit) for income taxes related to special items(a) | (2) | (1) | 9 |
Adjustments for special items | 8 | 3 | (32) |
Adjusted net income(b) | $ 295 | $ 420 | $ 934 |
Per diluted share: | |||
Net income | $ 0.47 | $ 0.66 | $ 1.37 |
Adjusted net income(b) | $ 0.48 | $ 0.67 | $ 1.32 |
Weighted average diluted shares | 615 | 629 | 705 |
(a) | We applied the estimated |
(b) | Non-GAAP financial measure. See "Non-GAAP Measures" above for further discussion. |
Supplemental Data (Unaudited) | Three Months Ended | ||
Jun. 30 | Mar. 31 | Jun. 30 | |
(Per share) | 2023 | 2023 | 2022 |
Adjusted Net Income Per Diluted Share | |||
Net income | $ 0.47 | $ 0.66 | $ 1.37 |
Adjustments for special items (pre-tax): | |||
Net (gain) loss on disposal of assets | — | (0.01) | — |
Proved property impairments | — | — | — |
Exploratory dry well costs, unproved property impairments and other | 0.01 | 0.02 | — |
Pension settlement | — | — | — |
Unrealized (gain) loss on commodity derivatives | — | — | (0.06) |
Unrealized loss on interest rate swaps | — | — | — |
Acquisition transaction costs | — | — | — |
Other | — | — | — |
Provision (benefit) for income taxes related to special items | — | — | 0.01 |
Adjustments for special items | 0.01 | 0.01 | (0.05) |
Adjusted net income per share(a) | $ 0.48 | $ 0.67 | $ 1.32 |
(a) | Non-GAAP financial measure. See "Non-GAAP Measures" above for further discussion. |
Supplemental Data (Unaudited) | Three Months Ended | ||
Jun. 30 | Mar. 31 | Jun. 30 | |
(In millions) | 2023 | 2023 | 2022 |
Segment income | |||
$ 365 | $ 425 | $ 846 | |
International | 30 | 89 | 160 |
Not allocated to segments | (108) | (97) | (40) |
Net income | $ 287 | $ 417 | $ 966 |
Net operating cash flow before changes in working capital (Adjusted CFO)(a) | |||
Net cash provided by operating activities | $ 1,076 | $ 865 | $ 1,678 |
Changes in working capital | 45 | 77 | (92) |
Adjusted CFO(a) | $ 1,121 | $ 942 | $ 1,586 |
Free cash flow | |||
Net cash provided by operating activities | $ 1,076 | $ 865 | $ 1,678 |
Cash additions to property, plant and equipment | (634) | (532) | (355) |
Free cash flow | $ 442 | $ 333 | $ 1,323 |
Adjusted free cash flow(a) | |||
Adjusted CFO(a) | $ 1,121 | $ 942 | $ 1,586 |
Adjustments: | |||
Capital expenditures (accrued)(a) | (623) | (601) | (375) |
EG return of capital and other financing(b) | 33 | (32) | 2 |
Adjusted free cash flow(a) | $ 531 | $ 309 | $ 1,213 |
Reinvestment rate(a) | 54 % | 66 % | 24 % |
Capital expenditures (accrued)(a) | |||
Cash additions to property, plant and equipment | $ (634) | $ (532) | $ (355) |
Change in capital accrual | 11 | (69) | (20) |
Capital expenditures (accrued)(a) | $ (623) | $ (601) | $ (375) |
(a) | Non-GAAP financial measure. See "Non-GAAP Measures" above for further discussion. |
(b) | Excludes approximately |
Supplemental Statistics (Unaudited) | Three Months Ended | ||
Jun. 30 | Mar. 31 | Jun. 30 | |
Net Production | 2023 | 2023 | 2022 |
Equivalent Production (mboed) | |||
356 | 341 | 283 | |
International | 43 | 55 | 60 |
Total net production | 399 | 396 | 343 |
Oil Production (mbbld) | |||
181 | 176 | 157 | |
International | 8 | 10 | 10 |
Total net production | 189 | 186 | 167 |
Supplemental Statistics (Unaudited) | Three Months Ended | ||
Jun. 30 | Mar. 31 | Jun. 30 | |
2023 | 2023 | 2022 | |
Crude oil and condensate (mbbld) | 181 | 176 | 157 |
Eagle Ford | 81 | 74 | 54 |
Bakken | 68 | 63 | 75 |
9 | 12 | 14 | |
Permian | 21 | 25 | 10 |
Other | 2 | 2 | 4 |
Natural gas liquids (mbbld) | 91 | 78 | 65 |
Eagle Ford | 39 | 33 | 15 |
Bakken | 25 | 18 | 25 |
17 | 17 | 18 | |
Permian | 10 | 10 | 5 |
Other | — | — | 2 |
Natural gas (mmcfd) | 504 | 522 | 365 |
Eagle Ford | 218 | 222 | 90 |
Bakken | 90 | 84 | 81 |
141 | 153 | 146 | |
Permian | 53 | 61 | 31 |
Other | 2 | 2 | 17 |
Total | 356 | 341 | 283 |
International - net sales volumes | |||
Crude oil and condensate (mbbld) | 8 | 11 | 10 |
8 | 11 | 10 | |
Natural gas liquids (mbbld) | 5 | 6 | 7 |
5 | 6 | 7 | |
Natural gas (mmcfd) | 186 | 232 | 256 |
186 | 232 | 256 | |
Total International (mboed) | 44 | 56 | 60 |
Total Company - net sales volumes (mboed) | 400 | 397 | 343 |
Net sales volumes of equity method investees | |||
LNG (mtd) | 1,716 | 2,112 | 2,601 |
Methanol (mtd) | 1,047 | 1,378 | 964 |
Condensate and LPG (boed) | 6,614 | 8,817 | 10,363 |
(a) | Includes sales volumes from certain non-core proved properties in our |
Supplemental Statistics (Unaudited) | Three Months Ended | ||
Jun. 30 | Mar. 31 | Jun. 30 | |
2023 | 2023 | 2022 | |
Crude oil and condensate ($ per bbl)(b) | $ 72.49 | $ 74.69 | $ 110.10 |
Eagle Ford | 71.32 | 73.90 | 110.16 |
Bakken | 73.51 | 75.81 | 110.67 |
73.57 | 73.37 | 108.85 | |
Permian | 73.42 | 75.25 | 108.59 |
Other | 69.34 | 69.23 | 107.15 |
Natural gas liquids ($ per bbl) | $ 18.72 | $ 24.27 | $ 40.32 |
Eagle Ford | 18.01 | 24.36 | 39.90 |
Bakken | 18.00 | 22.45 | 39.29 |
20.99 | 25.95 | 43.28 | |
Permian | 19.39 | 24.39 | 36.88 |
Other | 18.07 | 24.50 | 38.80 |
Natural gas ($ per mcf) | $ 1.89 | $ 2.95 | $ 6.84 |
Eagle Ford | 1.86 | 2.83 | 6.92 |
Bakken | 1.69 | 4.65 | 6.21 |
2.16 | 2.64 | 7.06 | |
Permian | 1.59 | 1.86 | 7.14 |
Other | 2.45 | 3.27 | 7.02 |
International - average price realizations | |||
Crude oil and condensate ($ per bbl) | $ 53.64 | $ 58.57 | $ 79.74 |
53.64 | 58.57 | 79.74 | |
Natural gas liquids ($ per bbl) | $ 1.00 | $ 1.00 | $ 1.00 |
1.00 | 1.00 | 1.00 | |
Natural gas ($ per mcf) | $ 0.24 | $ 0.24 | $ 0.24 |
0.24 | 0.24 | 0.24 | |
Benchmark | |||
WTI crude oil (per bbl) | $ 73.56 | $ 75.99 | $ 108.52 |
Brent ( | $ 78.32 | $ 81.17 | $ 113.54 |
Mont Belvieu NGLs (per bbl)(e) | $ 20.49 | $ 25.33 | $ 41.73 |
Henry Hub natural gas (per mmbtu)(f) | $ 2.10 | $ 3.42 | $ 7.17 |
TTF natural gas (per mmbtu) | $ 11.34 | $ 16.72 | $ 31.64 |
(a) | Excludes gains or losses on commodity derivative instruments. |
(b) | Inclusion of realized gains (losses) on crude oil derivative instruments would have decreased average price realizations by |
(c) | Represents fixed prices under long-term contracts with Alba Plant LLC, Atlantic Methanol Production Company LLC and/or Equatorial |
(d) | Average of monthly prices obtained from Energy Information Administration website. |
(e) | Bloomberg Finance LLP: Y-grade Mix NGL of |
(f) | Settlement date average per mmbtu. |
The following table sets forth outstanding derivative contracts as of July 31, 2023, and the weighted average prices for those contracts:
2023 | |||
Third Quarter | Fourth Quarter | ||
Crude Oil | |||
NYMEX WTI Three-Way Collars | |||
Volume (Bbls/day) | 10,000 | 10,000 | |
Weighted average price per Bbl: | |||
Ceiling | $ 97.59 | $ 97.59 | |
Floor | $ 60.00 | $ 60.00 | |
Sold put | $ 45.00 | $ 45.00 | |
Natural Gas | |||
Henry Hub Three-Way Collars | |||
Volume (MMBtu/day) | 50,000 | 50,000 | |
Weighted average price per MMBtu: | |||
Ceiling | $ 11.14 | $ 11.14 | |
Floor | $ 4.00 | $ 4.00 | |
Sold put | $ 2.50 | $ 2.50 |
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SOURCE Marathon Oil Corporation