Marathon Oil Reports First Quarter 2024 Results
Returned
Highlights
- Continued delivery on sector-leading commitment to return at least 40% of adjusted CFO to shareholders; returned
$349 million or 41% of adjusted CFO to shareholders during first quarter, including$285 million of share repurchases and$64 million base dividend - Strong financial and operational quarter with no change to full-year production or capital spending guidance
- Generated
$271 million of FCF and$239 million of adjusted FCF during first quarter, despite no E.G. cash dividends; expect catch-up in E.G. cash dividends during second quarter - Delivered first quarter oil production of 181,000 net bopd and first quarter oil-equivalent production of 371,000 net boed, inclusive of winter weather downtime, primarily in the Bakken
- Reiterated midpoints of full year production and capital spending guidance and on track to deliver 2024 program that benchmarks at top of peer group on combination of FCF, capital efficiency, and shareholder returns
- Generated
- Enhancing capital efficiency and resource recovery organically through extended laterals and ongoing progression of refrac and redevelopment opportunity set
- Brought online 12 three-mile wells during first quarter, delivered at a total per foot well cost more than 20% below comparable two-mile lateral wells; first three-mile Permian pad achieved an average per well 30-day IP rate of over 5,000 net boed
- Disclosing approximately 600 high-quality refrac and redevelopment opportunities across the Bakken and
Eagle Ford , with approximately 30% concentrated on the acquired Ensign acreage
- Continued to progress development of E.G. Regional Gas Mega Hub
- Realized uplift in value during first quarter from shift to global LNG pricing for Alba LNG sales
- Sanctioned two Alba infill wells with first gas from both wells expected in 2025
- Enhanced financial flexibility through successful offering of
$1.2 billion aggregate principal five and ten-year notes; proceeds used to pay off entirety of remaining variable-rate Term Loan balance and expected to deliver$20 million of annualized net interest savings
"With first quarter results, we continued to build on our multi-year track record of consistent operational execution, strong financial results, and compelling return of capital to our shareholders," said chairman, president, and CEO
Return of Capital & Balance Sheet Enhancement
During first quarter,
Over the trailing ten quarters, since significantly increasing return of capital to equity investors under its current Return of Capital Framework,
During first quarter, the Company successfully completed a public offering of
1Q24 Financials
CASH FLOW AND CAPEX: Net cash provided by operations was
BALANCE SHEET AND LIQUIDITY:
ADJUSTMENTS TO NET INCOME: The adjustments to net income for first quarter increased net income by
1Q24 Operations
First quarter
Excluding joint venture wells, the Company brought a total of 49 gross Company-operated wells to sales during first quarter. First quarter
INTERNATIONAL: During first quarter,
Beginning
Starting in first quarter, the revenue from
During first quarter, E.G. production averaged 45,000 net boed, while total sales volumes averaged 43,000 net boed, as a 2,000 net bopd condensate overlift was more than offset by a 24,000 net mcfd (4,000 net boed) LNG underlift. While
During first quarter,
2024 Guidance
A slide deck and Quarterly Investor Packet will be posted to the Company's website following this release. On
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Non-GAAP Measures
In analyzing and planning for its business,
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, net of capital expenditures and change in capital accrual. 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, net of capital expenditures and EG return of capital and other. 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 reinvestment rate is a non-GAAP measure. The reinvestment rate in the context of adjusted free cash flow is defined as capital expenditures divided by adjusted CFO. The reinvestment rate in the context of free cash flow is defined as capital expenditures 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
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), the timing and cost associated with Alba infill wells and their expected impact to Alba field base decline and production profile, balance sheet enhancement (including interest savings), capital efficiency, well productivity, receipt of E.G. dividends and the timing thereof, unit production costs, business strategy, capital expenditure guidance, production guidance, refrac and redevelopment opportunities, well inventory life, tax guidance 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 |
||
|
|
|
|
(In millions, except per share data) |
2024 |
2023 |
2023 |
Revenues and other income: |
|
|
|
Revenues from contracts with customers |
$ 1,538 |
$ 1,585 |
$ 1,567 |
Net gain (loss) on commodity derivatives |
(24) |
23 |
15 |
Income from equity method investments |
39 |
45 |
80 |
Net gain on disposal of assets |
— |
11 |
5 |
Other income (expense) |
(2) |
27 |
13 |
Total revenues and other income |
1,551 |
1,691 |
1,680 |
Costs and expenses: |
|
|
|
Production |
221 |
221 |
201 |
Shipping, handling and other operating, including related party of |
169 |
202 |
162 |
Exploration |
7 |
13 |
15 |
Depreciation, depletion and amortization |
524 |
549 |
520 |
Impairments |
— |
2 |
— |
Taxes other than income |
96 |
112 |
95 |
General and administrative |
86 |
72 |
82 |
Total costs and expenses |
1,103 |
1,171 |
1,075 |
Income from operations |
448 |
520 |
605 |
Net interest and other |
(69) |
(84) |
(82) |
Other net periodic benefit credits |
3 |
4 |
3 |
Income before income taxes |
$ 382 |
$ 440 |
$ 526 |
Provision for income taxes |
85 |
43 |
109 |
Net income |
$ 297 |
$ 397 |
$ 417 |
Adjusted Net Income |
|
|
|
Net income |
$ 297 |
$ 397 |
$ 417 |
Adjustments for special items (pre-tax): |
|
|
|
Net gain on disposal of assets |
— |
(11) |
(5) |
Proved property impairments |
— |
2 |
— |
Exploratory dry well costs, unproved property impairments and other |
— |
4 |
10 |
Pension settlement |
— |
— |
1 |
Unrealized (gain) loss on derivative instruments |
24 |
(21) |
(2) |
Acquisition transaction costs |
— |
— |
1 |
Other |
2 |
37 |
(1) |
Benefit for income taxes related to special items(b) |
(6) |
(2) |
(1) |
Adjustments for special items |
20 |
9 |
3 |
Adjusted net income(c) |
$ 317 |
$ 406 |
$ 420 |
Per diluted share: |
|
|
|
Net income |
$ 0.52 |
$ 0.68 |
$ 0.66 |
Adjusted net income(c) |
$ 0.55 |
$ 0.69 |
$ 0.67 |
Weighted average diluted shares |
576 |
584 |
629 |
(a) |
The related party expense represents compensation to EG LNG for liquefaction, storage and product handling services, pursuant to the agreement that became effective on |
(b) |
In both 2024 and 2023, we applied the estimated |
(c) |
Non-GAAP financial measure. See "Non-GAAP Measures" above for further discussion. |
Supplemental Data (Unaudited) |
Three Months Ended |
||
|
|
|
|
(Per share) |
2024 |
2023 |
2023 |
Adjusted Net Income Per Diluted Share |
|
|
|
Net income |
$ 0.52 |
$ 0.68 |
$ 0.66 |
Adjustments for special items (pre-tax): |
|
|
|
Net gain on disposal of assets |
— |
(0.02) |
(0.01) |
Exploratory dry well costs, unproved property impairments and other |
— |
0.01 |
0.02 |
Unrealized (gain) loss on derivative instruments |
0.04 |
(0.03) |
— |
Other |
— |
0.05 |
— |
Benefit for income taxes related to special items |
(0.01) |
— |
— |
Adjustments for special items |
0.03 |
0.01 |
0.01 |
Adjusted net income per share(a) |
$ 0.55 |
$ 0.69 |
$ 0.67 |
(a) |
Non-GAAP financial measure. See "Non-GAAP Measures" above for further discussion. |
Supplemental Data (Unaudited) |
Three Months Ended |
||
|
|
|
|
(In millions) |
2024 |
2023 |
2023 |
Segment income |
|
|
|
|
$ 334 |
$ 468 |
$ 425 |
International |
82 |
51 |
89 |
Not allocated to segments |
(119) |
(122) |
(97) |
Net income |
$ 297 |
$ 397 |
$ 417 |
Net operating cash flow before changes in working capital (Adjusted CFO)(a) |
|
|
|
Net cash provided by operating activities |
$ 757 |
$ 1,080 |
$ 865 |
Changes in working capital |
104 |
(100) |
77 |
Adjusted CFO(a) |
$ 861 |
$ 980 |
$ 942 |
Free cash flow |
|
|
|
Net cash provided by operating activities |
$ 757 |
$ 1,080 |
$ 865 |
Capital expenditures |
(603) |
(360) |
(601) |
Change in capital accrual |
117 |
(39) |
69 |
Free cash flow |
$ 271 |
$ 681 |
$ 333 |
Adjusted free cash flow(a) |
|
|
|
Adjusted CFO(a) |
$ 861 |
$ 980 |
$ 942 |
Adjustments: |
|
|
|
Capital expenditures |
(603) |
(360) |
(601) |
EG return of capital and other(b) |
(19) |
4 |
(32) |
Adjusted free cash flow(a) |
$ 239 |
$ 624 |
$ 309 |
Reinvestment rate(a) |
72 % |
37 % |
66 % |
(a) |
Non-GAAP financial measure. See "Non-GAAP Measures" above for further discussion. |
(b) |
Excludes approximately $12 million of debt issuance costs for the first quarter of 2024, and includes tax withholding for employee stock-based compensation of $18 million and $30 million for the first quarter 2024 and 2023, respectively. |
Supplemental Data (Unaudited) |
2024 Free Cash Flow |
(In millions) |
|
Expected free cash flow(b) |
|
Expected net cash provided by operating activities |
$ 4,200 |
Less: Capital expenditures (at mid-point of annual guidance) |
(2,000) |
Expected free cash flow(b) |
$ 2,200 |
(a) |
Based upon an |
(b) |
Non-GAAP financial measure. See "Non-GAAP Measures" above for further discussion. |
Supplemental Statistics (Unaudited) |
Three Months Ended |
||
|
|
|
|
Net Production |
2024 |
2023 |
2023 |
Oil Production (mbbld) |
|
|
|
|
172 |
180 |
176 |
International |
9 |
9 |
10 |
Total net production |
181 |
189 |
186 |
Equivalent Production (mboed) |
|
|
|
|
326 |
352 |
341 |
International |
45 |
52 |
55 |
Total net production |
371 |
404 |
396 |
Supplemental Statistics (Unaudited) |
Three Months Ended |
||
|
|
|
|
|
2024 |
2023 |
2023 |
|
|
|
|
Crude oil and condensate (mbbld) |
172 |
179 |
176 |
|
65 |
71 |
74 |
Bakken |
68 |
75 |
63 |
Permian |
28 |
21 |
25 |
|
10 |
10 |
12 |
Other |
1 |
2 |
2 |
Natural gas liquids (mbbld) |
75 |
86 |
78 |
|
31 |
37 |
33 |
Bakken |
21 |
26 |
18 |
Permian |
10 |
8 |
10 |
|
13 |
15 |
17 |
Other |
— |
— |
— |
Natural gas (mmcfd) |
477 |
520 |
522 |
|
188 |
217 |
222 |
Bakken |
94 |
101 |
84 |
Permian |
59 |
53 |
61 |
|
134 |
147 |
153 |
Other |
2 |
2 |
2 |
Total |
326 |
352 |
341 |
International (E.G) - net sales volumes |
|
|
|
Crude oil and condensate (mbbld) |
11 |
5 |
11 |
Natural gas liquids (mbbld) |
6 |
6 |
6 |
Total Natural gas (mmcfd) |
156 |
219 |
232 |
Natural gas, sold as gas (mmcfd)(b) |
78 |
219 |
232 |
Natural gas, sold as LNG (mmcfd)(c) |
78 |
— |
— |
|
43 |
48 |
56 |
|
369 |
400 |
397 |
Net sales volumes of equity method investees |
|
|
|
LNG (mtd)(d) |
388 |
1,669 |
2,112 |
Methanol (mtd) |
935 |
1,377 |
1,378 |
Condensate and LPG (boed) |
7,630 |
5,705 |
8,817 |
(a) |
Includes sales volumes from certain non-core proved properties in our |
(b) |
In 2023, the purchasers were primarily our equity method investees EG LNG and AMPCO, in addition to natural gas sold for local electricity generation. In 2024, the purchaser is primarily AMPCO, with continuing sales for local electricity generation. |
(c) |
Beginning |
(d) |
LNG sales from equity method investees in 2024 represents final residual volumes sold under the contract terms in place prior to |
Supplemental Statistics (Unaudited) |
Three Months Ended |
||
|
|
|
|
|
2024 |
2023 |
2023 |
|
|
|
|
Crude oil and condensate ($ per bbl) |
$ 75.39 |
$ 77.28 |
$ 74.69 |
|
74.70 |
76.71 |
73.90 |
Bakken |
75.04 |
77.19 |
75.81 |
Permian |
78.24 |
79.05 |
75.25 |
|
74.52 |
78.36 |
73.37 |
Other |
73.23 |
76.45 |
69.23 |
Natural gas liquids ($ per bbl) |
$ 22.24 |
$ 20.92 |
$ 24.27 |
|
20.97 |
20.12 |
24.36 |
Bakken |
21.34 |
19.29 |
22.45 |
Permian |
22.63 |
20.97 |
24.39 |
|
26.29 |
25.78 |
25.95 |
Other |
20.62 |
21.34 |
24.50 |
Natural gas ($ per mcf)(b) |
$ 1.97 |
$ 2.32 |
$ 2.95 |
|
1.93 |
2.34 |
2.83 |
Bakken |
1.82 |
2.44 |
4.65 |
Permian |
1.36 |
1.55 |
1.86 |
|
2.40 |
2.49 |
2.64 |
Other |
2.79 |
2.82 |
3.27 |
International (E.G) - average price realizations |
|
|
|
Crude oil and condensate ($ per bbl) |
$ 61.86 |
$ 47.43 |
$ 58.57 |
Natural gas liquids ($ per bbl)(c) |
$ 1.00 |
$ 1.00 |
$ 1.00 |
Average total natural gas ($ per mcf) |
$ 3.71 |
$ 0.24 |
$ 0.24 |
Natural gas, sold as gas ($ per mcf)(d) |
0.24 |
0.24 |
0.24 |
Natural gas, sold as LNG ($ per mcf)(e) |
7.21 |
— |
— |
Benchmark |
|
|
|
WTI crude oil (per bbl) |
$ 76.91 |
$ 78.53 |
$ 75.99 |
Brent ( |
$ 83.00 |
$ 83.72 |
$ 81.17 |
Mont Belvieu NGLs (per bbl)(g) |
$ 23.67 |
$ 22.33 |
$ 25.33 |
|
$ 2.24 |
$ 2.88 |
$ 3.42 |
TTF ( |
$ 8.79 |
$ 13.61 |
$ 16.72 |
JKM natural gas (per mmbtu)(j) |
$ 9.50 |
$ 15.83 |
$ 17.98 |
(a) |
Excludes gains or losses on commodity derivative instruments. |
(b) |
Inclusion of realized gains (losses) on natural gas derivative instruments would have increased the average price realizations by |
(c) |
Represents fixed prices under a long-term contract with |
(d) |
Represents fixed prices under long-term contracts. In 2023, the purchasers were primarily our equity method investees EG LNG and AMPCO, in addition to sales for local electricity generation. In 2024, the purchaser is primarily AMPCO, with continuing sales for local electricity generation. |
(e) |
Represents prices realized for sales of LNG to third party customers beginning in 2024, indexed to global LNG prices. |
(f) |
Average of monthly prices obtained from |
(g) |
|
(h) |
Settlement date average per mmbtu. |
(i) |
Average of monthly prices obtained from NYMEX Exchange (expressed in $). |
(j) |
Average of monthly prices obtained from |
The following table sets forth outstanding derivative contracts as of
|
2024 |
2025 |
|||||
|
Second |
Third |
Fourth |
First |
Second |
Third |
Fourth |
Crude Oil |
|
|
|
|
|
|
|
NYMEX WTI Three-Way Collars |
|
|
|
|
|
|
|
Volume (Bbls/day) |
60,000 |
50,000 |
50,000 |
— |
— |
— |
— |
Weighted average price per Bbl: |
|
|
|
|
|
|
|
Ceiling |
$ 97.44 |
$ 95.95 |
$ 95.95 |
$ — |
$ — |
$ — |
$ — |
Floor |
$ 65.83 |
$ 65.00 |
$ 65.00 |
$ — |
$ — |
$ — |
$ — |
Sold put |
$ 50.83 |
$ 50.00 |
$ 50.00 |
$ — |
$ — |
$ — |
$ — |
Natural Gas |
|
|
|
|
|
|
|
Henry Hub Two-Way Collars |
|
|
|
|
|
|
|
Volume (MMBtu/day) |
— |
— |
— |
100,000 |
100,000 |
100,000 |
100,000 |
Weighted average price per MMBtu |
|
|
|
|
|
|
|
Ceiling |
$ — |
$ — |
$ — |
$ 5.77 |
$ 5.77 |
$ 5.77 |
$ 5.77 |
Floor |
$ — |
$ — |
$ — |
$ 2.50 |
$ 2.50 |
$ 2.50 |
$ 2.50 |
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