Marathon Oil Announces 2024 Capital Budget and Reports Fourth Quarter and Full-Year 2023 Results
Delivered
Highlights
-
Returned 41% of adjusted CFO to shareholders in 2023, consistent with Return of Capital Framework
-
Distributed
$1.7 billion to shareholders, representing >12% distribution yield on current market capitalization; includes$417 million of shareholder returns during fourth quarter -
Executed
$1.5 billion of share repurchases, driving 9% reduction to outstanding share count; includes$352 million of share repurchases during fourth quarter - Raised per share base dividend 22% from year-end 2022 level, with no impact to peer-leading post-dividend free cash flow breakeven
-
Distributed
-
Reduced gross debt by
$500 million in 2023, further strengthening investment grade balance sheet; includes$300 million of gross debt reduction during fourth quarter -
Delivered strong full-year 2023 and fourth quarter financial and operational results
-
Full-year 2023 adjusted FCF of
$2.2 billion , including$624 million during fourth quarter - Full-year 2023 oil production of 190,000 net bopd, consistent with midpoint of annual guidance; includes fourth quarter oil production of 189,000 net bopd
- Full-year 2023 oil-equivalent production of 405,000 net boed, consistent with high end of annual guidance; includes fourth quarter oil-equivalent production of 404,000 net boed
-
Full-year 2023 adjusted FCF of
-
Achieved another year of comprehensive safety and environmental excellence
- Reported record annual safety performance, as measured by TRIR1
- Achieved 2025 GHG Intensity reduction goal of 50%2 two years ahead of schedule
- Improved total Company gas capture rate to 99.5%
-
Announced 2024 capital budget that again prioritizes corporate returns, FCF generation, and meaningful return of capital to shareholders
-
Expect
$2.0 billion capital program to deliver 190,000 net bopd at midpoints of respective annual guidance ranges - Expect to return at least 40% of adjusted CFO to shareholders in 2024 under differentiated CFO-driven framework that continues to provide investors with first call on cash flow
-
Expect
"2023 marked another year of impressive delivery against every dimension of our Framework for Success," said chairman, president, and CEO
"Looking to 2024 and beyond," continued
2024 Capital Budget and Guidance
The 2024 program is expected to deliver approximately
More detailed highlights of the 2024 capital program include the following:
- Expect 5% to 10% fewer net wells to sales in 2024 to deliver flat year-on-year total oil production as the Company optimizes well mix to maximize corporate returns and FCF generation
- 2024 well productivity expected to be comparable to 2023, with average lateral length increasing by ~5% and capital efficiency improving
- Capital spending again approximately 60% weighted to first half of year, driving higher production during second half of year
- Approximately 70% of total capital allocated to the Eagle Ford and Bakken
- Higher year-on-year capital spending in the Permian, accounting for majority of remaining Resource Play capital spend
- Modest E.G. capital spend limited to long-lead items in support of up to two potential Alba infill wells in 2025
- Higher year-on-year non-development capital spending, primarily related to environmental and emissions reduction efforts
Return of Capital Overview
During 2023,
While delivering on its Return of Capital Framework in 2023,
For 2024, consistent with its Return of Capital Framework,
4Q23 Operations
The Company brought a total of 32 gross Company-operated wells to sales during fourth quarter, including five wells that came online near the end of December. Additionally, the Company brought a total of 10 joint venture wells to sales during fourth quarter.
INTERNATIONAL: E.G. production averaged 52,000 net boed for fourth quarter, including 9,000 net bopd. Sales volumes averaged 48,000 net boed, including 5,000 net bopd, as the Company was underlifted during the quarter. Unit production costs averaged
Corporate Overview
2023 RESERVES: Year-end 2023 proved reserves totaled 1,320 million barrels of oil equivalent (mmboe), comparable to year-end 2022 proved reserves, despite lower
BALANCE SHEET AND LIQUIDITY:
FOURTH QUARTER ADJUSTMENTS TO NET INCOME: The adjustments to net income for fourth quarter totaled
Safety, Environmental, Social, and Governance Excellence
SAFETY:
ENVIRONMENTAL:
SOCIAL:
GOVERNANCE:
A slide deck and Quarterly Investor Packet will be posted to the Company's website following this release today,
Media Relations Contact:
Investor Relations Contacts:
Footnotes: |
|
1 |
Total recordable incident rate (TRIR) measures combined employee and contractor workforce incidents per 200,000 work hours |
2 |
2025 GHG intensity reduction goal of 50% is relative to 2019 GHG intensity baseline; MRO's 2023 GHG intensity is a preliminary estimate subject to final calculation |
About
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, goodwill and equity method investments, 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, 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, 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, and the timing thereof), growth in per share metrics, balance sheet enhancement, net wells to sales, well productivity, gross debt reduction, unit production costs, distribution yields, business strategy, capital expenditure guidance, production guidance, rig counts, tax assumptions 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 |
Year Ended |
|||
|
|
|
|
|
|
(In millions, except per share data) |
2023 |
2023 |
2022 |
2023 |
2022 |
Revenues and other income: |
|
|
|
|
|
Revenues from contracts with customers |
$ 1,585 |
$ 1,771 |
$ 1,603 |
$ 6,407 |
$ 7,540 |
Net gain (loss) on commodity derivatives |
23 |
1 |
15 |
42 |
(114) |
Income from equity method investments |
45 |
38 |
144 |
185 |
613 |
Net gain (loss) on disposal of assets |
11 |
1 |
(39) |
17 |
(38) |
Other income |
27 |
2 |
10 |
46 |
35 |
Total revenues and other income |
1,691 |
1,813 |
1,733 |
6,697 |
8,036 |
Costs and expenses: |
|
|
|
|
|
Production |
221 |
192 |
181 |
828 |
690 |
Shipping, handling and other operating |
202 |
164 |
158 |
689 |
733 |
Exploration |
13 |
20 |
18 |
59 |
110 |
Depreciation, depletion and amortization |
549 |
583 |
434 |
2,211 |
1,753 |
Impairments |
2 |
— |
3 |
2 |
7 |
Taxes other than income |
112 |
113 |
103 |
363 |
484 |
General and administrative |
72 |
72 |
88 |
297 |
308 |
Total costs and expenses |
1,171 |
1,144 |
985 |
4,449 |
4,085 |
Income from operations |
520 |
669 |
748 |
2,248 |
3,951 |
Net interest and other |
(84) |
(94) |
(60) |
(352) |
(188) |
Other net periodic benefit credits |
4 |
5 |
2 |
15 |
16 |
Income before income taxes |
440 |
580 |
690 |
1,911 |
3,779 |
Provision for income taxes |
43 |
127 |
165 |
357 |
167 |
Net income |
$ 397 |
$ 453 |
$ 525 |
$ 1,554 |
$ 3,612 |
Adjusted Net Income |
|
|
|
|
|
Net income |
$ 397 |
$ 453 |
$ 525 |
$ 1,554 |
$ 3,612 |
Adjustments for special items (pre-tax): |
|
|
|
|
|
Net (gain) loss on disposal of assets |
(11) |
(1) |
39 |
(17) |
38 |
Proved property impairments |
2 |
— |
3 |
2 |
7 |
Exploratory dry well costs, unproved property impairments and other |
4 |
11 |
12 |
30 |
74 |
Pension settlement |
— |
— |
2 |
1 |
2 |
Unrealized (gain) loss on derivative instruments |
(21) |
6 |
(22) |
(13) |
(18) |
Unrealized loss on interest rate swaps |
— |
— |
— |
— |
27 |
Acquisition transaction costs |
— |
1 |
18 |
2 |
18 |
Other |
37 |
— |
(2) |
37 |
46 |
Benefit for income taxes related to special items (a) |
(2) |
(4) |
(12) |
(9) |
(43) |
Valuation allowance |
— |
— |
— |
— |
(685) |
Adjustments for special items |
9 |
13 |
38 |
33 |
(534) |
Adjusted net income (b) |
$ 406 |
$ 466 |
$ 563 |
$ 1,587 |
$ 3,078 |
Per diluted share: |
|
|
|
|
|
Net income |
$ 0.68 |
$ 0.75 |
$ 0.82 |
$ 2.56 |
$ 5.26 |
Adjusted net income (b) |
$ 0.69 |
$ 0.77 |
$ 0.88 |
$ 2.61 |
$ 4.48 |
Weighted average diluted shares |
584 |
604 |
637 |
608 |
687 |
|
|
(a) |
In both 2023 and 2022, we applied the estimated |
(b) |
Non-GAAP financial measure. See "Non-GAAP Measures" above for further discussion. |
Supplemental Data (Unaudited) |
Three Months Ended |
Year Ended |
|||
|
|
|
|
|
|
(Per share) |
2023 |
2023 |
2022 |
2023 |
2022 |
Adjusted Net Income Per Diluted Share |
|
|
|
|
|
Net income |
$ 0.68 |
$ 0.75 |
$ 0.82 |
$ 2.56 |
$ 5.26 |
Adjustments for special items (pre-tax): |
|
|
|
|
|
Net (gain) loss on disposal of assets |
(0.02) |
— |
0.06 |
(0.03) |
0.06 |
Proved property impairments |
— |
— |
— |
— |
0.01 |
Exploratory dry well costs, unproved property impairments and other |
0.01 |
0.01 |
0.02 |
0.05 |
0.11 |
Unrealized (gain) loss on derivative instruments |
(0.03) |
0.01 |
(0.03) |
(0.02) |
(0.03) |
Unrealized loss on interest rate swaps |
— |
— |
— |
— |
0.04 |
Acquisition transaction costs |
— |
— |
0.03 |
— |
0.03 |
Other |
0.05 |
— |
— |
0.05 |
0.06 |
Benefit for income taxes related to special items |
— |
— |
(0.02) |
— |
(0.06) |
Valuation allowance |
— |
— |
— |
— |
(1.00) |
Adjustments for special items |
0.01 |
0.02 |
0.06 |
0.05 |
(0.78) |
Adjusted net income per share (a) |
$ 0.69 |
$ 0.77 |
$ 0.88 |
$ 2.61 |
$ 4.48 |
|
|
(a) |
Non-GAAP financial measure. See "Non-GAAP Measures" above for further discussion. |
Supplemental Data (Unaudited) |
Three Months Ended |
Year Ended |
|||
|
|
|
|
|
|
(In millions) |
2023 |
2023 |
2022 |
2023 |
2022 |
Segment income |
|
|
|
|
|
|
$ 468 |
$ 505 |
$ 510 |
$ 1,763 |
$ 2,740 |
International |
51 |
62 |
129 |
232 |
585 |
Not allocated to segments |
(122) |
(114) |
(114) |
(441) |
287 |
Net income |
$ 397 |
$ 453 |
$ 525 |
$ 1,554 |
$ 3,612 |
|
|
|
|
|
|
Net operating cash flow before changes in working capital (Adjusted CFO)(a) |
|
|
|
|
|
Net cash provided by operating activities |
$ 1,080 |
$ 1,066 |
$ 1,127 |
$ 4,087 |
$ 5,428 |
Changes in working capital |
(100) |
78 |
(23) |
100 |
(18) |
Adjusted CFO(a) |
$ 980 |
$ 1,144 |
$ 1,104 |
$ 4,187 |
$ 5,410 |
|
|
|
|
|
|
Free cash flow |
|
|
|
|
|
Net cash provided by operating activities |
$ 1,080 |
$ 1,066 |
$ 1,127 |
$ 4,087 |
$ 5,428 |
Capital expenditures |
(360) |
(449) |
(344) |
(2,033) |
(1,480) |
Change in capital accrual |
(39) |
(44) |
11 |
(25) |
30 |
Free cash flow |
$ 681 |
$ 573 |
$ 794 |
$ 2,029 |
$ 3,978 |
|
|
|
|
|
|
Adjusted free cash flow(a) |
|
|
|
|
|
Adjusted CFO(a) |
$ 980 |
$ 1,144 |
$ 1,104 |
$ 4,187 |
$ 5,410 |
Adjustments: |
|
|
|
|
|
Capital expenditures |
(360) |
(449) |
(344) |
(2,033) |
(1,480) |
EG return of capital and other financing(b) |
4 |
23 |
3 |
28 |
17 |
Adjusted free cash flow (a) |
$ 624 |
$ 718 |
$ 763 |
$ 2,182 |
$ 3,947 |
Reinvestment rate (a) |
37 % |
38 % |
31 % |
48 % |
27 % |
|
|
(a) |
Non-GAAP financial measure. See "Non-GAAP Measures" above for further discussion. |
(b) |
Excludes approximately |
Supplemental Data (Unaudited) |
2024 Free Cash Flow |
(In millions) |
|
Expected free cash flow(b) |
|
Expected net cash provided by operating activities |
$ 3,900 |
Less: Capital expenditures (at mid-point of annual guidance) |
(2,000) |
Expected free cash flow(b) |
$ 1,900 |
|
|
(a) |
Based upon an |
(b) |
Non-GAAP financial measure. See "Non-GAAP Measures" above for further discussion. |
Supplemental Statistics (Unaudited) |
Three Months Ended |
Year Ended |
|||
|
|
|
|
|
|
Net Production |
2023 |
2023 |
2022 |
2023 |
2022 |
Equivalent Production (mboed) |
|
|
|
|
|
|
352 |
369 |
278 |
355 |
284 |
International |
52 |
52 |
55 |
50 |
59 |
Total net production |
404 |
421 |
333 |
405 |
343 |
Oil Production (mbbld) |
|
|
|
|
|
|
180 |
189 |
156 |
182 |
159 |
International |
9 |
9 |
10 |
8 |
10 |
Total net production |
189 |
198 |
166 |
190 |
169 |
Supplemental Statistics (Unaudited) |
Three Months Ended |
Year Ended |
|||
|
|
|
|
|
|
|
2023 |
2023 |
2022 |
2023 |
2022 |
|
|
|
|
|
|
Crude oil and condensate (mbbld) |
179 |
189 |
156 |
181 |
159 |
|
71 |
80 |
62 |
77 |
57 |
Bakken |
75 |
77 |
59 |
71 |
71 |
|
10 |
9 |
10 |
10 |
12 |
Permian |
21 |
22 |
20 |
21 |
14 |
Other |
2 |
1 |
5 |
2 |
5 |
Natural gas liquids (mbbld) |
86 |
90 |
59 |
87 |
64 |
|
37 |
40 |
14 |
37 |
15 |
Bakken |
26 |
27 |
22 |
24 |
25 |
|
15 |
13 |
15 |
16 |
17 |
Permian |
8 |
10 |
6 |
10 |
5 |
Other |
— |
— |
2 |
— |
2 |
Natural gas (mmcfd) |
520 |
539 |
371 |
521 |
363 |
|
217 |
229 |
93 |
222 |
86 |
Bakken |
101 |
103 |
80 |
94 |
87 |
|
147 |
143 |
143 |
146 |
140 |
Permian |
53 |
61 |
40 |
57 |
34 |
Other |
2 |
3 |
15 |
2 |
16 |
Total |
352 |
369 |
277 |
355 |
284 |
International - net sales volumes |
|
|
|
|
|
Crude oil and condensate (mbbld) |
5 |
11 |
11 |
9 |
10 |
|
5 |
11 |
11 |
9 |
10 |
Natural gas liquids (mbbld) |
6 |
6 |
6 |
5 |
7 |
|
6 |
6 |
6 |
5 |
7 |
Natural gas (mmcfd) |
219 |
217 |
235 |
214 |
252 |
|
219 |
217 |
235 |
214 |
252 |
|
48 |
53 |
56 |
50 |
59 |
|
400 |
422 |
333 |
405 |
343 |
Net sales volumes of equity method investees |
|
|
|
|
|
LNG (mtd) |
1,669 |
1,670 |
1,653 |
1,790 |
2,565 |
Methanol (mtd) |
1,377 |
1,208 |
1,328 |
1,252 |
1,058 |
Condensate and LPG (boed) |
5,705 |
8,264 |
7,540 |
7,344 |
7,969 |
|
|
(a) |
Includes sales volumes from certain non-core proved properties in our |
Supplemental Statistics (Unaudited) |
Three Months Ended |
Year Ended |
|||
|
|
|
|
|
|
|
2023 |
2023 |
2022 |
2023 |
2022 |
|
|
|
|
|
|
Crude oil and condensate ($ per bbl)(b) |
$ 77.28 |
$ 80.90 |
$ 84.29 |
$ 76.42 |
$ 95.58 |
|
76.71 |
79.70 |
84.26 |
75.41 |
95.73 |
Bakken |
77.19 |
81.97 |
84.93 |
77.32 |
96.40 |
|
78.36 |
80.48 |
82.36 |
76.25 |
95.26 |
Permian |
79.05 |
81.86 |
84.21 |
77.35 |
92.25 |
Other |
76.45 |
78.54 |
81.74 |
73.47 |
91.74 |
Natural gas liquids ($ per bbl) |
$ 20.92 |
$ 21.37 |
$ 26.02 |
$ 21.20 |
$ 34.55 |
|
20.12 |
21.60 |
26.47 |
20.89 |
34.12 |
Bakken |
19.29 |
19.24 |
23.17 |
19.52 |
33.80 |
|
25.78 |
24.52 |
30.14 |
24.22 |
37.09 |
Permian |
20.97 |
21.97 |
25.82 |
21.72 |
31.75 |
Other |
21.34 |
18.94 |
24.55 |
20.81 |
33.30 |
Natural gas ($ per mcf)(c) |
$ 2.32 |
$ 2.28 |
$ 4.93 |
$ 2.36 |
$ 6.11 |
|
2.34 |
2.33 |
4.99 |
2.34 |
5.94 |
Bakken |
2.44 |
2.10 |
5.55 |
2.66 |
6.23 |
|
2.49 |
2.35 |
4.95 |
2.41 |
6.27 |
Permian |
1.55 |
2.18 |
3.83 |
1.81 |
5.65 |
Other |
2.82 |
3.03 |
3.96 |
2.88 |
5.89 |
International - average price realizations |
|
|
|
|
|
Crude oil and condensate ($ per bbl) |
$ 47.43 |
$ 64.30 |
$ 59.27 |
$ 57.50 |
$ 68.67 |
|
47.43 |
64.30 |
59.27 |
57.50 |
68.67 |
Natural gas liquids ($ per bbl) |
$ 1.00 |
$ 1.00 |
$ 1.00 |
$ 1.00 |
$ 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 |
0.24 |
0.24 |
0.24 |
0.24 |
Benchmark |
|
|
|
|
|
WTI crude oil (per bbl) |
$ 78.53 |
$ 82.22 |
$ 82.64 |
$ 77.60 |
$ 94.33 |
Brent ( |
$ 83.72 |
$ 86.66 |
$ 88.56 |
$ 82.47 |
$ 100.78 |
Mont Belvieu NGLs (per bbl)(f) |
$ 22.33 |
$ 23.13 |
$ 27.18 |
$ 22.82 |
$ 35.78 |
|
$ 2.88 |
$ 2.55 |
$ 6.26 |
$ 2.74 |
$ 6.64 |
TTF natural gas (per mmbtu) |
$ 13.61 |
$ 10.80 |
$ 37.18 |
$ 13.10 |
$ 40.85 |
|
|
(a) |
Excludes gains or losses on commodity derivative instruments. |
(b) |
Inclusion of realized gains (losses) on crude oil derivative instruments would have had no effect on average price realizations for the fourth quarter 2023, third quarter 2023 and the year ended |
(c) |
Inclusion of realized gains (losses) on natural gas derivative instruments would have increased average price realizations by |
(d) |
Represents fixed prices under long-term contracts with |
(e) |
Average of monthly prices obtained from |
(f) |
|
(g) |
Settlement date average per mmbtu. |
The following table sets forth outstanding derivative contracts as of
|
|
2024 |
||||||
|
|
First Quarter |
|
Second |
|
Third Quarter |
|
Fourth Quarter |
Crude Oil |
|
|
|
|
|
|
|
|
NYMEX WTI Three-Way Collars |
|
|
|
|
|
|
|
|
Volume (Bbls/day) |
|
40,000 |
|
40,000 |
|
20,000 |
|
20,000 |
Weighted average price per Bbl: |
|
|
|
|
|
|
|
|
Ceiling |
|
$ 101.01 |
|
$ 101.01 |
|
$ 101.95 |
|
$ 101.95 |
Floor |
|
$ 66.25 |
|
$ 66.25 |
|
$ 65.00 |
|
$ 65.00 |
Sold put |
|
$ 51.25 |
|
$ 51.25 |
|
$ 50.00 |
|
$ 50.00 |
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