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Marathon Oil Second Quarter 2021 Results

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   |    Friday,August 06,2021

Marathon Oil Corp. reported its Q2 2021 results.

Marathon reported second quarter 2021 net income of $16 million, or $0.02 per diluted share, which includes the impact of certain items not typically represented in analysts' earnings estimates and that would otherwise affect comparability of results. The adjusted net income was $173 million, or $0.22 per diluted share. Net operating cash flow was $655 million, or $701 million before changes in working capital.


  • Strong financial performance highlighted by $420 million of second quarter free cash flow generation; $863 million of free cash flow generation through first half of 2021
  • Committed to capital discipline with no change to $1 billion 2021 capital expenditure budget; second quarter capital expenditures of $289 million and first half 2021 capital expenditures of $473 million
  • Second quarter oil-equivalent production of 348,000 net boed; raising 2021 full year oil-equivalent production guidance by 5,000 net boed
  • Second quarter oil production of 170,000 net bopd; no change to full year 2021 oil production guidance
  • Raised quarterly base dividend by 25% to 5 cents per share
  • Full redemption of $900 million 2025 maturity in September accelerates $4.0 billion gross debt objective and increases total 2021 gross debt reduction to $1.4 billion; shifting return of capital focus to equity holders and retiring future debt at maturity
  • Raising return of capital target to at least 40% of cash flow from operations to equity holders in a $60/bbl WTI or higher price environment

CEO Lee Tillman said: "I am once again proud of the commitment and dedication of our employees and contractors to deliver outstanding operational results while also achieving top quartile safety performance. The combination of our high-quality multi-basin portfolio, our consistent operational execution, and our commitment to capital discipline has resulted in exceptional financial results, highlighted by over $850 million of free cash flow generation through just the first half of this year. Supported by such strong outcomes, we are raising our quarterly base dividend for the second time this year, accelerating our balance sheet improvement initiatives, and enhancing our return of capital framework. We are increasing our return of capital target to at least 40% of our cash flow from operations, assuming an oil price of $60/bbl WTI or higher, and expect to shift that return to equity holders given the strength of our balance sheet. We continue to believe that our commitment to a transparent and disciplined capital allocation model, ESG excellence, sustainable free cash flow generation, and meaningful return of capital is the best approach to maximizing shareholder value in our industry."

United States (U.S.)

U.S. production averaged 283,000 net barrels of oil equivalent per day (boed) for second quarter 2021. Oil production averaged 159,000 net barrels of oil per day (bopd). U.S. unit production costs were $4.41 per boe for second quarter.

During second quarter, the Company brought a total of 61 gross Company-operated wells to sales in comparison to guidance of approximately 70 wells to sales. In the Eagle Ford, Marathon Oil's second quarter production averaged 91,000 net boed. Oil production averaged 59,000 net bopd on 45 gross Company-operated wells to sales. In the Bakken, production averaged 107,000 net boed, including oil production of 70,000 net bopd. The Company brought 16 gross Company-operated wells to sales in the Bakken. Oklahoma production averaged 54,000 net boed, including oil production of 12,000 net bopd. Northern Delaware production averaged 24,000 net boed, including oil production of 13,000 net bopd.


Equatorial Guinea production averaged 65,000 net boed for second quarter 2021, including 11,000 net bopd of oil. Second quarter sales totaled 65,000 net boed, including 12,000 net bopd of oil. Unit production costs averaged $2.17 per boe. Net income from equity method investees totaled $49 million during second quarter.


Marathon Oil's 2021 capital expenditure guidance of $1 billion remains unchanged.

The Company is raising the midpoint of its 2021 full year U.S. oil-equivalent production guidance by 5,000 net boed. All other full year 2021 production guidance remains unchanged.

Due primarily to continued commodity price strength, the Company is raising its 2021 E.G. equity method income guidance to $180 million to $200 million, an increase of over 70% at the midpoint.


CASH FLOW AND CAPEX: Net cash provided by operations was $655 million during second quarter 2021, or $701 million before changes in working capital. Second quarter capital expenditures totaled $289 million.

FREE CASH FLOW: Marathon Oil generated $420 million of free cash flow during second quarter and $863 million of free cash flow through the first half of 2021.

ADJUSTMENTS TO NET INCOME: The adjustments to net income for second quarter 2021 totaled $157 million, primarily due to the income impact associated with unrealized losses on derivative instruments, miscellaneous asset impairments, and make-whole premium associated with early debt retirement.

Balance Sheet Improvement

Marathon Oil ended second quarter with total liquidity of $4.1 billion, which consisted of an undrawn revolving credit facility of $3.1 billion and $1.0 billion in cash and cash equivalents. The revolving credit facility was recently extended from May 2023 to June 2024. The Company continues to maintain an investment grade credit rating at all three primary rating agencies and recently received an outlook upgrade from stable to positive from Fitch.

In light of continued strong financial performance and significant free cash flow generation, the Company has given irrevocable notice of its intention to fully redeem its $900 million 3.85% Senior Notes Due 2025 with final settlement expected in September of 2021. This transaction will reduce gross debt by $900 million and accelerates the realization of Marathon Oil's previously disclosed absolute gross debt objective of approximately $4.0 billion. The transaction will bring total 2021 gross debt reduction to $1.4 billion and contributes to approximately $50 million of annualized cash interest expense savings. Going forward, the company expects to retire future debt at maturity.

Base Dividend Increase

Subsequent to the end of second quarter, the Company raised its quarterly base dividend, from 4 cents per share to 5 cents per share, the second consecutive quarterly increase to the base dividend.

The Company also updated and enhanced its return of capital framework. Marathon Oil now expects to return at least 40% of its cash flow from operations, assuming a WTI oil price of $60/bbl or higher, and is shifting its return of capital focus to equity holders given the strength of its balance sheet. The company has $1.3 billion of share repurchase authorization outstanding.

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