Marathon Oil Corporation 2013 Analyst Day December 11, 2013
Welcome and Introductions Howard J. Thill Vice President, Corporate, Government & Investor Relations
Agenda December 11, 2013 Analyst Day Welcome and Introductions Howard J. Thill Vice President, Corporate, Government & Investor Relations Overview and Corporate Strategy Lee M. Tillman President & Chief Executive Officer North…
Overview and Corporate Strategy Lee M. Tillman President & Chief Executive Officer
Accelerating US Resource Activity, Marketing North Sea Assets and Approves Additional Share Repurchase Authorization Accelerating Eagle Ford and Bakken rig activity 20% each; 100% rig activity increase planned for Oklahoma Woodford…
We Will be Recognized as the Premier Independent E&P Company by: Living our values Investing in our people Continuous improvement in operating and capital efficiency Driving profitable and sustainable growth Rigorous portfolio…
Strategic Imperatives Uncompromising focus on core values to protect our license to operate and drive business performance Invest in our people to grow and maintain our capabilities and competencies to ensure shareholders access to…
Uncompromising Focus on Core Values To protect our license to operate Differentiated safety performance promotes MRO as partner / operator of choice 3.5 Total Recordable Injury Rate 3.0 Our attitude, actions 2.5 and…
Uncompromising Focus on Core Values To drive business performance Safety and integrity focus captures business value through higher reliability International Operational Excellence Trend* 1.0 10% Unplanned Production Losses…
Invest in our People To grow and maintain our capabilities and competencies Ensuring our shareholders access to the full global opportunity set US Onshore Resource Plays Complex Upstream Developments Offshore / International…
Relentless Pursuit of Operational Efficiency To be recognized as the operator of choice Favorable 2012 cash costs per BOE relative to peer group 2012 Cash Costs 80 20:1 gas to oil ratio 70 60 50 /BOE 40 30 20 10…
Relentless Pursuit of Operational Efficiency To be recognized as the operator of choice Continuous improvement in expense management North America E&P Cash Costs Total E&P Cash Costs 25 25 20 20 15 15 /BOE /BOE 10 10 5…
Relentless Pursuit of Capital Efficiency To be recognized as the developer of choice Accelerating learning curve in capital intensive resource plays 30 Eagle Ford Drilling 25 Spud to TD (Days) 20 15 24 10 18 18 15 15 5 12…
Accelerate Resource Development to Optimize Value Liquids biased production differentiates from peer group MRO Sales through 3Q 2013 70% liquids 900 80% 800 70% 700 60% 600 50% % Liquids MBOED 500 40% 400 30%…
Accelerate Resource Development to Grow Profitable Volumes Robust growth through 2017 Delivering on our 5 7% CAGR target with acceleration of higher margin resource plays offsetting pending Angola exit 750 7% Available for sale…
Accelerate Resource Development to Grow Profitable Volumes Accelerating investment in three high quality resource plays 2014 Rig activity increases 20% Eagle Ford, 20% Bakken and 100% Woodford 200 Woodford Bakken Available for…
Accelerate Resource Development to Replace Reserves Optimization and co-development in resource plays Growing 2P resource through Aggressive pursuit of co-development in downspacing and optimization parallel with main horizons Initial…
Rigorous Portfolio Management To accelerate shareholder value 4.8B in completed / announced sales since 2010 Dispositions 2.7 B Transaction value closed (2010 to date) MM 2010 Angola 32 1,300 2011 Norway Gudrun 85 2011 DJ Basin…
Rigorous Portfolio Management Simplify portfolio while providing higher rate of growth Operated Alvheim Marketing of North Sea assets in 2014 2012 Production 2012 2P Resource 2% 17% 3% 1% 97% Operated Brae 80% Norway UK…
Rigorous Portfolio Management Marketing of North Sea assets in 2014 Production Increases growth rate and 750 accelerates cash flows 500 Simplifies and concentrates MBOED portfolio 250 Timing reflective of asset 0 maturity…
Robust Capital Allocation Funding highest margin opportunities Greater than 60% 2014 CAPEX directed towards high growth resource plays North America E&P Resource Plays 3.6B Woodford 2014 CAPEX 5.9B 7% Eagle Ford 64%…
Quality and Material Resource Capture Focused exploration tailored to well-defined risk criteria Emphasis in four oil-prone areas generating success Proven / Emerging Basins Kurdistan Carbonates Mirawa-1 discovery Oil Prone…
Quality and Material Resource Capture Opportunistic business development a significant contributor and value enhancer Over 50% of 2013 production from three significant business development successes Available For Sale 3Q 2013…
Quality and Material Resource Capture Line of sight on 100% reserve replacement 2013 Estimated reserve replacement ratio 140% 2010 2012 Reserve Replacement Ratio 400 300 Percentage 200 100 0 A B C MRO D E F G H I…
Competitive Shareholder Value Through disciplined long-term focus Disciplined use of capital sourced 2013 Estimated Uses of Capital from strong cash flows: - Organic reinvestments Opportunistic Stock - Quality and material resource…
Investment Case for MRO Living our Values Differentiated safety performance promotes MRO as partner / operator of choice Safety and integrity focus captures business value through high reliability Growing and maintaining our…
North America Lance W. Robertson Vice President, North America Production Operations
Accelerating Activity in Resource Plays to Drive Value Onshore US Accelerating rig activity 20% in 400 Available for Sale Bakken & Eagle Ford; 100% in Oklahoma 100% increase in 2P resource in 300 the 3 growth assets since 2011…
Strong US Onshore Business Delivering Growth and Value Positioned in three high-value, liquids-rich unconventional resource plays Driving well performance Improving cost efficiency Liquids-rich resource plays Growing resource…
Delivering Compelling Liquids Growth Eagle Ford production available for sale Gas 120 NGL Oil 100 80 MBOED 60 40 20 0 2012 2012 2012 2012 2013 2013 2013 2013E 2014E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Annual Marathon…
Completions and Spacing Drives Performance Eagle Ford 2013 wells at 40 & 60 acre spacing exhibit higher IP than wells at 80 - 160 acre spacing 2011 wells at 80-acre and greater spacing 90% of 2013 wells at 60-acre spacing or less…
Growing the Business Through Downspacing Strategic spacing pilots in Eagle Ford Original Design (11 wells) 100,000 Cumulative Oil (BBL) New Design (10 wells) 80,000 Challenger Unit B 7H, 8H& 9H (40 ac) 60,000 Drake Borchers…
Spacing Density Pilots Support Infill Development Eagle Ford high GOR oil High GOR Oil Pilot Results Key Learnings 100% Select areas at 40-acre development Relative Recovery 90% Improved completion efficiency and well 80%…
Spacing Density Pilots Support Infill Development Eagle Ford gas condensate Gas Condensate Pilot Results Key Learnings 100% Developing high value gas condensate at 40-acre Relative Recovery 90% equivalent spacing 80% Improved…
Doubled 2P Resource Base Since Acquisition Eagle Ford Initial 2P Resource Grew 2P well inventory from 900 net 469 net MMBOE to 2,300 net (3,300 gross) Gross EF Well Inventory 51% High GOR oil 160 acre 22% Gas condensate 80 acre…
Accelerating Value Through Increased Pace Eagle Ford Available for Sale Increasing activity by 20% relative 160 to 2013 Increasing from 290 to 340 - 355 gross company operated wells in 120 2014 Moving to 18 rig program MBOED…
Consistently High Performing Wells Relative to Peers Eagle Ford Oil Area Quartile Ranking by 180-day Cum BOE (wells) 100% 3rd & 4th Quartiles 80% 1st & 2nd Quartiles 60% 40% 20% 0% A (18) B (121) MRO C (121) D (87) E (225)…
Operational Excellence & Best-in-Class Drilling Efficiency Eagle Ford Ft/Day TD Continuously improving cycle times 1,500 Competitor Average 1,020 16,483 Average Drill Rate, Ft/Day1 MRO Average 1,450 17,297 Most efficient…
Co-Development of Eagle Ford / Austin Chalk Not Your Fathers Austin Chalk Unconventional Austin Chalk Co-Development Pilot Direct contact with EF reservoir in oil generation window TOC presence = partial self sourcing Lower…
Strong Growth in Low Risk Basin Bakken production available for sale Gas 50 NGL Oil 40 30 MBOED 20 10 0 2012 2012 2012 2012 2013 2013 2013 2013E 2014E 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Annual Marathon Oil Corporation…
Improving Well Results Every Year Bakken Continuously improving well performance across acreage since inception 300% improvement in 180-day cumulative production over the last 5 years 50% increase in EUR over the same period…
Further Stimulation Enhancement in 2013 90-Day cumulative production increased 25% in Bakken 14% Increase New stimulation design drives higher IPs 8% Increase 70 60 Cum 90 Days (MBBL) Cum 90 Days (MBBL) Martin 31-14H 50…
Consistently High Performing Wells Relative to Peers Bakken Quartile Ranking by 180-day Cum BOE (wells) 100% 3rd & 4th Quartile Myrmidon 80% 1st & 2nd Quartile 60% 40% 20% 0% A (17) MRO B (49) C (32) D (28) E (14) F…
Operational Excellence & Best-in-Class Drilling Efficiency Bakken Ft/Day TD Best-in-class across North Dakota in 1,400 Competitor Average 802 20,632 drilling efficiency Average Drill Rate (Ft/day) 1,200 MRO Average 1,425…
High Density Pilot Testing for Enhanced Resource Bakken Spacing pilots in progress Ostlund Spacing Unit Myrmidon 1,500 2,800 BOED Wolding Spacing Unit Four pilot locations in core producing areas 8 wells producing Myrmidon 1,600…
Recompleting Open Hole Wells for Incremental Resource Bakken Recomplete open hole wells to current best practice 100 open hole candidate wells One additional stimulation crew in place Work guided by the first 9 wells which were…
2P Resource Base 80% Increase Since 2011 Bakken YE 2011 2P Resource 345 net MMBOE Grew well inventory from 450 net to 1,300 net over last 2 years (2,300 gross) 370,000 net acres Bakken Three Forks Future growth opportunities to…
Accelerating Value Through Increased Activity Bakken Increasing rig activity 20% relative to Available for Sale 2013 75 Increasing from 73 in 2013 to 75-85 gross MRO-op spuds in 2014 with recompletions of 22 26 gross wells with…
Expanding Liquids-rich Anadarko Woodford Basin Added acreage and horizons Currently hold 180,000 net acres in resource plays across the basin 40% with stacked reservoirs Southern Miss Trend and growing Almost 1.2 BBOE of total…
SCOOP Well Performance Accelerating Oklahoma Activity in 2013 shifted to SCOOP SCOOP Core Acreage Adds in 2013 Focused in condensate & oil windows Davis Trust 1-7H Flowback strategy optimized 30 day IP: 1,027 BOED 53% liquids…
Focused on Operational Efficiency Oklahoma SCOOP Activity 400 Continuously improving cycle times Avg Drill Rate (Ft/day)1 year on year 300 Competitive capital efficiency 200 Increasing activity will further 100…
More Than Doubled 2P Resource Base Since 2011 Oklahoma unconventional resource plays 2011 YE 2P Resource Grew well inventory from 530 to 960 300 net MMBOE net over last 2 years (3,500 gross) 180,000 net acres Woodford Future growth…
Accelerating Value Through Increased Activity Woodford Increasing activity by 100% 50 Available for Sale relative to 2013 Drilling 20 - 25 gross company operated wells in 2014 40 Moving to 4 rig program Increasing growth to 30…
Additional Liquid Growth Opportunities Beyond Woodford Southern Miss Trend Multiple play types 2 wells drilled early results Southern Miss Trend encouraging Vertically stacked with Cana Cana Woodford Woodford Anadarko Basin…
Accelerating Activity in Resource Plays to Drive Value Onshore US Accelerating rig activity 20% in 400 Available for Sale Bakken & Eagle Ford; 100% in Oklahoma 100% increase in 2P resource in 300 the 3 growth assets since 2011…
International and Offshore T. Mitch Little Vice President, International & Offshore Production Operations
Material Source Of Earnings & Cash Flow International Production outlook 2013 1Q 3Q International Production Operations Long-life, reliable assets Liquids weighted, Brent based Norway United Kingdom Total Sales (MBOED): 81…
Stable, Long-Lived Cash Flow with Near-Term Upside Equatorial Guinea World-class integrated gas business Primary B3 Compression project in execution phase Condensate Mid-2016 start-up Oil-prone, near-field exploration upside…
B3 Compression Project on Track for Mid-2016 Startup Equatorial Guinea Alba field Project Highlights Alba B3 model Plan of Development approved by Equatorial Guinea MMIE Continued development and optimization of Alba field…
Near-Field, Oil-Prone Exploration Opportunity Equatorial Guinea block A12, Sub Area B amplitude driven play Total gross resource potential: 500 MMBOE Within multiple prospects MRO operated (65% to 100% WI) 2014 Program targeting…
Performance Continues to Beat Expectations Norway Consistent resource growth Norway Resources 2P Reserves Cumulative Production 400 Byla Development in progress 350 300 Early 2015 start-up Net MMBOE 250 200 Leveraging…
Leveraging Alvheim Infrastructure & Knowledge Norway Byla project 4th subsea tieback to Alvheim FPSO Project highlights 17-mile subsea tie-back to Alvheim Two horizontal production wells One water-injection well Plan of development…
Technology to Drive Further Resource Growth Norway opportunities Attic oil development Gekko opportunity Advanced processing of 3D seismic 100 MMBO gross in place greatly improves subsurface image 4D Seismic acquired to identify…
Exploration Annell R. Bay Vice President, Global Exploration
Focused Strategy Targeting High Impact Oil Renewed global exploration portfolio Actively exploring in 4 proven or emerging oil-prone provinces Focused on expertise Deepwater reservoirs, rift basin deposits, fractured carbonates…
Significant Oil Potential in MRO portfolio Kurdistan Fractured Gulf of Mexico Mesozoic-Permian Subsalt Miocene, Carbonates Paleogene, and 550,000 acres Jurassic Sandstones 500 1,300 MMBOE 500,000 acres Gabon 750 2,250 MMBOE…
Renewed Portfolio Drives 2013 Successes Kurdistan Region of Iraq Mirawa-1 discovery Approved Atrush field development Mirawa and Gabon Atrush Diaman1B discovery Diaman 1-B High bidder as operator on two pre-salt deepwater…
Three Discoveries in World-Class Hydrocarbon Basin Exploration discoveries transitioning towards development in Kurdistan Region of Iraq Underexplored world-class hydrocarbon basin Fractured carbonates 3 Discoveries to date Atrush…
Emerging East Africa Rift Plays Testing multiple impact oil opportunities in Ethiopia and Kenya Tertiary and Cretaceous rift systems Muglad Basin 15 BBO gross resource potential 1,950 MMBO disc Melut Basin 1,780 MMBO disc…
Diaman-1B Confirms Working Hydrocarbon System Emerging deepwater pre-salt play in Gabon Gabon deepwater pre-salt play 12 BBOE gross resource potential Diaba block (MRO 21.25% WI, TOTAL operator) Rabi Kounga Field 3 BBOE unrisked…
Emerging GOM Jurassic Norphlet Oil Play Madagascar well nearing TD Madagascar exploration well Petronius MRO operated, 40% WI Appomattox FPS Farmed down with promote Jurassic Norphlet sandstone Lobster Salt-cored 4-way dip…
High Impact GOM Inboard Paleogene Portfolio 8 Inboard Paleogene prospects 6 MRO operated Petronius Average 60% WI Provides farm down / trade opportunities 2014 Paleogene activity Shenandoah appraisal well Appomattox FPS Key…
Superior Properties of Inboard Paleogene Trend Gulf of Mexico emerging oil play Play characteristics Shenandoah Large structures Bigfoot TLP Channel Laterally extensive, thick sandstones Solomon High net sand to gross thickness…
2014 Program Tests Significant Oil Potential Target 8 to 10 impact wells 2014 J F M A M J J A S O N D Country Well 1Q 2Q 3Q 4Q Kurdistan *Jisik-1 45% WI TD Testing Kenya Sala-1 50% WI Ethiopia Shimela-1 20% WI Ethiopia…
Disciplined Execution Drives Shareholder Value Financial strategy Financial discipline fund capital allocation needs with operating cash flow and portfolio management Disciplined capital allocation robust capital allocation to highest…
Financial Discipline Strong operating cash flows Liquids leveraged cash flow profile 2014 Estimated Operating Cash Flow** Interest 70% of 2014 BOE production tied to Other Expense liquids prices Corporate MRO liquids realizations…
Disciplined Capital Allocation Priorities for cash Value accretive investment opportunities Organic Rigorous portfolio management Investment Focused exploration in emerging basins Resource Opportunistic business development…
Rigorous Portfolio Management Integral to disciplined capital allocation Ongoing asset management Acquisitions 5.6 B Transaction value closed (2010 to date) MM to accelerate shareholder 2011 EF Hilcorp, et. al. 4,500 value 2012…
Strong Balance Sheet Maintain financial strength and flexibility Ample liquidity - 2.7B at September 30, 2013 Cash on hand Revolver - 2.3B available at September 30, 2013 Covenant debt to…
Return Capital to Shareholders Competitive dividends and opportunistic buybacks MRO Dividend per Share Growth Competitive and sustainable dividends to 0.75 shareholders 0.70 Dividend per Share s Dividend growth CAGR 10% since…
Disciplined Execution Drives Shareholder Value Financial strategy summary Financial discipline Disciplined capital allocation Rigorous portfolio management Strong balance sheet Return capital to shareholders The right strategy…
Summary Lee Tillman President & Chief Executive Officer
We Will be Recognized as the Premier Independent E&P Company by: Living our values Investing in our people Continuous improvement in operating and capital efficiency Driving profitable and sustainable growth Rigorous portfolio…
Appendix
Definitions Term Definition 2P Volumes represent most likely deterministic estimates of proved plus probable reserves as defined by the SEC plus volumes with the same technical certainty as 2P proved and probable reserves that are…
Definitions Term Definition BBOE Billions of barrels of oil equivalent BFIT Before federal income tax BHP BHP Billiton Limited BOE Barrels of oil equivalent BOED Barrels of oil equivalent per day BOPD Barrels of oil per…
Definitions Term Definition COP ConocoPhillips CRK Comstock Resources CUM Cumulative CWC Completed well cost DACF Debt adjusted cash flow DST Drill stem test DVN Devon Energy Corporation ECA Encana Corporation E&P…
Definitions Term Definition ERF Enerplus Corporation EROC Eagle Rock Energy Partners EUR Estimated ultimate recoverable FCX Freeport-McMoRan FPSO Floating production, storage and offloading vessel FST Forest Oil…
Definitions Term Definition IP Initial production rate IPO International production operations IRR Internal rate of return km Kilometer KOG Kodiak Oil & Gas Corporation LHC Liquid hydrocarbons LLS Light Louisiana Sweet…
Definitions Term Definition MBBL Thousand barrels MBOE Thousand barrels of oil equivalent MBD Thousand barrels of bitumen per day MBOED Thousand barrels of oil equivalent per day MBOPD Thousand barrels of oil per day MCF Thousand…
Definitions Term Definition MMCFD Million cubic feet equivalent per day MMIE Equatorial Guinea Ministry of Mines, Industry and Energy MNR Ministry of Natural Resources MRO Marathon Oil Corporation MRO-OP Marathon Oil Corporation…
Definitions Term Definition NPV Net present value NPV/I Net present value / Investment OAS Oasis Petroleum OBO Operated by others The business segment through which MROs oil sands mining results are reported; Oil Sands Mining or…
Definitions Term Definition Proved Reserves Proved oil, natural gas and bitumen reserves determined under SEC requirements PVA Penn Virginia Corporation PXD Pioneer Natural Resources QEP QEP Resources Relative NPV Relative net…
Definitions Term Definition STO Santos Limited TAQA Abu Dhabi National Energy Company PJSC TD Target depth TF1 Three Forks 1st Bench TF2 Three Forks 2nd Bench TRIR Total recordable injury rate TLM Talisman Energy Inc. TOC Total…
Definitions Term Definition US United States WLL Whiting Petroleum Corporation WPX WPX Energy WTI West Texas Intermediate crude, type of crude oil used as a benchmark in oil pricing WI Working interest XTO Energy XTO Yrs Year YE…
Relentless Pursuit of Operational Efficiency To be recognized as the operator of choice Favorable 2012 cash costs per BOE relative to peer group 2012 Cash Costs 80 20:1 gas to oil ratio 70 60 50 /BOE 40 30 20 10…
Strong US Business Delivering Growth and Value US Onshore BAKKEN 370,000 net acres Total potential net resource 740 MMBOE MRO-OP WI 85%, OBO WI 10% OKLAHOMA RESOURCE PLAYS 180,000 net acres Total potential net resource 1.2…
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