HOUSTON, April 8, 2020 /PRNewswire/ -- In response to
current market conditions, Marathon Oil (NYSE: MRO) has announced
an updated 2020 capital spending budget and has also provided a
hedging update. The revised capital budget of $1.3 billion or less represents a cumulative
budget reduction of $1.1 billion from
initial 2020 capital spending guidance. 2020 capital spending is
now expected to be approximately 50% below actual capital spending
in 2019.
In addition to previously announced actions to fully suspend
Resource Play Exploration (REx) and Oklahoma activity, the Company now plans to
suspend further drilling activity in the Northern Delaware, with only a limited number
of wells to sales expected through the balance of the year. The
Company will continue to optimize development plans in the Bakken
and Eagle Ford. The revised 2020 capital budget of $1.3 billion or less includes the implementation
of second quarter frac holidays in the Bakken and Eagle Ford,
before transitioning to a lower and more continuous drilling and
completion program over the second half of 2020 in both Basins.
Marathon Oil retains flexibility to adjust capital spending plans
as necessary in response to a dynamic macro
environment.
"In light of extreme commodity price weakness and anticipated
ongoing demand impacts, we have dramatically reduced activity in
REx, Oklahoma and the Northern Delaware, and plan to take frac
holidays in both the Bakken and Eagle Ford during second quarter.
We're maintaining our returns-first mindset with a focus on
preserving value through the cycle," said Marathon Oil Chairman,
President, and CEO Lee Tillman. "We
believe our high quality, multi-basin portfolio affords us ample
flexibility to swiftly and appropriately respond to changing market
conditions, and we currently expect to transition to a more
continuous but lower level of activity in both the Bakken and Eagle
Ford during the second half of the year. Against a highly volatile
and uncertain environment, these decisive actions are designed
first and foremost to protect our balance sheet and our hard earned
financial strength. We remain investment grade at all primary
rating agencies, with recent reviews by both Fitch and S&P, and
maintain a strong liquidity position with no near-term debt
maturities. Our financial strength, high quality portfolio, and
ongoing focus on reducing our cost structure position us well to
navigate this extraordinary time for our industry."
Marathon Oil has also provided a hedging update, with new and
restructured hedges designed to protect near-term crude oil
downside and basis differentials.
Marathon Oil plans to provide a more comprehensive update to its
revised 2020 business plan as part of its first quarter earnings
release in May.
The following table sets forth outstanding derivative contracts
as of April 7, 2020, and the weighted
average prices for those contracts:
|
|
2020
|
|
|
2021
|
|
Crude
Oil
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
|
|
Full
Year
|
|
NYMEX WTI
Three-Way Collars
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
(Bbls/day)
|
|
80,000
|
|
|
—
|
|
|
80,000
|
|
|
80,000
|
|
|
|
—
|
|
|
Weighted average
price per Bbl:
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceiling
|
|
$
|
66.12
|
|
|
|
—
|
|
|
$
|
64.40
|
|
|
$
|
64.40
|
|
|
|
|
—
|
|
|
Floor
|
|
$
|
55.00
|
|
|
|
—
|
|
|
$
|
55.00
|
|
|
$
|
55.00
|
|
|
|
|
—
|
|
|
Sold put
|
|
$
|
47.75
|
|
|
|
—
|
|
|
$
|
48.00
|
|
|
$
|
48.00
|
|
|
|
|
—
|
|
|
NYMEX WTI
Two-Way Collars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
(Bbls/day)
|
|
|
—
|
|
|
|
40,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Weighted average price
per Bbl::
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceiling
|
|
|
—
|
|
|
$
|
40.31
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Floor
|
|
|
—
|
|
|
$
|
32.89
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Fixed Price WTI
Swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
(Bbls/day)
|
|
|
—
|
|
|
|
60,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Weighted average price
per Bbl:
|
|
|
—
|
|
|
$
|
30.73
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Basis Swaps -
Argus WTI Midland (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
(Bbls/day)
|
|
15,000
|
|
|
15,000
|
|
|
15,000
|
|
|
15,000
|
|
|
|
—
|
|
|
Weighted average
price per Bbl:
|
|
$
|
(0.94)
|
|
|
$
|
(0.94)
|
|
|
$
|
(0.94)
|
|
|
$
|
(0.94)
|
|
|
|
|
—
|
|
|
Basis Swaps -
NYMEX WTI / ICE Brent (b)
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
(Bbls/day)
|
|
5,000
|
|
|
5,000
|
|
|
5,000
|
|
|
5,000
|
|
|
|
808
|
|
|
Weighted average
price per Bbl:
|
|
$
|
(7.24)
|
|
|
$
|
(7.24)
|
|
|
$
|
(7.24)
|
|
|
$
|
(7.24)
|
|
|
|
$
|
(7.24)
|
|
|
Basis Swaps -
NYMEX WTI / MEH (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
(Bbls/day)
|
|
|
—
|
|
|
|
26,813
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Weighted average
price per Bbl:
|
|
|
—
|
|
|
$
|
(0.75)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
NYMEX Roll
Basis Swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
(Bbls/day)
|
|
|
—
|
|
|
|
43,571
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Weighted average
price per Bbl:
|
|
|
—
|
|
|
$
|
(1.62)
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Natural
Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Way
Collars
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
(MMBtu/day)
|
|
100,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
Weighted average
price per MMBtu:
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceiling
|
|
$
|
3.32
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Floor
|
|
$
|
2.75
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Sold put
|
|
$
|
2.25
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
(a)
|
The basis
differential price is indexed against Argus WTI Midland.
|
(b)
|
The basis
differential price is indexed against Intercontinental Exchange
("ICE") Brent and NYMEX WTI.
|
(c)
|
The basis
differential price is indexed against Argus WTI Houston.
|
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 spending budgets
and allocations (including development capital budget and resource
play leasing and exploration spend), future performance,
corporate-level cash returns on invested capital, business
strategy, asset quality, drilling plans, production guidance, cash
margins, leasing and exploration activities, production, oil growth
and other plans and objectives for future operations, are
forward-looking statements. Words such as "anticipate," "believe,"
"could," "estimate," "expect," "forecast," "guidance," "intend,"
"may," "outlook," "plan," "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 and the resulting impact on price; changes in expected
reserve or production levels; changes in political or economic
conditions in the U.S. and Equatorial
Guinea; changes in foreign currency exchange rates, interest
rates, inflation rates, and global and domestic market conditions;
capital available for exploration and development; risks related to
the Company's hedging activities; well production timing; drilling
and operating risks; availability of drilling rigs, materials and
labor, including the costs associated therewith; difficulty in
obtaining necessary approvals and permits; non-performance by third
parties of contractual obligations; hazards such as weather
conditions, a prolonged health pandemic, acts of war or terrorist
acts and the government or military response thereto;
cyber-attacks; changes in safety, health, environmental, tax and
other regulations, requirements or initiatives, including
initiatives addressing the impact of global climate change,
flaring, or water disposal; other geological, operating and
economic considerations; and the risk factors, forward-looking
statements and challenges and uncertainties described in the
Company's 2019 Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and other public filings and press releases, available at
www.marathonoil.com. Except as required by law, the Company
undertakes no obligation to revise or update any forward-looking
statements as a result of new information, future events or
otherwise.
Media Relations Contacts:
Lee Warren: 713-296-4103
Investor Relations Contacts:
Guy Baber: 713-296-1892
John Reid: 713-296-4380
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SOURCE Marathon Oil Corporation