Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
MRO > SEC Filings for MRO > Form 10-Q/A on 7-Aug-2014All Recent SEC Filings

Show all filings for MARATHON OIL CORP

Form 10-Q/A for MARATHON OIL CORP


7-Aug-2014

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
We are a global energy company based in Houston, Texas, with operations in North America, Europe, Africa and the Middle East. We have three reportable operating segments. Each of these segments is organized based upon both geographic location and the nature of the products and services it offers.
• North America E&P - explores for, produces and markets liquid hydrocarbons and natural gas in North America;

• International E&P - explores for, produces and markets liquid hydrocarbons and natural gas outside of North America and produces and markets products manufactured from natural gas, such as LNG and methanol, in Equatorial Guinea ("E.G."); and

• Oil Sands Mining - mines, extracts and transports bitumen from oil sands deposits in Alberta, Canada, and upgrades the bitumen to produce and market synthetic crude oil and vacuum gas oil.

As discussed in Note 5 to the consolidated financial statements, our Angola and Norway businesses are reflected as discontinued operations and are excluded from the International E&P segment in all periods presented. We sold our Angola assets in the first quarter of 2014 and entered into an agreement to sell our Norway business in June 2014 in a transaction expected to close in the fourth quarter of 2014. Assets and liabilities of these businesses are presented as held for sale in the consolidated balance sheets as of December 31, 2013 and June 30, 2014.
Executive Summary
Our net sales volumes from continuing operations for the second quarter and first six months of 2014 averaged 394 thousand barrels of oil equivalent per day ("mboed") and 390 mboed compared to 410 mboed and 418 mboed for the second quarter and first six months of 2013. Since we had no oil liftings from Libya in the second quarter and first six months of 2014 as a result of third-party labor strikes at the Es Sider oil terminal, a more representative comparison is net sales volumes from continuing operations excluding Libya. Excluding Libya, our net sales volumes from continuing operations averaged 361 mboed and 375 mboed for the second quarter and first six months of 2013, representing increases in net sales volume of 9 percent and 4 percent in the second quarter and first six months of 2014. The continued ramp up of production from our U.S. resource plays was the most significant contributor to the 2014 increases when comparing results excluding Libya. Net sales volumes related to the Angola and Norway discontinued operations for the second quarter and first six months of 2014 averaged 70 mboed and 73 mboed compared to 96 mboed and 97 mboed for the second quarter and first six months of 2013, ranging from 15 to 19 percent of total company net sales volumes in those periods.
Net income per diluted share was $0.80 and $2.46 for the second quarter and first six months of 2014, increases of 33 percent and 116 percent over the same periods of 2013, reflecting higher income from our North America E&P and Oil Sands Mining segments driven primarily by higher commodity prices and growth in net sales volumes from our U.S. resource plays. The increase for the first six months of 2014 also reflects the $0.83 per diluted share after-tax gain on the sale of our Angola assets in the first quarter of 2014 and non-cash unproved property impairments on Eagle Ford leases that either expired or that we did not expect to drill or extend in the first quarter of 2013.


Key Operating and Financial Activities
In the second quarter of 2014, notable activities were:
• Increased net income per diluted share to $0.80 compared to $0.60 for the same quarter of 2013

• Increased income from continuing operations per diluted share to $0.53 compared to $0.34 for the same quarter of 2013

• Increased average net sales volumes from the three U.S. resource plays to 170 mboed, up 29 percent from same quarter of last year, with liquid hydrocarbon production up more than 30 percent

• Executed agreements to add approximately 30,000 net acres to our Oklahoma resource position, increasing total net acreage to more than 300,000 net acres

•Recorded 98 percent average operational availability for operated assets
• Reached definitive agreement to sell Norway business for a total transaction value of $2.7 billion; expect to close in the fourth quarter of 2014 with net proceeds of $2.1 billion

• Repurchased approximately 13 million common shares at a cost of $449 million leaving $1.5 billion remaining on the share repurchase authorization

Significant third quarter activity through August 7, 2014 includes:
• Increased quarterly dividend by 11 percent to $0.21 per share


Operations
North America E&P--Production
                                         Three Months Ended June 30,      Six Months Ended June 30,
                                            2014             2013           2014             2013
Net Sales Volumes
Crude Oil and Condensate (mbbld)
Bakken                                            44               35             41               34
Eagle Ford                                        67               50             65               48
Oklahoma resource basins                           2                1              2                1
Other North America                               38               40             36               41
Total Crude Oil and Condensate                   151              126            144              124
Natural Gas Liquids (mbbld)
Bakken                                             3                2              2                2
Eagle Ford                                        16               14             16               13
Oklahoma resource basins                           6                4              5                4
Other North America                                2                2              4                2
Total Natural Gas Liquids                         27               22             27               21
Total Liquid Hydrocarbons (mbbld)
Bakken                                            47               37             43               36
Eagle Ford                                        83               64             81               61
Oklahoma resource basins                           8                5              7                5
Other North America                               40               42             40               43
Total Liquid Hydrocarbons                        178              148            171              145
Natural Gas (mmcfd)
Bakken                                            18               12             17               13
Eagle Ford                                       111               99            109               91
Oklahoma resource basins                          61               48             58               49
Other North America                              104              157            113              175
Total Natural Gas                                294              316            297              328
Equivalent Barrels (mboed)
Bakken                                            50               39             46               38
Eagle Ford                                       102               81             99               76
Oklahoma resource basins                          18               13             17               13
Other North America                               57               68             58               73
Total North America E&P                          227              201            220              200

North America E&P segment average net sales volumes in the second quarter and first six months of 2014 increased 13 percent and 10 percent when compared to the second quarter and first six months of 2013. Net liquid hydrocarbon sales volumes increased 30 thousand barrels per day ("mbbld") and 26 mbbld for the second quarter and first six months of 2014, primarily reflecting continued growth across our three U.S. resource plays, partially offset by natural declines in Gulf of Mexico production. The negative impact of extreme winter weather on availability and completion operations in the first quarter of 2014 is reflected in the smaller increase for the six-month period. Net natural gas sales volumes decreased 7 percent and 9 percent during the same periods due primarily to the cessation of production from operated wells in the Powder River Basin in Wyoming and to the sale of our Alaska assets in January 2013, somewhat offset by increases in associated natural gas production from our U.S. resource plays.
Eagle Ford - Average net sales volumes from Eagle Ford were 102 mboed and 99 mboed in the second quarter and first six months of 2014 compared to 81 mboed and 76 mboed in the same periods of 2013, for increases of 26 percent and 30 percent. Approximately 66 percent of second quarter sales were crude oil and condensate, 16 percent was natural gas liquids ("NGLs") and 18 percent was natural gas.
Enhanced completion design in the Eagle Ford is delivering strong early results. Wells with 180-day cumulative production are yielding on average 25 percent improvement relative to modeled type curves. The pace of execution continued to improve along with the transition to higher density pad drilling, as evidenced by the 55 percent increase in the number of wells brought to sales compared to the first quarter of 2014. During the second quarter of 2014, we reached total depth on 88 gross operated wells and brought 76 gross operated wells to sales compared to 82 reaching total depth and 79 brought to sales in the second quarter of 2013. During the first six months of 2014, we reached total depth on 171 gross operated wells and brought 125 gross operated


wells to sales compared to 158 reaching total depth and 148 brought to sales in the same period of 2013. Our second quarter of 2014 average spud-to-total depth time was 13 days compared to 12 days in the same period of 2013.
We continued our successful delineation of the Austin Chalk/Upper Eagle Ford for co-development with an initial 15,500 net acres now delineated. Nine additional Austin Chalk/Upper Eagle Ford wells are currently being drilled, completed or awaiting first production.
Bakken - Average net sales volumes from the Bakken shale were 50 mboed and 46 mboed in the second quarter and first six months of 2014 compared to 39 mboed and 38 mboed in the same periods of 2013, for increases of 28 percent and 21 percent. Our Bakken production averages approximately 90 percent crude oil, four percent NGLs and six percent natural gas. During the second quarter of 2014, we reached total depth on 19 gross operated wells and brought 19 gross operated wells to sales compared to 22 reaching total depth and 16 brought to sales in the second quarter of 2013. During the first six months of 2014, we reached total depth on 35 gross operated wells and brought 30 gross operated wells to sales compared to 40 reaching total depth and 38 brought to sales in the same period of 2013. Our second quarter average time to drill a well was 17 days spud-to-total depth, compared to 15 days in the same period of 2013. We recompleted eight wells during the second quarter of 2014, and a total of 13 wells in the first six months of 2014, in the Myrmidon and Hector areas. With our continued success in earlier 320-acre spacing pilots, four additional spacing pilots with six Middle Bakken and six Three Forks first bench wells are planned. The first of these new 12-well spacing pilots spud in July, with the remainder planned over the balance of 2014. During the second half of 2014, more than 50 percent of planned Bakken wells will test enhanced completion designs, including elevated proppant volumes, slickwater and hybrid fracs, increased stages and cemented liners.
Oklahoma resource basins - Net sales volumes from the Oklahoma resource basins averaged 18 mboed and 17 mboed in the second quarter and first six months of 2014 compared to 13 mboed in both of the same periods of 2013, for increases of 38 percent and 31 percent. Our Oklahoma resource basins production averaged approximately 44 percent liquid hydrocarbons and 56 percent natural gas for the second quarter of 2014. During the second quarter of 2014, we reached total depth on six gross operated wells and brought four gross SCOOP wells to sales. During the first six months of 2014, we reached total depth on 11 gross operated wells and brought eight gross operated wells to sales.
We continue to test other horizons in Oklahoma, with three operated wells producing in the Southern Mississippi Trend and a second operated Granite Wash horizontal well brought online. Three additional operated wells in the Southern Mississippi Trend are scheduled to spud in the second half of 2014. During the second quarter of 2014, we executed agreements to add approximately 30,000 net acres to our Oklahoma resource position, bringing our overall position to more than 300,000 net acres.
Wyoming - Operated production at the Powder River Basin field ceased in March 2014. Plug and abandonment activities are expected to be completed in the fall of 2014.
North America E&P--Exploration
Gulf of Mexico - A well on the Key Largo prospect, located on Walker Ridge Block 578, is anticipated to spud in the third quarter of 2014 as the first well with a new-build deepwater drillship. We are operator and hold a 60 percent working interest in the prospect.
The second appraisal well on the non-operated Shenandoah prospect was spud in late May 2014 and is still drilling. The well is located on Walker Ridge Block 52, in which we hold a 10 percent working interest.
An exploration well is anticipated to spud in the second half of 2014 on the Perseus prospect, located on Desoto Canyon Block 231. We hold a 30 percent non-operated working interest in the prospect. North America E&P--Acquisitions and Dispositions See Note 5 to the consolidated financial statements for information about these dispositions.


International E&P--Production
                                      Three Months Ended June 30,     Six Months Ended June 30,
                                          2014            2013            2014           2013
Net Sales Volumes
Total Liquid Hydrocarbons (mbbld)
Equatorial Guinea                               31            30               33            34
United Kingdom                                  13            14               13            17
Libya                                            -            45                -            39
Total Liquid Hydrocarbons                       44            89               46            90
Natural Gas (mmcfd)
Equatorial Guinea                              446           401              441           424
United Kingdom(a)                               28            36               29            38
Libya                                            -            24                1            25
Total Natural Gas                              474           461              471           487
Equivalent Barrels (mboed)
Equatorial Guinea                              105            97              107           105
United Kingdom(a)                               18            20               18            23
Libya                                            -            49                -            43
Total International E&P (mboed)                123           166              125           171
Net Sales Volumes of Equity Method
Investees
LNG (mtd)                                    6,624         5,820            6,601         6,301
Methanol (mtd)                                 980           973            1,066         1,191

(a) Includes natural gas acquired for injection and subsequent resale of 5 mmcfd and 8 mmcfd for the second quarters of 2014 and 2013, and 6 mmcfd and 10 mmcfd for the first six months of 2014 and 2013.

International E&P segment average net sales volumes in the second quarter and first six months of 2014 decreased 26 percent and 27 percent when compared to the second quarter and first six months of 2013. We had lower oil sales from Libya in 2014 as a result of on-going third-party labor strikes at the Es Sider oil terminal. Excluding Libya, net sales volumes increased 5 percent in the second quarter of 2014 and decreased 2 percent in the first six months of 2014 compared to the same periods of 2013. The second quarter 2014 net sales volume increase, excluding Libya, is due to increased sales from Equatorial Guinea due to a planned turnaround at the LNG facility during the second quarter of 2013. The net sales volume decrease for the first six months of 2014, excluding Libya, is primarily related to reliability issues at the non-operated U.K. Foinaven field as well as natural production decline within the U.K. Brae fields.
Equatorial Guinea - Average net sales volumes were 105 mboed and 107 mboed in the second quarter and first six months of 2014 compared to 97 mboed and 105 mboed in the same periods of 2013. Second quarter 2014 net sales volumes are higher than in the same quarter of 2013 because sales volumes were impacted by a planned turnaround at the LNG facility in April 2013. Net sales volumes for the first six months of 2014 are only slightly higher because first quarter 2014 sales were impacted by scheduled offshore riser repairs, an unplanned repair at the methanol plant and a planned nine-day partial shut-down at the LNG facility. United Kingdom - Average net sales volumes were 18 mboed in both the second quarter and first six months of 2014 compared to 20 mboed and 23 mboed in the same periods of 2013, with decreases of 10 percent and 22 percent, primarily as a result of reliability issues at the non-operated Foinaven field as well as natural decline within the Brae fields and planned and unplanned maintenance activities that resulted in lower overall operating availability. Planned maintenance activities on the non-operated Forties Pipeline System is expected to impact Brae net sales volumes in the third quarter of 2014.
Libya - Libya's National Oil Corporation in early July 2014 rescinded force majeure associated with the third-party labor strikes at the Es Sider oil terminal. However, liftings have yet to resume and there remains uncertainty around future production and sales levels.


International E&P--Exploration
Kurdistan Region of Iraq - The Jisik-1 exploration well reached total depth in June 2014 on the operated Harir Block. Testing is underway. Following the successful 2013 Mirawa-1 discovery, the Mirawa-2 appraisal well is expected to spud in the third quarter of 2014. We hold a 45 percent operated working interest in the Harir Block.
On the non-operated Sarsang Block, the East Swara Tika-1 exploratory well reached a total depth of approximately 13,000 feet in June 2014 and testing is underway. The co-venturers declared the Swara Tika discovery commercial in May 2014 and filed a field development plan in June. Testing of the Mangesh well was finalized and the well costs were charged to dry well expense in the second quarter of 2014. Due to a contract amendment in April 2014, we hold a 20 percent non-operated working interest in the Sarsang block.
The Chiya Khere-5 development well (formerly Atrush-5), included in the previously approved Atrush development plan, was spud in May 2014 and reached a total depth of approximately 6,900 feet in late June, ahead of schedule and under budget. The well will be tested in early 2015 prior to final completion and tie-in to the phase one production facility as part of the previously approved Atrush development plan. The Atrush-4 development well reached total depth in January 2014. Well testing was completed in April and the well has been suspended as a future producer. We hold a 15 percent non-operated working interest in the Atrush Block.
Kenya - The Sala-1 exploration well was spud in February 2014 on the eastern side of Block 9 and made a natural gas discovery in the second quarter of 2014. The well was drilled to a total depth of approximately 10,000 feet and analysis indicated three zones of interest over a 3,280-foot gross interval which were subsequently drill-stem tested. The Sala-2 appraisal well spud in the third quarter of 2014. We hold a 50 percent non-operated working interest in Block 9 with the option to operate any commercial development.
Ethiopia - Two wells were drilled on the South Omo Block: the Shimela-1 well, which reached total depth in May 2014, and the Gardim-1 well, which reached total depth in July 2014. Neither well encountered commercial hydrocarbons and the well costs were charged to dry well expense in the second quarter of 2014. We hold a 20 percent non-operated interest in the South Omo Block. Early in 2014, we increased our acreage in Ethiopia through a farm-in to the Rift Basin Area Block with 10.5 million gross acres. We hold a 50 percent non-operated working interest in the block with the option to operate if a discovery is made.
Gabon - In late October 2013, we were the high bidder as operator on the G13 deepwater block in the pre-salt play offshore Gabon. Negotiations toward a final production sharing contract are ongoing.
Poland - During the first quarter of 2014, we relinquished our remaining 4 operated concessions to the government.
International E&P--Acquisitions and Dispositions In June 2014, we entered into an agreement to sell our Norway business, including the operated Alvheim floating production, storage and offloading vessel, 10 operated licenses and a number of non-operated licenses on the Norwegian Continental Shelf in the North Sea, with an effective date of January 1, 2014. We expect the transaction to close in the fourth quarter of 2014, pending government and regulatory approvals, with net proceeds of $2.1 billion. The Norway business is excluded from the International E&P segment results and is reported as discontinued operations, average net sales volumes from Norway were 70 mboed in both the second quarter and first six months of 2014 compared to 87 mboed and 88 mboed in the same periods of 2013. The decrease was primarily as the result of water breakthrough, as anticipated, at Volund, as well as natural decline in the remaining fields. Alvheim was also impacted in the first quarter of 2014 by severe winter weather which resulted in eight days of curtailed production. Planned maintenance and system upgrades on the Alvheim floating production, storage and offloading vessel are expected to impact production in the third quarter.
In the first quarter of 2014, we closed the sales of our non-operated 10 percent working interests in the Production Sharing Contracts and Joint Operating Agreements for Angola Blocks 31 and 32 for aggregate proceeds of approximately $2 billion. See Note 5 to the consolidated financial statements for information about these dispositions.
Oil Sands Mining
Our Oil Sands Mining operations consist of a 20 percent non-operated working interest in the AOSP. Our net synthetic crude oil sales volumes were 44 mbbld and 45 mbbld in the second quarter and first six months of 2014 compared to 43 mbbld and 47 mbbld in the same periods of 2013. The six-month period of 2014 was impacted by lower mine reliability and nine days of planned mine maintenance in the first quarter of 2014 and a planned turnaround in the second quarter of 2013.


Market Conditions
Prevailing prices for the crude oil, NGLs and natural gas that we produce
significantly impact our revenues and cash flows. Additional detail on market
conditions, including our average price realizations and benchmarks for crude
oil, NGLs and natural gas relative to our operating segments, follows.
North America E&P
 The following table presents our average price realizations and the related
benchmarks for crude oil, NGLs and natural gas for the second quarter and first
six months of 2014 and 2013.
                                     Three Months Ended June 30,    Six Months Ended June 30,
                                         2014           2013           2014           2013
Average Price Realizations (a)
Crude Oil and Condensate (per bbl)
Bakken                                   $93.08         $88.65         $91.43         $89.89
Eagle Ford                                99.08          99.40          97.65         101.50
Oklahoma resource basins                 101.12          90.51          98.05          90.32
Other North America                       93.45          91.32          91.40          89.31
Total Crude Oil and Condensate            95.95          93.75          94.30          94.20
Natural Gas Liquids (per bbl)
Bakken                                   $45.13         $35.92         $51.04         $38.42
Eagle Ford                                30.20          28.09          33.76          28.12
Oklahoma resource basins                  33.04          27.99          38.21          34.77
Other North America                       54.13          51.05          57.65          53.71
Total Natural Gas Liquids                 34.80          31.72          38.75          33.51
Total Liquid Hydrocarbons (per bbl)
(b)
Bakken                                   $90.47         $85.96         $89.16         $87.23
Eagle Ford                                85.36          83.90          84.78          85.88
Oklahoma resource basins                  52.00          47.05          55.04          49.88
Other North America                       90.45          88.64          88.97          87.02
Total Liquid Hydrocarbons                 86.43          84.51          85.65          85.30
Natural Gas (per mcf)
Bakken                                    $4.12          $4.47          $6.14          $4.02
Eagle Ford                                 4.76           4.17           4.83           3.80
Oklahoma resource basins                   4.57           4.71           5.01           4.13
Other North America                        5.65           4.01           5.35           4.11
Total Natural Gas                          5.00           4.19           5.14           4.02
Benchmarks
West Texas Intermediate ("WTI")
crude oil (per bbl)                     $102.99         $94.17          $100.84         $94.26
Louisiana Light Sweet ("LLS") crude
oil (per bbl)(c)                         105.55         104.77         104.97         107.36
Mont Belvieu NGLs (per bbl) (d)           34.54          31.84          36.42          32.84
Henry Hub natural gas(e) (per
mmbtu)(f)                                  4.67           4.09           4.80           3.71

(a) Excludes gains or losses on derivative instruments.

(b) Inclusion of realized gains on crude oil derivative instruments would have increased average liquid hydrocarbon price realizations by $1.26 and $0.50 per bbl for the second quarter and first six months of 2013. There were no crude oil derivative instruments for the second quarter and first six months of 2014.

(c) Bloomberg Finance LLP: LLS St. James.

(d) Bloomberg Finance LLP: Y-grade Mix NGL of 50% ethane, 25% propane, 10% butane, 5% isobutane and 10% natural gasoline.

(e) Settlement date average.

(f) Million British thermal units.

Crude oil and condensate - The quality and location of our production mix can cause our North America E&P price realizations to differ from the WTI benchmark. Quality - Light sweet crude contains less sulfur and tends to be lighter than sour crude oil so that refining it is less costly and has historically produced higher value products; therefore, light sweet crude is considered of higher quality and has historically sold at a price that approximates WTI or at a . . .

  Add MRO to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for MRO - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.