Marathon Oil Reports Second Quarter 2024 Results
HIGHLIGHTS
- Second quarter free cash flow (FCF) of
$442 million and adjusted FCF of$364 million before changes in working capital and includingEquatorial Guinea (E.G.) distributions and other financing - Total return of capital to shareholders of
$294 million during second quarter - Sequential increase in second quarter production to 191,000 net bopd and 393,000 net boed
- No change to full-year 2024 production and capital expenditure guidance ranges
2Q24 Financial Overview
CASH FLOW: Net cash provided by operations was
RETURN OF CAPITAL: Second quarter return of capital totaled
BALANCE SHEET:
ADJUSTMENTS TO NET INCOME: The adjustments to net income for second quarter totaled
2Q24 Operational Overview
Excluding joint venture wells, the Company brought a total of 99 gross Company-operated wells to sales during second quarter, above the guidance range of 85 to 90 wells due to continued drilling and completion efficiency gains.
Asset |
Production (bopd) |
Production (boed) |
Wells to Sales (Gross) |
|
81,000 |
153,000 |
63 |
Bakken |
67,000 |
107,000 |
17 |
Permian |
26,000 |
47,000 |
19 |
|
7,000 |
42,000 |
0 |
INTERNATIONAL: E.G. production averaged 42,000 net boed during second quarter, including 8,000 net bopd.
The Company continued optimizing its operations by diverting a portion of its Alba gas from AMPCO methanol sales to higher margin LNG sales.
2024 Guidance Overview
2024 Annual Guidance |
High |
Low |
Oil Production (bopd) |
195,000 |
185,000 |
BOE Production (boed) |
400,000 |
380,000 |
Capital Expenditures |
|
|
Earnings Call
Due to the pending merger with ConocoPhillips,
About
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Investor Relations Contacts:
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, 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, net of 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, net of 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 proposed business combination transaction between ConocoPhillips ("ConocoPhillips") and the Company, 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), balance sheet enhancement (including interest savings), capital efficiency, well productivity, receipt of E.G. dividends and the timing thereof, unit production costs, business strategy, capital expenditure guidance, production guidance 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: the risks and uncertainties associated with the proposed transaction between ConocoPhillips and the Company, 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
No Offer or Solicitation
This release is not intended to and shall not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made, except by means of a prospectus meeting the requirements of Section 10 of the
Additional Information about the Merger and Where to Find It
In connection with the proposed transaction, ConocoPhillips has filed with the
Participants in the Solicitation
ConocoPhillips,
Information about the directors and executive officers of Marathon is set forth in (i) Marathon's proxy statement for its 2024 annual meeting of stockholders under the headings "Proposal 1: Election of Directors", "Director Compensation", "Security Ownership of Certain Beneficial Owners and Management", "Compensation Discussion and Analysis", "Executive Compensation" and "Transactions with Related Persons", which was filed with the
Investors should read the definitive proxy statement/prospectus carefully before making any voting or investment decisions.
Consolidated Statements of Income (Unaudited) |
Three Months Ended |
||
|
|
|
|
(In millions, except per share data) |
2024 |
2024 |
2023 |
Revenues and other income: |
|
|
|
Revenues from contracts with customers |
$ 1,666 |
$ 1,538 |
$ 1,484 |
Net gain (loss) on commodity derivatives |
1 |
(24) |
3 |
Income from equity method investments |
26 |
39 |
22 |
Net gain on disposal of assets |
10 |
— |
— |
Other income (expense) |
4 |
(2) |
4 |
Total revenues and other income |
1,707 |
1,551 |
1,513 |
Costs and expenses: |
|
|
|
Production |
216 |
221 |
214 |
Shipping, handling and other operating, including related party of |
175 |
169 |
161 |
Exploration |
14 |
7 |
11 |
Depreciation, depletion and amortization |
577 |
524 |
559 |
Taxes other than income |
103 |
96 |
43 |
General and administrative |
99 |
86 |
71 |
Total costs and expenses |
1,184 |
1,103 |
1,059 |
Income from operations |
523 |
448 |
454 |
Net interest and other |
(80) |
(69) |
(92) |
Other net periodic benefit credits |
2 |
3 |
3 |
Income before income taxes |
$ 445 |
$ 382 |
$ 365 |
Provision for income taxes |
96 |
85 |
78 |
Net income |
$ 349 |
$ 297 |
$ 287 |
|
|
|
|
Adjusted Net Income |
|
|
|
Net income |
$ 349 |
$ 297 |
$ 287 |
Adjustments for special items (pre-tax): |
|
|
|
Net gain on disposal of assets |
(10) |
— |
— |
Exploratory dry well costs, unproved property impairments and other |
4 |
— |
5 |
Unrealized (gain) loss on derivative instruments |
(1) |
24 |
4 |
Merger related costs |
10 |
— |
— |
Other |
8 |
2 |
1 |
Benefit for income taxes related to special items(b) |
(3) |
(6) |
(2) |
Adjustments for special items |
8 |
20 |
8 |
Adjusted net income(c) |
$ 357 |
$ 317 |
$ 295 |
Per diluted share: |
|
|
|
Net income |
$ 0.62 |
$ 0.52 |
$ 0.47 |
Adjusted net income(c) |
$ 0.63 |
$ 0.55 |
$ 0.48 |
Weighted average diluted shares |
567 |
576 |
615 |
(a) |
The related party expense represents compensation to EG LNG for liquefaction, storage and product handling services, pursuant to the agreement that became effective on |
(b) |
In both 2024 and 2023, we applied the estimated |
(c) |
Non-GAAP financial measure. See "Non-GAAP Measures" above for further discussion. |
Supplemental Data (Unaudited) |
Three Months Ended |
||
|
|
|
|
(Per share) |
2024 |
2024 |
2023 |
Adjusted Net Income Per Diluted Share |
|
|
|
Net income |
$ 0.62 |
$ 0.52 |
$ 0.47 |
Adjustments for special items (pre-tax): |
|
|
|
Net gain on disposal of assets |
(0.02) |
— |
— |
Exploratory dry well costs, unproved property impairments and other |
0.01 |
— |
0.01 |
Unrealized (gain) loss on derivative instruments |
— |
0.04 |
— |
Merger related costs |
0.02 |
— |
— |
Other |
0.01 |
— |
— |
Benefit for income taxes related to special items |
(0.01) |
(0.01) |
— |
Adjustments for special items |
0.01 |
0.03 |
0.01 |
Adjusted net income per share(a) |
$ 0.63 |
$ 0.55 |
$ 0.48 |
(a) Non-GAAP financial measure. See "Non-GAAP Measures" above for further discussion. |
Supplemental Data (Unaudited) |
Three Months Ended |
||
|
|
|
|
(In millions) |
2024 |
2024 |
2023 |
Segment income |
|
|
|
|
$ 379 |
$ 334 |
$ 365 |
International |
79 |
82 |
30 |
Not allocated to segments |
(109) |
(119) |
(108) |
Net income |
$ 349 |
$ 297 |
$ 287 |
Net operating cash flow before changes in working capital (Adjusted CFO)(a) |
|
|
|
Net cash provided by operating activities |
$ 1,088 |
$ 757 |
$ 1,076 |
Changes in working capital |
(60) |
104 |
45 |
Adjusted CFO(a) |
$ 1,028 |
$ 861 |
$ 1,121 |
Free cash flow |
|
|
|
Net cash provided by operating activities |
$ 1,088 |
$ 757 |
$ 1,076 |
Capital expenditures |
(665) |
(603) |
(623) |
Change in capital accrual |
19 |
117 |
(11) |
Free cash flow |
$ 442 |
$ 271 |
$ 442 |
Adjusted free cash flow(a) |
|
|
|
Adjusted CFO(a) |
$ 1,028 |
$ 861 |
$ 1,121 |
Adjustments: |
|
|
|
Capital expenditures |
(665) |
(603) |
(623) |
EG return of capital and other(b) |
1 |
(19) |
33 |
Adjusted free cash flow(a) |
$ 364 |
$ 239 |
$ 531 |
Reinvestment rate(a) |
65 % |
72 % |
54 % |
(a) |
Non-GAAP financial measure. See "Non-GAAP Measures" above for further discussion. |
(b) |
Excludes approximately $12 million and |
Supplemental Statistics (Unaudited) |
Three Months Ended |
||
|
|
|
|
Net Production |
2024 |
2024 |
2023 |
Oil Production (mbbld) |
|
|
|
|
183 |
172 |
181 |
International |
8 |
9 |
8 |
Total net production |
191 |
181 |
189 |
Equivalent Production (mboed) |
|
|
|
|
351 |
326 |
356 |
International |
42 |
45 |
43 |
Total net production |
393 |
371 |
399 |
Supplemental Statistics (Unaudited) |
Three Months Ended |
||
|
|
|
|
|
2024 |
2024 |
2023 |
|
|
|
|
Crude oil and condensate (mbbld) |
183 |
172 |
181 |
|
81 |
65 |
81 |
Bakken |
67 |
68 |
68 |
Permian |
26 |
28 |
21 |
|
7 |
10 |
9 |
Other |
2 |
1 |
2 |
Natural gas liquids (mbbld) |
85 |
75 |
91 |
|
37 |
31 |
39 |
Bakken |
23 |
21 |
25 |
Permian |
11 |
10 |
10 |
|
14 |
13 |
17 |
Natural gas (mmcfd) |
500 |
477 |
504 |
|
211 |
188 |
218 |
Bakken |
99 |
94 |
90 |
Permian |
61 |
59 |
53 |
|
128 |
134 |
141 |
Other |
1 |
2 |
2 |
Total |
351 |
326 |
356 |
International (E.G) - net sales volumes |
|
|
|
Crude oil and condensate (mbbld) |
5 |
11 |
8 |
Natural gas liquids (mbbld) |
5 |
6 |
5 |
Total Natural gas (mmcfd) |
191 |
156 |
186 |
Natural gas, sold as gas (mmcfd)(b) |
82 |
78 |
186 |
Natural gas, sold as LNG (mmcfd)(c) |
109 |
78 |
— |
|
42 |
43 |
44 |
|
393 |
369 |
400 |
Net sales volumes of equity method investees |
|
|
|
LNG (mtd)(d) |
— |
388 |
1,716 |
Methanol (mtd) |
954 |
935 |
1,047 |
Condensate and LPG (boed) |
5,998 |
7,630 |
6,614 |
(a) |
Includes sales volumes from certain non-core proved properties in our |
(b) |
In 2023, the purchasers were primarily our equity method investees EG LNG and AMPCO, in addition to natural gas sold for local electricity generation. In 2024, the purchaser is primarily AMPCO, with continuing sales for local electricity generation. |
(c) |
Beginning |
(d) |
LNG sales from equity method investees in 2024 represents final residual volumes sold under the contract terms in place prior to |
Supplemental Statistics (Unaudited) |
Three Months Ended |
||
|
|
|
|
|
2024 |
2024 |
2023 |
|
|
|
|
Crude oil and condensate ($ per bbl) |
$ 79.12 |
$ 75.39 |
$ 72.49 |
|
78.69 |
74.70 |
71.32 |
Bakken |
79.11 |
75.04 |
73.51 |
Permian |
80.47 |
78.24 |
73.42 |
|
79.45 |
74.52 |
73.57 |
Other |
77.79 |
73.23 |
69.34 |
Natural gas liquids ($ per bbl) |
$ 21.18 |
$ 22.24 |
$ 18.72 |
|
20.24 |
20.97 |
18.01 |
Bakken |
21.24 |
21.34 |
18.00 |
Permian |
21.16 |
22.63 |
19.39 |
|
23.54 |
26.29 |
20.99 |
Other |
22.48 |
20.62 |
18.07 |
Natural gas ($ per mcf) |
$ 1.42 |
$ 1.97 |
$ 1.89 |
|
1.62 |
1.93 |
1.86 |
Bakken |
1.22 |
1.82 |
1.69 |
Permian |
0.31 |
1.36 |
1.59 |
|
1.77 |
2.40 |
2.16 |
Other |
2.23 |
2.79 |
2.45 |
International (E.G) - average price realizations |
|
|
|
Crude oil and condensate ($ per bbl) |
$ 57.31 |
$ 61.86 |
$ 53.64 |
Natural gas liquids ($ per bbl)(b) |
$ 1.00 |
$ 1.00 |
$ 1.00 |
Average total natural gas ($ per mcf) |
$ 4.96 |
$ 3.71 |
$ 0.24 |
Natural gas, sold as gas ($ per mcf)(c) |
0.24 |
0.24 |
0.24 |
Natural gas, sold as LNG ($ per mcf)(d) |
8.52 |
7.21 |
— |
Benchmark |
|
|
|
WTI crude oil (per bbl) |
$ 80.66 |
$ 76.91 |
$ 73.56 |
Brent ( |
$ 84.65 |
$ 83.00 |
$ 78.32 |
Mont Belvieu NGLs (per bbl)(f) |
$ 22.91 |
$ 23.67 |
$ 20.49 |
|
$ 1.89 |
$ 2.24 |
$ 2.10 |
TTF ( |
$ 9.98 |
$ 8.79 |
$ 11.34 |
JKM natural gas (per mmbtu)(i) |
$ 11.10 |
$ 9.50 |
$ 11.12 |
(a) |
Excludes gains or losses on commodity derivative instruments. |
(b) |
Represents fixed prices under a long-term contract with |
(c) |
Represents fixed prices under long-term contracts. In 2023, the purchasers were primarily our equity method investees EG LNG and AMPCO, in addition to sales for local electricity generation. In 2024, the purchaser is primarily AMPCO, with continuing sales for local electricity generation. |
(d) |
Represents prices realized for sales of LNG to third party customers beginning in 2024, indexed to global LNG prices. |
(e) |
Average of monthly prices obtained from |
(f) |
|
(g) |
Settlement date average per mmbtu. |
(h) |
Average of monthly prices obtained from NYMEX Exchange (expressed in $). |
(i) |
Average of monthly prices obtained from |
The following table sets forth outstanding derivative contracts as of
|
2024 |
2025 |
||||
|
Third |
Fourth |
First |
Second |
Third |
Fourth |
Crude Oil |
|
|
|
|
|
|
NYMEX WTI Three-Way Collars |
|
|
|
|
|
|
Volume (Bbls/day) |
50,000 |
50,000 |
— |
— |
— |
— |
Weighted average price per Bbl: |
|
|
|
|
|
|
Ceiling |
$ 95.95 |
$ 95.95 |
$ — |
$ — |
$ — |
$ — |
Floor |
$ 65.00 |
$ 65.00 |
$ — |
$ — |
$ — |
$ — |
Sold put |
$ 50.00 |
$ 50.00 |
$ — |
$ — |
$ — |
$ — |
Natural Gas |
|
|
|
|
|
|
Henry Hub Two-Way Collars |
|
|
|
|
|
|
Volume (MMBtu/day) |
— |
— |
150,000 |
150,000 |
150,000 |
150,000 |
Weighted average price per MMBtu |
|
|
|
|
|
|
Ceiling |
$ — |
$ — |
$ 5.85 |
$ 5.85 |
$ 5.85 |
$ 5.85 |
Floor |
$ — |
$ — |
$ 2.50 |
$ 2.50 |
$ 2.50 |
$ 2.50 |
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