News Releases

HOUSTON, Nov. 3, 2021 /PRNewswire/ -- Marathon Oil Corporation (NYSE:MRO) reported third quarter 2021 net income of $184 million, or $0.23 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 $310 million, or $0.39 per diluted share. Net operating cash flow was $816 million, or $775 million before changes in working capital.

Highlights

• Strong financial performance highlighted by third quarter free cash flow generation of $478 million; over $1.3 billion of free cash flow generation through third quarter
• Committed to capital discipline with no change to $1 billion 2021 capital expenditure budget; third quarter capital expenditures of $308 million and $781 million of capital expenditures through third quarter
• Third quarter oil-equivalent production of 345,000 net boed, including oil production of 168,000 net bopd; no change to midpoint of 2021 total Company oil or oil-equivalent production guidance
• Total 2021 gross debt reduction of $1.4 billion, including full redemption of $900 million 2025 maturity during third quarter, contributing to $50 million of annualized cash interest expense savings; going forward, expect to retire future debt at maturity
• Raised quarterly base dividend for third consecutive quarter to $0.06 per share representing cumulative 100% increase since year-end 2020
• Executed $200 million of share repurchases since October 1^st and targeting approximately $500 million of total share repurchases during fourth quarter
• Fourth quarter return of capital to equity holders, inclusive of base dividend and share repurchases, expected to exceed minimum target of 40% of cash flow from operations
• Board of Directors approved share repurchase authorization increase to $2.5 billion

"Third quarter was once again characterized by both strong safety performance and an improving GHG emissions trend," said Chairman, President, and CEO Lee Tillman. "Additionally, through our commitment to capital discipline and our differentiated execution, we are delivering outsized financial outcomes, highlighted by over $1.3 billion of year-to-date free cash flow generation. This strong financial performance in combination with the substantial improvement to our balance sheet has enabled us to dramatically accelerate the return of capital to equity holders. Consistent with our framework, the shareholder will get the first call on cash flow. We've raised our base dividend for the third consecutive quarter, we've repurchased $200 million of stock since October 1^st, and we are targeting approximately $300 million of additional repurchases before year-end. Through our increased base dividend and share repurchases, we expect to return around 50% of our fourth quarter cash flow from operations to our equity holders. Looking ahead to 2022, with our commitment to capital discipline firmly in place, no material debt maturities, and our upsized share repurchase authorization, we are well positioned to continue delivering outsized free cash flow generation and return of capital to our shareholders."

United States (U.S.)
U.S. production averaged 284,000 net barrels of oil equivalent per day (boed) for third quarter 2021 with sales of 281,000 net barrels of oil equivalent per day. Oil production averaged 157,000 net barrels of oil per day (bopd) with sales of 154,000 net barrels of oil per day. The difference between production and sales, as previously disclosed, was due to pipeline linefill in the Bakken related to the DAPL expansion, which was largely completed during third quarter. The Company brought a total of 63 gross Company-operated wells to sales during third quarter. U.S. unit production costs were $4.59 per boe for third quarter.

Marathon Oil's third quarter production in the Eagle Ford averaged 95,000 net boed, including 60,000 net bopd of oil, with 29 gross Company-operated wells to sales. In the Bakken, production averaged 107,000 net boed, including 71,000 net bopd of oil, with 27 gross Company-operated wells to sales. This compares to Bakken sales volumes of 103,000 net boed, including 68,000 net bopd of oil, with the difference between production and sales due to pipeline linefill related to the DAPL expansion. In Oklahoma, production averaged 55,000 net boed, including 12,000 net bopd of oil, with 4 gross Company-operated wells to sales. Northern Delaware production averaged 21,000 net boed, including 11,000 net bopd of oil, with 3 gross Company-operated wells to sales.

Marathon Oil has completed its 2021 Resource Play Exploration (REx) drilling program, which was focused on the continued delineation of its contiguous 50,000 net acreage position in the Texas Delaware Oil Play. The Company recently brought online its first multi-well pad in the play, with initial production rates in both the Woodford and Meramec exceeding pre-drill expectations. Marathon Oil has now brought online a total of 9 successful wells (6 Woodford, 3 Meramec) in this new play.

International
Equatorial Guinea production averaged 61,000 net boed for third quarter 2021, including 11,000 net bopd of oil. Unit production costs averaged $2.17 per boe. Net income from equity method investees totaled $86 million during third quarter, with cash dividends received during third quarter of $47 million.

Guidance
Marathon Oil's 2021 capital expenditure guidance of $1 billion remains unchanged, as do the midpoints of full year 2021 total Company oil and oil-equivalent production guidance.

Marathon Oil is raising its full year 2021 Equatorial Guinea equity method income guidance for the second consecutive quarter to a new range of $235 million to $255 million.

The Company's full year 2021 production and Equatorial Guinea equity method income guidance fully contemplate an unplanned outage experienced in Equatorial Guinea late in the third quarter. Normal operations resumed this week.

During fourth quarter, Marathon Oil expects total oil production to increase to between 176,000 and 180,000 net bopd in comparison to third quarter production of 168,000 net bopd. The Company expects fourth quarter total oil-equivalent production to be similar to third quarter production of 345,000 net boed. 

Corporate
CASH FLOW AND CAPEX: Net cash provided by operations was $816 million during third quarter 2021, or $775 million before changes in working capital. Third quarter capital expenditures totaled $308 million, representing the peak capital expenditure quarter for the year.

FREE CASH FLOW: Marathon Oil generated $478 million of free cash flow during third quarter and over $1.3 billion of free cash flow year-to-date through third quarter 2021.

ADJUSTMENTS TO NET INCOME: The adjustments to net income for third quarter 2021 totaled $126 million, primarily due to make-whole premium associated with early debt retirement, miscellaneous asset impairments, and the income impact associated with unrealized gains on derivative instruments.

Balance Sheet Improvement
During third quarter, the Company fully redeemed the $900 million 3.85% Senior Notes Due 2025. This transaction accelerated the realization of Marathon Oil's previously disclosed absolute gross debt objective of approximately $4.0 billion. Total gross debt reduction in 2021 has amounted to $1.4 billion and is expected to contribute to approximately $50 million of annualized cash interest expense savings. Going forward, the Company expects to retire future debt at maturity. Marathon Oil has no material maturities due in 2022.

Marathon Oil ended third quarter with total liquidity of $3.6 billion, which consisted of an undrawn revolving credit facility of $3.1 billion and $0.5 billion in cash and cash equivalents. The Company continues to maintain an investment grade credit rating at all three primary rating agencies.

Base Dividend Increase and Return of Capital Update
Subsequent to the end of third quarter, the Company raised its quarterly base dividend by 20% from 5 cents per share to 6 cents per share. This is the third consecutive quarterly increase to the base dividend, representing a cumulative increase of 100% since the end of 2020.

Since October 1st, Marathon Oil has executed $200 million of share repurchases and is targeting approximately $300 million of additional share repurchases before year-end for total fourth quarter share repurchases of approximately $500 million. Marathon Oil expects its total fourth quarter return of capital to equity holders, inclusive of the base dividend and share repurchases, to equate to approximately 50% of cash flow from operations.

The Company's Board of Directors approved an increase in total share repurchase authorization to $2.5 billion.

A slide deck and Quarterly Investor Packet will be posted to the Company's website following this release today, November 3. On Thursday, November 4, at 9:00 a.m. ET, the Company will conduct a question and answer webcast/call, which will include forward-looking information. The live webcast, replay and all related materials will be available at https://ir.marathonoil.com/.

Non-GAAP Measures 
In analyzing and planning for its business, Marathon Oil supplements its use of GAAP financial measures with non-GAAP financial measures, including adjusted net income (loss), adjusted net income (loss) per share, free cash flow, net cash provided by operations before changes in working capital and total capital expenditures.

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/losses on dispositions, impairments of proved and certain unproved properties, goodwill and equity method investments, certain exploration expenses relating to a strategic decision to exit conventional exploration, unrealized derivative gain/loss 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 U.S. GAAP.

Our presentation of free cash flow is a non-GAAP measure. Free cash flow before dividend ("free cash flow") is defined as net cash provided by operating activities adjusted for working capital, 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. 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 U.S. GAAP.

Our presentation of net cash provided by operations before changes in operating working capital is defined as net cash provided by operating activities adjusted for operating 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. Net cash provided by operations before changes in working capital 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 U.S. GAAP.

Our presentation of total capital expenditures is a non-GAAP measure. Total capital expenditures is defined as cash additions to property, plant and equipment adjusted for the change in working capital associated with property, plant and equipment and additions to other assets. Management believes this is useful to investors as an indicator of Marathon's commitment to capital expenditure discipline by eliminating differences caused by the timing of certain working capital and other items. Total capital expenditures should not be considered in isolation or as an alternative to, or more meaningful than, cash additions to property, plant and equipment as determined in accordance with U.S. GAAP.

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 Marathon Oil's financial and operating performance. These measures should not be considered in isolation or as an alternative to their most directly comparable GAAP financial measures. A reconciliation to their most directly comparable GAAP financial measures can be found in our investor package on our website at https://ir.marathonoil.com/ and in the tables below. Marathon Oil strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure.

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 budgets and allocations, future performance, expected free cash flow, future debt retirement and the timing thereof, annualized cash interest expense savings, returns to investors (including dividends and share repurchases, and the timing thereof), business strategy, capital expenditure guidance, production guidance, E.G. equity method income guidance and other 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: 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 U.S. and Equatorial Guinea, including changes in foreign currency exchange rates, interest rates, inflation rates; actions taken by the members of the Organization of the Petroleum Exporting Countries (OPEC) and Russia affecting the production and pricing of crude oil; and other global and domestic political, economic or diplomatic developments; capital available for exploration and development; risks related to the Company's hedging activities; voluntary or involuntary curtailments, delays or cancellations of certain drilling activities; well production timing; liability or corrective actions resulting from litigation or other proceedings and investigations; drilling and operating risks; lack of, or disruption in, access to storage capacity, pipelines or other transportation methods; 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 or legal obligations, including due to bankruptcy; changes in our credit ratings; hazards such as weather conditions, a health pandemic (including COVID-19), acts of war or terrorist acts and the government or military response thereto; security threats, including cybersecurity threats and disruptions to our business and operations from breaches of our information technology systems, or breaches of the information technology systems, facilities and infrastructure of third parties with which we transact business; changes in safety, health, environmental, tax and other regulations, requirements or initiatives, including initiatives addressing the impact of global climate change, air emissions, or water management; other geological, operating and economic considerations; and the risk factors, forward-looking statements and challenges and uncertainties described in the Company's 2020 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other public filings and press releases, available at https://ir.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 Contact:
Stephanie Gentry: 826-206-3746

Investor Relations Contacts:
Guy Baber: 713-296-1892
John Reid: 713-296-4380

The following table sets forth outstanding derivative contracts as of November 1, 2021, and the weighted average prices for those contracts:

SOURCE Marathon Oil Corporation