Marathon Oil (MRO) reported second quarter earnings in line with analyst expectations, at $0.56 per share, buoyed by rapidly increasing production. However, the rapid rise will be tapering off in the near future as Marathon attempts to keep its spending within revenues, rather than following the example of firms like Encana (ECA) and Chesapeake Energy (CHK), which are outstripping earnings in a desperate attempt to keep oil production growing. This more level headed approach will help Marathon through the next two years with what I believe will be consistent growth, even if that growth will not be as meteoric as seen in the past.
Marathon CEO Clarence Cazalot Jr. explained the main reason for the anticipated pullback when he indicated that the current oil and gas prices and stable or rising production costs call for “a more disciplined level of domestic spending and activity,” though Marathon expects to meet its production targets for the year. While it is cutting its rig count domestically in line with this outlook, particularly in the Anadarko Woodford Basin and the Bakken Shale, Marathon’s unconventional shale production is beating the company’s expectations, in some cases dramatically. In the Eagle Ford, Marathon increased its second quarter production by 50% over the first quarter, which was a major contributor to its production growth.
Marathon is making moves to shed non-core assets, led by its plans to sell ten of its Cook Inlet fields with net proved reserves totaling 17 mboe to Hilcorp Alaska LLC, a subsidiary of privately owned Hilcorp Energy Company.To continue reading, click here.