Marathon Oil

Marathon Oil CompanyMarathon Oil grabbed headlines with its $3.5 billion (almost $25,000 per acre without consideration for production) acquisition of acreage in the Eagle Ford Shale in June of 2011 from Hilcorp Resources. The company was active in the oil window of the play prior to the acquisition and increased its holdings to over 285,000 net acres through the transaction.  At the beginning of 2012, the company had further supplemented its acreage to more than 300,000 acres and that grew to more than 325,000 acres throughout the year. The added acreage provides a drilling inventory that includes wells in the mature oil, volatile oil, condensate, and dry gas windows of the Eagle Ford Shale. Later in 2012, the company announced plans to sell 100,000 non-core acres in the play. At year-end 2012, the company had approximately 225,000 net acres in what it deems the core area of the play.

Marathon will be drilling in South Texas for many years to come and the Eagle Ford is now a core to the company’s production growth plans.  Expect Marathon to utilize horizontal drilling with multi-stage completions across its entire acreage position.

The new Marathon Oil (NYSE: MRO) is the upstream unit of what was an integrated oil and gas company that is now both Marathon Oil and Marathon Petroleum. Marathon Oil will now solely pursue upstream growth. Marathon is active is several liquids rich areas including North Dakota’s Bakken Shale, Oklahoma’s Woodford Shale, and Colorado’s Niobrara Shale. The company headquarters is in Houston, TX.  The company services its Eagle Ford operations through field offices in Pleasanton and San Antonio.

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Marathon Oil Eagle Ford Shale Quarterly Commentary

December 11, 2013

$3.6 billion of the capital spending budget is allocated to North America resource play projects.

$2.3 billion is allocated toward the Eagle Ford in south Texas, with plans for drilling 250-260 net wells (385-405 gross – 88% operated) in 2014. Included in Eagle Ford spending is $225 million for central batteries and pipeline construction.

November 4, 2013

Marathon Oil’s production in the Eagle Ford shale averaged 81,000 net boed in the third quarter. While total Eagle Ford production was up only slightly over the second quarter, due largely to acreage retention drilling in areas of lower working interest, liquids volumes grew 3 percent while natural gas volumes declined. Approximately 64 percent of third quarter net production was crude oil/condensate, 17 percent was natural gas liquids (NGLs) and 19 percent was natural gas.

As a result of pad drilling and the timing of bringing wells online, Marathon Oil reached total depth on 70 gross Company operated wells and brought 71 gross operated wells to sales, compared to 82 and 79 gross wells respectively in the second quarter. Marathon Oil’s average time to drill an Eagle Ford well, spud-to-total depth, averaged 12 days in the third quarter, a top-quartile performance in the areas where Marathon Oil operates. Drilling times have improved by 20 percent over the year-ago quarter, while drilling and completion costs have decreased by over 20 percent over the same period.

Marathon Oil continues to expect to exit 2013 at a net production rate of approximately 100,000 boed for the Eagle Ford.

August 6, 2013

Marathon Oil’s average net production in the Eagle Ford Shale grew approximately 11 percent from the first quarter of 2013 to approximately 80,000 boed in the second quarter. Approximately 62 percent of second quarter net production was crude oil/condensate, 17 percent was natural gas liquids (NGLs) and 21 percent was natural gas.

During the second quarter, Marathon Oil reached total depth on 82 gross Company operated wells and brought 70 gross operated wells to sales, compared to 76 and 68 gross wells respectively in the first quarter. With approximately 85 percent pad drilling, which continues to improve efficiencies and reduce costs, the Company’s second quarter spud-to-total depth averaged 12 days and 18 days spud-to-spud.

The Company continues to evaluate the potential of downspacing to 40- and 60-acre units, with results of the downspacing pilots expected to be released in December. It also continues to evaluate the Austin Chalk and Pearsall formations across its acreage position. To date the Company has completed four Austin Chalk wells with average lateral length of 4,075 feet yielding average 24-hour initial production (IP) rates of 980 gross boed (485 bbld of crude oil/condensate, 220 bbld of NGLs and 1.65 million cubic feet per day of natural gas) on chokes ranging from 12/64-inch to 16/64-inch.

Early Austin Chalk production results suggest the mix of crude oil/condensate, NGLs and natural gas to be similar to Eagle Ford condensate wells. Also in the second quarter one Pearsall well was completed with a 24-hour IP rate of 580 gross boed on a maximum choke of 18/64-inch.

May 7, 2013

Marathon Oil’s average net production in the Eagle Ford shale grew approximately 22 percent from the fourth quarter of 2012 to approximately 72,000 boed in the first quarter. Approximately 64 percent of first quarter production was crude oil/condensate, 17 percent was natural gas liquids (NGLs) and 19 percent was natural gas. For the month of April, the Company estimates average production was approximately 76,000 net boed.

During the first quarter, Marathon Oil reached total depth on 76 gross Company operated wells and brought 68 gross operated wells to sales. Marathon Oil has continued to advance its drilling performance in the Eagle Ford, improving its spud-to-spud performance 36 percent from the first quarter of 2012 (28 days) to the first quarter of 2013 (18 days). The Company expects the spud-to-spud time to continue dropping during 2013 as additional efficiencies are gained from pad drilling.

Marathon Oil continues to build infrastructure to support production growth across the Eagle Ford operating area. Approximately 148 miles of gathering lines were installed in the first quarter of 2013, while five new central gathering and treating facilities were commissioned, with two additional facilities in various stages of planning or construction. The Company currently transports approximately 65 percent of its crude/condensate by pipeline, with additional contract negotiations and facility designs under way that are expected to push that figure to 75 percent by the end of May. The ability to transport more barrels by pipeline enables the Company to reduce costs, improve reliability and lessen its environmental footprint.

The Company is confident the core acreage position will be developed on a maximum of 80-acre spacings and continues to evaluate the potential of downspacing to 40- and 60-acre units.

Marathon Oil has begun drilling wells in the Austin Chalk and Pearsall formations to further test the resource potential of these other horizons. The results to-date of the downspacing pilots have been in line with its expectations, and the Company anticipates releasing more definitive results of the downspacing pilots and additional formation testing in the second half of this year.

February 6, 2013

Marathon Oil’s average net production in the Texas Eagle Ford shale rose 50 percent in the fourth quarter to approximately 60,000 boed compared to 40,000 net boed in the prior quarter. Approximately 64 percent of the production was crude oil/condensate, 16 percent was natural gas liquids (NGLs) and 20 percent was natural gas.

During the fourth quarter, Marathon Oil reached total depth on 70 gross Company operated wells and brought 70 gross operated wells to sales. For all of 2012, the Company reached total depth on 248 Eagle Ford gross operated wells, an increase of approximately 15 percent from original 2012 estimates, and brought 215 gross operated wells to sales.

The Company improved its spud-to-spud performance 40 percent from the fourth quarter of 2011 (35 days) to the fourth quarter of 2012 (21 days). During January, the Company improved another 10 percent averaging 19 days spud-to-spud on wells drilled in the Eagle Ford. The Company fully expects the spud-to-spud time to continue dropping during 2013 as it moves to more pad drilling.

Additionally, Marathon Oil continues to build infrastructure to support liquid hydrocarbon and natural gas production growth across the Eagle Ford operating area. Approximately 370 miles of gathering lines were installed in 2012, while 12 new central gathering and treating facilities were commissioned, with seven additional facilities in various stages of planning or construction. Marathon Oil also owns and operates the Sugarloaf gathering system, a 42-mile natural gas pipeline through the heart of the Company’s acreage in Karnes, Atascosa and Bee counties. The Company currently transports approximately 60 percent of its product by pipeline, with additional contract negotiations and facility designs under way. In 2013, Marathon Oil plans to drill 215-250 net wells (275-320 gross, all Company operated) in the Eagle Ford.

November 6, 2012

Marathon Oil’s production in the Texas Eagle Ford Shale nearly doubled in the third quarter compared to the second quarter, to approximately 40,000 net boe/d from 21,000 net boe/d, of which 75 percent was crude oil/condensate and 11 percent was natural gas liquids (NGLs). The increase in production was made up of 5,900 net boe/d from the Paloma acquisition, with the remainder coming from organic growth and subsequent development of the Paloma assets. Currently, the Company is producing over 60,000 net boe/d with 29 gross operated wells awaiting completion.

The company has reduced its rig count to 18 while maintaining four dedicated and two spot-market hydraulic fracturing crews. During the third quarter, Marathon Oil drilled 78 gross wells and brought 73 wells to sales, for 180 gross wells drilled in 2012. The Company now expects to drill 250 – 260 Eagle Ford gross wells by year-end 2012, an increase of approximately 20 wells from previous estimates. The Company’s average drilling time in the Eagle Ford is approximately 24 days.

On Nov. 1, the Company closed a previously announced acquisition in the Eagle Ford of approximately 4,300 net acres for an estimated $232 million, excluding purchase price adjustments. This increased the Company’s average working interest by 4.6 to 7.3 percent in four core areas of mutual interest (AMI), included 2,900 net boe/d of production at the time of closing, and added at least 40 net drilling locations to Marathon Oil’s inventory in the Eagle Ford.

May 2, 2012

Marathon is now delivering 16 to 20 Eagle Ford well completions a month; and, at the end of April production exceeded 20,000 net boed compared to an average of approximately 15,000 boed over the previous several months. Additionally, we continue to actively manage our portfolio, announcing the sale of our Alaska assets while we build upon our strong position in the profitable liquids-rich core of the Eagle Ford resource play, adding 20,000 net acres through recent and pending acquisitions with current net production of 7,000 boed, nearly all of which is operated.

Marathon Acquires Paloma Energy Partners II for $750 Million

Marathon expects these transactions to be closed by the end of the third quarter and to add two rigs to our 18 rigs currently operating in the play. Our capital, investment and exploration expenditures budget, excluding acquisition costs, will move up slightly from $4.8 billion to $5 billion as a result of this additional activity and other adjustments.

February 1, 2012

Marathon Oil closed on multiple Eagle Ford transactions in the fourth quarter, bringing its total acreage in the trend to more than 300,000 acres. Marathon’s operated rig count in the play is now 14, with plans to have 18 rigs operating in the play by the third quarter of 2012. The Company has four hydraulic fracturing crews under contract for 2012, with eight wells currently awaiting completion. Exit rates for 2011 were lower than anticipated, largely because of stricter choke management and a number of wells being offline for the installation of production tubulars. Currently the Company is producing approximately 15,000 boed net and reaffirms the full-year 2012 guidance of 30,000 boed net for the Eagle Ford.

December 7, 2011

Marathon’s 2012 Budget is Eagle Ford Directed

November 1, 2011

Marathon Oil is closing on agreements for the previously announced 141,000 net acres from Hilcorp in the Eagle Ford shale in south Texas, additional interests of approximately 19,000 net acres and a gas gathering system. Also, during the fourth quarter, the Company expects to close on another 6,800 net acres from previously announced tag-along rights. The total acquisition cost for these nearly 167,000 acres and the gathering system is expected to be approximately $4.5 billion, including projected closing adjustments and future costs carried by the Company. These transactions are expected to be funded largely from existing cash. Marathon Oil now expects its year-end acreage position across the Eagle Ford to be in excess of 300,000 net acres. Marathon Oil’s 2011 Eagle Ford exit rate is forecast to be approximately 18,000 net boepd, of which 80 percent is estimated to be liquids.

Marathon Oil is ramping up to 10 rigs by the end of the year and is scheduled to add a third crew dedicated to hydraulic fracturing in January 2012 and a fourth crew in June 2012. By this time next year, the Company expects to have 17 rigs operating in the play.

August 2, 2011

On Marathon Oil’s existing acreage, four wells have been drilled and are being tested. During the second quarter, Marathon Oil announced an agreement to acquire Eagle Ford shale assets in south Texas for $3.5 billion, subject to closing adjustments. The transaction is expected to close Nov. 1 with an effective date of May 1. Including this transaction, Marathon Oil’s 2011 exit rate from the Eagle Ford is expected to exceed 13,000 net boepd.

June 1, 2011

“Marathon has captured a top-five acreage position in the core of the premier resource play in the U.S. since first entering the Eagle Ford in November 2010. This transaction enhances our already strong North America position focused on unconventional, liquids-rich resource plays that provide low-risk, scalable and profitable growth,” said Clarence P. Cazalot Jr., Marathon president and CEO. “This and other projects under development serve as a catalyst for Marathon to increase our projected Upstream production growth to 5 – 7 percent on a compound average annual growth rate (CAGR) during the period 2010 – 2016.

“In addition to establishing our position in the highest value oil and condensate core area of the Eagle Ford shale, these assets will deliver immediate production and reserve additions, an active Company-operated drilling program, significant resource potential, as well as solid economic returns and profitability that are immediately accretive to earnings and operating cash flow, and expected to be self-funding by 2014.”

Read the full press release at marathonoil.com

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