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A Deep Look at Marathon Oil’s Operational Performance

PART:
1 2 3 4 5 6 7 8 9 10 11 12 13
Part 2
A Deep Look at Marathon Oil’s Operational Performance PART 2 OF 13

Tracking Marathon Oil’s Progress on Key Operational Strategies

Marathon Oil’s key operational strategies

In 4Q16, Marathon Oil outlined its own playbook for success. The key strategies it outlined are listed below:

  • strengthened balance sheet
  • relentless focus on costs
  • simplifying and concentrating on its portfolio
  • profitable growth within cash flows

In this part of the series, we’ll see how Marathon Oil is progressing on some of these key operational strategies in 2017.

Tracking Marathon Oil’s Progress on Key Operational Strategies

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Simplification of portfolio and cost reductions in 2017

In June 2017, Marathon Oil closed the divestitures of its oil sands mining (or OSM) assets in Canada to Royal Dutch Shell (RDS.A) (RDS.B) and Canadian Natural Resources (CNQ). This transformative divestiture marked MRO’s complete exit from Canada. MRO’s OSM business represented around a third of its operating costs and only ~12.0% of its total production. According to an MRO press release in March 2017, the company expects to achieve a ~25.0% reduction in 2017 production and operating costs due to its exit from the OSM business.

The benefits of MRO’s portfolio simplification and cost reduction strategy are evident in its updated capital expenditure guidance. In August 2017, due to savings on costs, MRO reduced its 2017 capital budget by ~10.0% to a new range of $2.1 billion–$2.3 billion.

Concentration of portfolio in 2017

In 2017, MRO is focusing on US resource plays. It used the OSM divestiture proceeds to reduce its debt and fund the acquisitions of ~91,000 acres in the Permian Basin from BC Operating and Black Mountain in June 2017. The benefits of MRO’s focus on the most prolific basins in the United States are evident in its increased production guidance for 2017. We’ll look at MRO’s production in the next part.

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