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How Marathon Oil’s 2Q16 Production Guidance Differs from 1Q16

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Production guidance for 2Q16

For 2Q16, Marathon Oil (MRO) expects its total production to be in the range of 375–400 Mboe (thousand barrels of oil equivalent) per day. The midpoint of the 2Q16 production guidance is ~388 Mboe per day, which would be ~5% lower than its production of ~407 Mboe per day in 2Q15.

Marathon Oil’s YoY (year-over-year) decrease in production can be attributed the reduced capital investments and divestitures it has enacted during the past year.

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Sequentially, Marathon Oil’s 2Q16 production guidance is almost equal to Marathon Oil’s production in 1Q16. For 2Q16, MRO expects its North America E&P (exploration and production) production to be in the range of 220–230 MBoe per day, which would be a midpoint decrease of ~6% from its 1Q16 North America E&P production of 239 MBoe per day.

For 2Q16, MRO expects International E&P production to be in the range of 115–125 MBoe per day, a which would mean a midpoint increase of ~20% from its 1Q16 International E&P production of 100 MBoe per day.

For 2Q16, MRO expects its synthetic crude oil production to be in the range of 40–45 MBoe per day.

2016 production guidance

For 2016, MRO expects its total production volume to be in the range of 375–405 Mboe per day, which would mean a midpoint decrease of ~9% from its 2015 production of 429 MBoe per day.

On a divestiture adjusted basis, Marathon Oil’s production is expected to be 6%–8% lower than in 2015 due to a significantly lower 2016 capital program.

The PayRock Energy Holdings acquisition

In June 2016, Marathon Oil announced its intention to acquire PayRock Energy Holdings for ~$888 million. (For detailed analysis of Marathon Oil’s PayRock acquisition, check out the Market Realist series Marathon Oil to Acquire PayRock Energy: The Cost, the Benefits.)

Many upstream companies are attempting to add quality acreage to their portfolios at attractive prices. In May 2016, Range Resources (RRC) announced a merger with Memorial Resource Development (MRD) in an all-stock transaction valued at $4.4 billion. In June 2016, Antero Resources (AR) acquired Marcellus Shale acreage from Southwestern Energy (SWN) for ~$450 million.

Notably, the Vanguard Energy ETF (VDE) invests in the broader energy market.

Continue to the next part for a discussion of lifting costs.

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