uploads///MRO Q Production

Why Marathon Oil’s Production Trend Is in Decline

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Dec. 16 2016, Updated 1:38 p.m. ET

Marathon Oil’s 2Q16 production

For 2Q16, Marathon Oil (MRO) reported total production of 384 Mboepd (thousand barrels of oil equivalent per day), which is within its 2Q16 production guidance range of 375–400 Mboepd.

Although Marathon Oil met its own production guidance, its 2Q16 production is lower by 23 Mboe, or by ~6%, as compared to its 2Q15 production of 407 Mboepd. On a divestiture-adjusted basis, Marathon Oil’s 2Q16 production is down by 5 Mboe, or by ~2%, as compared to 2Q15.

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Marathon Oil’s production trend

As you can see in the graph, Marathon Oil’s QoQ (quarter-over-quarter) production volumes started to decline in 4Q14. In 2Q15 and 1Q16, Marathon Oil saw steep declines in its production volumes, mainly due to reduced capital spending in response to lower crude oil and natural gas prices.

Sequentially, Marathon Oil’s 2Q16 production is lower by ~4 Mboe, or by ~1%, than in 1Q16. On a divestiture-adjusted basis, the company’s 2Q16 production fell ~2 Mboe, or ~1%, from 1Q16.

Marathon Oil’s production guidance

Due to its divestment of the majority of its Wyoming assets, to the acquisition of PayRock Energy, and to the declines in the Eagle Ford high-density pads drilled in 2015, Marathon Oil has updated its fiscal 2016 production guidance.

For 2016, Marathon Oil now expects full-year production in the range of 330–345 Mboepd, which represents a midpoint decrease of ~53 Mboepd (or ~13%) from its previous guidance of ~390 Mboepd.

For 3Q16, Marathon Oil expects total production in the range of 370–395 Mboepd, which represents a midpoint decrease of ~12% from its 3Q15 production. Marathon Oil’s 3Q16 guidance reflects all divestitures and acquisitions closed to date.

Other upstream players

Recently, many S&P 500 (SPY) upstream companies including ConocoPhillips (COP), Southwestern Energy (SWN), and Pioneer Natural Resources (PXD) have also increased their fiscal 2016 production guidance.

Now let’s take a closer look at Marathon Oil’s US operations.

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