Charts in Focus: MRO’s Production Costs and Margins for 3Q16

Excluding hedges, Marathon Oil (MRO) reported positive cash margins but negative total margins in 3Q16, as shown in Chart 1, below.

Gains on crude oil (USO) and natural gas (USO) hedges helped Marathon Oil increase its cash margins. These gains reduced the deficit in its total margins, as shown below in Chart 2.

For 3Q16, upstream companies Diamondback Energy (FANG) and EOG Resources (EOG) have reported positive cash margins, whereas Southwestern Energy (SWN) had a negative cash margin.

Production cash cost = LOE (lease operating expenses) + production and ad valorem taxes + transportation expenses + G&A (general and administration) cash expenses + interest expenses.

Total production cost = Cash cost + DD&A (depletion, depreciation and amortization).