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Marathon Oil Increases Production for the First Time in a Year

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Marathon Oil’s production

For 3Q16, Marathon Oil (MRO) reported total production of 402 Mboepd (thousand barrels of oil equivalent per day), which is above the top end of its 3Q16 production guidance range of 370–395 Mboepd. Although Marathon Oil beat its own production guidance, its 3Q16 production is ~7% lower (or 32 Mboe) when compared with its 3Q15 production of 434 Mboepd.

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Production trend

As seen in the above chart, Marathon Oil’s quarter-over-quarter production volumes started to decline in 4Q14. In 2Q15 and 1Q16, Marathon Oil saw a steep decline in its production volumes mainly due to reduced capital spending in response to lower crude oil and natural gas prices.

Sequentially, Marathon Oil’s 3Q16 production rose 18 Mboe (or ~5%) when compared with 2Q16.

Divestiture-adjusted production

On a divestiture-adjusted basis, Marathon Oil’s (MRO) 3Q16, 2Q16, and 3Q15 production is around 402 Mboepd, 370 Mboepd, and 404 Mboepd, respectively. This means on a divestiture-adjusted basis, Marathon Oil’s 3Q16 production fell 2 Mboe when compared with 3Q15. On a divestiture-adjusted basis and sequentially, Marathon Oil’s 3Q16 production is up ~32 Mboe (or ~9%) when compared with 2Q16.

Marathon Oil’s divestitures include the sale of some New Mexico and West Texas assets in July and August 2016, and its Wyoming assets closed in June 2016. MRO’s assets in East Texas, North Louisiana, and Wilburton, Oklahoma, closed in August 2015. The sale of some of its Gulf of Mexico assets closed in December 2015 and February 2016. These production volumes have been removed from all periods (3Q16, 2Q16, and 3Q15) in arriving at its divestiture-adjusted production.

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Production guidance

Due to the divestment of the majority of its Wyoming assets, the acquisition of PayRock Energy, and the decline from 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 380–395 Mboepd, a midpoint increase of ~5 Mboepd (or ~1%) from its previous guidance of ~382.5 Mboepd.

For 4Q16, Marathon Oil expects total production in the range of 365–390 Mboepd, a midpoint decrease of ~13% when compared with its 4Q15 production. Marathon Oil’s 4Q16 guidance reflects all divestitures and acquisitions closed to date.

Other upstream players

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

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