Where Is Marathon Oil Aiming Its Capital Expenditure?

In 3Q16, Marathon Oil (MRO) spent ~$248 million in capital expenditure (excluding its PayRock acquisition deposit), which was ~61% lower than in 3Q15. In 3Q16, Marathon Oil allocated ~85% of its capital expenditure to US resource plays—higher than what it allocated to US resource plays in 3Q15.

This indicates that MRO’s 2016 capital expenditure is primarily focused on US resource plays.

Marathon Oil’s 2016 capital budget remains unchanged at ~$1.3 billion, which is ~57% lower than what MRO spent in 2015. In the first nine months of 2016, MRO spent ~$846 million in capital expenditures. This means MRO’s 4Q16 capital budget will be around $454 million.

Investors must note that lower capital expenditure has a negative impact on future production volumes. In 2016, MRO plans to spend ~$600 million on its Eagle Ford operations, ~$270 million on its Oklahoma Resource Basin operations, and ~$140 million on its Bakken operations.

In contrast to Marathon Oil, S&P 500 (SPY) upstream companies like Southwestern Energy (SWN), Devon Energy (DVN), and Pioneer Natural Resources (PXD) have recently increased their fiscal 2016 capital guidances.