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Understanding Marathon Oil’s Production Mix

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Marathon Oil’s production mix

In 1Q17, Marathon Oil’s (MRO) production mix from continuing operations was ~46% crude oil and condensate, ~16% natural gas liquids, and ~38% natural gas. This means Marathon Oil’s continuing operations are more tilted toward liquids production. Its total liquids production is at ~62%. Typically, upstream companies with more crude oil and natural gas liquids production have better operating margins.

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Production mix trend

Marathon Oil’s quarterly oil (crude oil, condensate and synthetic crude oil) percentage in its production mix has fallen from ~65% in 1Q11 to ~56% in 4Q16. However, in March 2017, MRO sold its OSM (oil sands mining) business. So, excluding synthetic crude oil production from OSM, MRO’s oil percentage from continuing operations comes in lower at ~46% in 1Q17.

Segmental production mix

In 1Q17, Marathon Oil’s North America E&P (exploration and production) operations reported a production mix of ~57% crude oil and condensate, ~19% of natural gas liquids, and ~24% natural gas. This arrangement means Marathon Oil’s 1Q17 production from North America E&P operations contains ~76% liquids and is tilted toward liquids production.

Within Marathon Oil’s US Resource plays, 1Q17 production from the Bakken Shale reported the highest crude oil and condensate percentage of ~82% in its production mix. MRO’s production from the Oklahoma Resource Basin reported the lowest crude oil and condensate percentage of ~27% in its production mix.

For 1Q17, Marathon Oil’s International E&P operations reported a production mix of ~29% crude oil, ~10% natural gas liquids, and ~61% natural gas. This arrangement means Marathon Oil’s production from International E&P operations is tilted toward natural gas.

Marathon Oil’s OSM (oil sands mining) operations produced 100% synthetic crude oil in 1Q17.

Other oil and gas producers

Other upstream companies with higher crude oil percentages in their production mix include Devon Energy (DVN) and Occidental Petroleum (OXY). These companies contain ~46% and ~75% crude oil in their production mix, respectively. The volatility in oil prices also impacts ETFs and ETNs like the Vanguard Energy ETF (VDE), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), and the VelocityShares 3x Long Crude Oil ETN (UWTI).

Now, let’s take a look at MRO’s oil and gas revenue mix for 1Q17 in the next part of this series.

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