Marathon cuts 2016 capital spending in half

Marathon Oil Corp., Houston, reported a 2016 capital spending program of $1.4 billion, down 50% from that of 2015 and 75% from that of 2014.

The firm reported a full-year 2015 adjusted net loss of $869 million, compared with adjusted earnings of $1.16 billion in 2014. The reported net loss was $2.2 billion, compared with reported earnings of $969 million a year earlier.

During the year ahead, Marathon is allocating $1.15 billion to activity in North America with the majority focused on three US resource plays.

The Eagle Ford will receive $600 million, of which $520 million is for drilling and completions. Marathon expects to bring 124-132 gross company-operated wells online in the South Texas play using an average of 5 rigs. That’s down from an average of 11 rigs in 2015 with 276 gross company-operated wells.

The 2016 drilling program will continue focusing on codevelopment of the Lower and Upper Eagle Ford horizons as well as the Austin Chalk in the core of the play.

In the Oklahoma Resource basins, $200 million, of which $195 million is for drilling and completions, will support 20-22 gross company-operated SCOOP and STACK wells. An average of 2 rigs in 2016 will focus primarily on lease retention in the STACK and delineation of the Meramec.

Marathon expects to be 70% held by production in the STACK by yearend, with the SCOOP already more than 90% HBP. In the SCOOP Springer, the firm plans to complete its second company-operated well in the first quarter and drill another well later in the year.

In the Bakken, the company plans to spend just fewer than $200 million, with $150 million allocated for drilling and completions. Marathon expects to average 1 rig for half a year and bring online 13-15 gross company-operated wells.

Following encouraging results in 2015 from the company’s first pad in West Myrmidon near the Nesson anticline, plans are to bring a second West Myrmidon pad to sales in 2016. Facilities and infrastructure spending will be significantly lower than 2015 with the next phase of the water-gathering system on schedule to be completed in this year’s second half to contribute further to unit cost reductions.

Other activity; expected output drop

Outside the US, Marathon plans to spend $170 million mainly to complete long-cycle projects in Equatorial Guinea and the Kurdistan region of Iraq. The Alba field compression project in Equatorial Guinea remains on budget and on schedule to start up by midyear, and will extend plateau production by 2 years as well as the asset’s life by up to 8 years, the firm says.

The start of oil production from the outside-operated Atrush development in Kurdistan is currently expected later this year.

Marathon also has reduced conventional exploration spending to $30 million, down from more than $250 million in 2015 and from more than $500 million in 2014. Activity in 2016 is limited to existing commitments in the Gulf of Mexico and Gabon, with no exploration wells planned.

The company forecasts production from its combined North America and international businesses, excluding Libya, to average 335,000-355,000 net boe/d. On a divestiture-adjusted basis, total company production is expected to be 6-8% lower than that of 2015 due to the lower 2016 capital program.

“Importantly, we enter 2016 in a strong position with $4.2 billion in liquidity,” said Lee Tillman, Marathon Oil president and chief executive officer. “Given our objective of living within our means in 2016, we anticipate continued execution of our noncore asset divestiture program will contribute to that goal. Based on our progress to date, we’ve increased our original target for noncore asset sales from at least $500 million to a range of $750 million to $1 billion.”

The firm in November agreed to sell its producing properties in the greater Ewing Bank area and nonoperated producing interests in Petronius and Neptune fields in the Gulf of Mexico for $205 million (OGJ Online, Nov. 9, 2015).

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