HOUSTON, Feb. 21, 2024 /PRNewswire/ — Marathon Oil Corporation (NYSE: MRO) reported full-year 2023 net income of $1,554 million, or $2.56 per diluted share, which includes the impact of certain items not typically represented in analysts’ earnings estimates and that would otherwise affect comparability of results. Adjusted net income was $1,587 million, or $2.61 per diluted share. Net operating cash flow was $4,087 million, or $4,187 million before changes in working capital (adjusted CFO). Free cash flow was $2,029 million, or $2,182 million before changes in working capital and including Equatorial Guinea (E.G.) distributions (adjusted FCF).
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Marathon Oil Wells Drilled 2024
Marathon Oil reported fourth quarter 2023 net income of $397 million, or $0.68 per diluted share, which includes the impact of certain items not typically represented in analysts’ earnings estimates and that would otherwise affect comparability of results. Adjusted net income was $406 million, or $0.69 per diluted share. Net operating cash flow was $1,080 million, and adjusted CFO was $980 million. Free cash flow was $681 million, and adjusted FCF was $624 million.
Highlights
- Returned 41% of adjusted CFO to shareholders in 2023, consistent with Return of Capital Framework
- Distributed $1.7 billion to shareholders, representing >12% distribution yield on current market capitalization; includes $417 million of shareholder returns during fourth quarter
- Executed $1.5 billion of share repurchases, driving 9% reduction to outstanding share count; includes $352 million of share repurchases during fourth quarter
- Raised per share base dividend 22% from year-end 2022 level, with no impact to peer-leading post-dividend free cash flow breakeven
- Reduced gross debt by $500 million in 2023, further strengthening investment grade balance sheet; includes $300 million of gross debt reduction during fourth quarter
- Delivered strong full-year 2023 and fourth quarter financial and operational results
- Full-year 2023 adjusted FCF of $2.2 billion, including $624 million during fourth quarter
- Full-year 2023 oil production of 190,000 net bopd, consistent with midpoint of annual guidance; includes fourth quarter oil production of 189,000 net bopd
- Full-year 2023 oil-equivalent production of 405,000 net boed, consistent with high end of annual guidance; includes fourth quarter oil-equivalent production of 404,000 net boed
- Achieved another year of comprehensive safety and environmental excellence
- Reported record annual safety performance, as measured by TRIR1
- Achieved 2025 GHG Intensity reduction goal of 50%2 two years ahead of schedule
- Improved total Company gas capture rate to 99.5%
- Announced 2024 capital budget that again prioritizes corporate returns, FCF generation, and meaningful return of capital to shareholders
- Expect $2.0 billion capital program to deliver 190,000 net bopd at midpoints of respective annual guidance ranges
- Expect to return at least 40% of adjusted CFO to shareholders in 2024 under differentiated CFO-driven framework that continues to provide investors with first call on cash flow
“2023 marked another year of impressive delivery against every dimension of our Framework for Success,” said chairman, president, and CEO Lee Tillman. “We generated $2.2 billion of adjusted free cash flow, returned $1.7 billion of capital back to our shareholders, and reduced gross debt by $500 million, further improving our investment grade balance sheet. Within our high-quality E&P peer group, we delivered among the best free cash flow and shareholder distribution yields, the most growth in production per share, the strongest capital efficiency, and the lowest reinvestment rate. These results are a strong testament to the quality of our multi-basin portfolio, the discipline in our capital allocation framework, and the hard work of all our employees. Most importantly, we delivered these outstanding results while holding true to our core values: reporting a record year for safety performance, achieving our 2025 GHG intensity reduction goal two years ahead of schedule, and further improving our natural gas capture.”
“Looking to 2024 and beyond,” continued Mr. Tillman, “I expect more of the same from our Company: strong free cash flow generation, underlying growth in per share metrics, compelling return of capital to shareholders, and ongoing balance sheet enhancement. We believe the combination of our consistent, disciplined strategy; our high-quality U.S. multi-basin portfolio; and our unique E.G. integrated gas business positions us to sustainably compete not only at the top of our energy peer group, but with the very best companies in the S&P 500.”
2024 Capital Budget and Guidance
Marathon Oil announced a $1.9 billion to $2.1 billion capital expenditure budget for 2024, fully consistent with the Company’s disciplined capital allocation framework that prioritizes corporate returns and FCF generation.
The 2024 program is expected to deliver approximately $1.9 billion of FCF, assuming $75/bbl WTI, $2.50/MMBtu Henry Hub, and $10/MMBtu TTF. 2024 cash flow sensitivities to WTI, Henry Hub, and TTF commodity prices are provided in the Company’s fourth quarter and full-year 2023 investor presentation.
Marathon Oil’s 2024 financial guidance assumes Alternative Minimum Tax (AMT) cash tax payments for its U.S. domestic operations at 15% of pre-tax income, partially offset by approximately $150 million of expected research and development (R&D) tax credits.
Marathon Oil expects to deliver total Company oil production of 190,000 net bopd at the midpoint of its 2024 guidance range. Although winter weather is expected to lower first quarter production by about 4,000 net bopd, primarily concentrated in the Bakken, the Company expects no impact to its flat oil production guidance for the full year. Marathon Oil expects to continue driving significant growth in oil production per share. The underlying capital efficiency and bottom line financial outcomes of the 2024 capital program are again expected to benchmark at the top of Marathon Oil’s high-quality E&P peer group.
More detailed highlights of the 2024 capital program include the following:
- Expect 5% to 10% fewer net wells to sales in 2024 to deliver flat year-on-year total oil production as the Company optimizes well mix to maximize corporate returns and FCF generation
- 2024 well productivity expected to be comparable to 2023, with average lateral length increasing by ~5% and capital efficiency improving
- Capital spending again approximately 60% weighted to first half of year, driving higher production during second half of year
- Approximately 70% of total capital allocated to the Eagle Ford and Bakken
- Higher year-on-year capital spending in the Permian, accounting for majority of remaining Resource Play capital spend
- Modest E.G. capital spend limited to long-lead items in support of up to two potential Alba infill wells in 2025
- Higher year-on-year non-development capital spending, primarily related to environmental and emissions reduction efforts
Return of Capital Overview
Marathon Oil’s percentage of CFO Return of Capital Framework provides clear visibility to shareholder returns, ensuring the shareholder gets the first call on cash flow generation. In a $60/bbl WTI or higher price environment, the Company targets returning a minimum of 40% of adjusted CFO to equity investors.
During 2023, Marathon Oil returned 41% of adjusted CFO, or $1,724 million, to equity holders in the form of base dividends and share repurchases, representing a total shareholder distribution yield of >12% on the Company’s current market capitalization. Marathon Oil executed $1,473 million of share repurchases during 2023, driving a 9% reduction to outstanding share count and contributing to significant underlying improvement in per share metrics. Since Marathon Oil re-initiated its share repurchase program in October 2021, the Company has reduced its outstanding share count by more than 27%.
While delivering on its Return of Capital Framework in 2023, Marathon Oil also reduced gross debt by $500 million, including a $300 million prepayment on its Term Loan Facility during fourth quarter.
For 2024, consistent with its Return of Capital Framework, Marathon Oil expects to return at least 40% of adjusted CFO to shareholders, equating to a minimum shareholder return of $1.6 billion and providing shareholders visibility to a double-digit distribution yield (assuming $75/bbl WTI, $2.50/MMBtu Henry Hub, and $10/MMBtu TTF commodity pricing). While prioritizing its Return of Capital Framework, the Company expects to continue improving its investment grade balance sheet through further gross debt reduction.
4Q23 Operations
UNITED STATES (U.S.): U.S. production averaged 352,000 net barrels of oil equivalent per day (boed) for fourth quarter 2023, including 180,000 net barrels of oil per day (bopd). U.S. unit production costs averaged $6.51 per boe fourth quarter, with the increase from the prior quarter primarily due to lower sales volumes on fewer net wells to sales and a higher level of opportunistic workover activity. The Company expects average 2024 U.S. unit production costs to be consistent with the full year 2023 average.
The Company brought a total of 32 gross Company-operated wells to sales during fourth quarter, including five wells that came online near the end of December. Additionally, the Company brought a total of 10 joint venture wells to sales during fourth quarter.
Marathon Oil’s fourth quarter production in the Eagle Ford averaged 144,000 net boed, including 71,000 net bopd, with four gross Company-operated wells to sales. In the Bakken, production averaged 118,000 net boed, including 76,000 net bopd, with 23 gross Company-operated wells to sales. Permian production averaged 39,000 net boed, including 21,000 net bopd, with five gross company-operated wells to sales and four joint venture wells to sales. Oklahoma production averaged 49,000 net boed, including 10,000 net bopd, with six joint venture wells to sales.
INTERNATIONAL: E.G. production averaged 52,000 net boed for fourth quarter, including 9,000 net bopd. Sales volumes averaged 48,000 net boed, including 5,000 net bopd, as the Company was underlifted during the quarter. Unit production costs averaged $2.30 per boe. Fourth quarter net income from equity method investees totaled $45 million, while total cash distributions from equity method companies amounted to $33 million, including $29 million of dividends. Fourth quarter represented the final quarter under the legacy Henry Hub-linked LNG sales contract. Effective Jan. 1, 2024, pricing is global LNG-linked. The Company has successfully contracted all 2024 LNG cargoes at a global LNG price linkage and recently lifted its first cargo under these new contractual terms.
Corporate Overview
2023 RESERVES: Year-end 2023 proved reserves totaled 1,320 million barrels of oil equivalent (mmboe), comparable to year-end 2022 proved reserves, despite lower SEC commodity pricing. 2023 reserve additions were primarily attributable to expansion of proved areas and 5-year plan optimization and effectively replaced produced volumes. Excluding the impacts of SEC commodity pricing, reserve replacement totaled over 120%. Oil and liquids accounted for 49% and 73% of the Company’s year-end 2023 proved reserves, respectively.
BALANCE SHEET AND LIQUIDITY: Marathon Oil ended fourth quarter with total liquidity of $2.3 billion, including $155 million of cash and cash equivalents and $2.1 billion of available borrowings on the Company’s revolving credit facility that matures in 2027. All three primary credit rating agencies continue to rate Marathon Oil investment grade.
FOURTH QUARTER ADJUSTMENTS TO NET INCOME: The adjustments to net income for fourth quarter totaled $9 million.
Safety, Environmental, Social, and Governance Excellence
SAFETY: Marathon Oil holds safety as a core value and strives to provide safe, healthy, and secure workplaces. During 2023, Marathon Oil achieved a record-low annual Total Recordable Incident Rate (TRIR) of 0.21 for employees and contractors. Marathon Oil’s safety performance remains a key element of its executive compensation scorecard, underscoring the Company’s commitment to keeping its employees and contractors safe.
ENVIRONMENTAL: Marathon Oil aims to help meet global oil and gas demand with strong environmental performance by driving significant improvement to both the greenhouse gas (GHG) and methane intensity of its operations, consistent with the trajectory of the Paris Climate Agreement. Preliminary calculations indicate Marathon Oil achieved its 2025 GHG intensity reduction goal of 50%2 two years ahead of schedule. The Company’s annual GHG intensity remains a key element of its executive compensation scorecard. Additionally, Marathon Oil improved its total Company 2023 gas capture to 99.5% and continues to make progress toward its World Bank Zero Routine Flaring by 2030 commitment.
SOCIAL: Marathon Oil is committed to promoting a diverse and inclusive workplace, respecting human rights, and making strategic investments to build healthier, safer, more resilient, and stronger local communities. Key strategic social investments during 2023 included: ongoing support of Equatorial Guinea’s Bioko Island Malaria Elimination Project; partnership with the National Fish and Wildlife Foundation on grassland restoration projects in the Bakken; awarding grants to teachers across operating areas through the Unconventional Thinking in Teaching Program; and continued support of the Barbara Bush Houston Literacy Foundation My Home Library Program.
GOVERNANCE: Marathon Oil believes best-in-class governance is foundational to delivering shareholder value. The Company is especially focused on industry leadership in aligning executive compensation with the most critical drivers of shareholder value and on maintaining an independent and diverse board of directors with strong skills and experience. During 2023, Marathon Oil continued to enhance its board of director oversight through its focus on refreshment, independence, and diversity. The Company elected one new board member in 2023. Seven of eight directors are independent, average director tenure remains below the S&P 500 average while maintaining a diverse mix of short and longer-tenured directors, three directors are female (including the lead director), and two directors are ethnically/racially diverse.
A slide deck and Quarterly Investor Packet will be posted to the Company’s website following this release today, February 21. On Thursday, February 22, at 9:00 a.m. ET, the Company will conduct a question-and-answer webcast/call, which will include forward-looking information. The live webcast, replay and all related materials will be available at https://ir.marathonoil.com/.
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