Marathon Oil Corp. said May 2 that its first-quarter net income fell by 58 percent following a decline in production and natural gas prices. The company also was comparing its results with a year-ago period that included its now spun-off refining business.
The Houston oil and natural gas producer reported earnings of $417 million, or 59 cents per share, for the first three months of the year. That compares with $996 million, or $1.39 per share, in the year-ago quarter that included $541 million from Marathon‘s refining business that was spun off last June, so that Marathon Oil could focus its drilling efforts on tight U.S. plays, such as the Bakken field in North Dakota, Anadarko Woodford in Oklahoma and Eagle Ford in Texas. Revenue increased by 6.1 percent to $4.04 billion.
Excluding special items such as an impairment charge related to a reduction in some of its Gulf of Mexico reserve estimates, Marathon said it earned an adjusted 67 cents per share. That still fell below Wall Street profit expectations of 88 cents per share, though Marathon beat analyst sales forecasts of $3.37 billion, according to FactSet.
Shares of the company fell nearly 5 percent, or $1.37, to $28.82 in afternoon trading.
Marathon said that overall production available for sale declined 4.3 percent in the period to 383,000 barrels of oil equivalent per day. It sold oil between January and March for an average of $106.06 per barrel, up 10.7 percent from the same period last year. Natural gas was sold for an average of $2.96 per 1,000 cubic feet, down 11.4 percent.
The company reported production — available for sale — of 371,000 oil-equivalent barrels per day, a modest decline from the 375,000 boe per day achieved in fourth quarter 2011.
Bakken, Eagle Ford partly offset production drop elsewhere
The decline is primarily due to the downtime associated with planned turnaround in Equatorial Guinea and unplanned interruption at the BP-operated Foinaven field in the U.K. North Sea; both were partly offset by improved production from the Eagle Ford and Bakken shale plays.
Average Bakken production increased from 22,500 boe per day in the fourth quarter to 25,500 boe per day by March 31.
This was partially offset, the company said, “by lower U.S. natural gas prices and U.S. and Canadian liquid hydrocarbon price realizations that were negatively impacted by dislocations in the crude markets creating wider differentials and lower crude realizations in the Bakken, across the Rocky Mountain region and from the Oil Sands Mining segment.”
Strong results
Marathon said it “achieved strong results from the Ajax and Hector areas with average 24-hour initial production (IP) rates of 1,500 boe per day, a 30 percent increase over previous averages for those areas, and at Myrmidon, company record 24-hour IP rates of 2,100 and 2,400 boe per day for Middle Bakken and Three Forks, respectively.”
The company has eight drilling rigs and three hydraulic fracturing crews working in the play, as compared to 18, soon to be 20, rigs operating in the Eagle Ford play.
Marathon’s “drilling pace has exceeded expectations this year with improved ‘spud-to-spud’ drilling times averaging 30 days compared to the previous 38 days planned.”
Marathon’s Bakken production averages about 95 percent crude oil. As of the end of April, the company had 14 gross operated wells awaiting completion.
Marathon holds approximately 416,000 net acres in the Bakken play in North Dakota and Montana. Its drilling and production operations started there in 2006.
At the end of December, Marathon projected net Bakken production of approximately 38,000 boe per day by 2016.
