Marathon Oil Corporation has reported first quarter 2019 net income of $174 million, or $0.21 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 $256 million, or $0.31 per diluted share. Net operating cash flow was $515 million, or $672 million before changes in working capital.

Highlights

• Generated $80 million of organic free cash flow post-dividend, and remains on track to achieve two-year organic free cash flow objectives 
• Executed $50 million of year-to-date share repurchases in addition to $41 million of dividend payments; $750 million of share repurchase authorization remaining 
• Development capital spend of $569 million, down 8% from year-ago quarter; annual $2.4 billion development capital budget remains unchanged 
• Total Company oil production averaged 203,000 net bopd, up 6% from year-ago quarter, divestiture-adjusted; U.S. oil production averaged 177,000 net bopd, up 11% from year-ago quarter, divestiture-adjusted 
• Eagle Ford production averaged 105,000 net boed; 41 wells achieved an average 30-day IP rate of 1,515 boed (62% oil) at an average completed well cost of approx. $4.4 million 
• Bakken production averaged 92,000 net boed; 29 wells achieved an average 30-day IP rate of 2,500 boed (77% oil) at an average completed well cost of approx. $5.1 million 
• Oklahoma production averaged 63,000 net boed; successful over-pressured STACK development continues at optimized spacing designs, with infill pads developed at three, six and eight wells per section equivalent spacing delivering an average 30-day IP rate of 1,870 boed (53% oil) 
• Northern Delaware production averaged 26,000 net boed; 15 wells achieved an average 30-day IP rate of 1,815 boed (65% oil), or 360 boed per 1,000 foot lateral 
• Portfolio optimization continues with agreement for divestiture of U.K. business, including approx. $950 million of asset retirement obligations 
• Strong financial position with total liquidity of $4.4 billion as of March 31; investment grade at all three major ratings agencies following recent upgrade by Moody's Investor Services, Inc.

"First quarter featured strong execution across our advantaged multi-basin portfolio and was highlighted by solid well productivity and improving well costs in each of our basins," said Chairman, President and CEO Lee Tillman. "We remain fully committed to our well-established framework for success: improving bottom-line corporate returns, generating sustainable free cash flow with an organic break-even of only $45/bbl WTI, prioritizing return of capital to shareholders, and enhancing our capital efficiency and underlying resource base through differentiated execution. We've returned over $90 million to shareholders year-to-date, more than fully funded by organic free cash flow. As we look forward to second quarter, strong April performance underpins our confidence in expected 5% sequential U.S. oil growth. With this significant operational momentum, we expect returns and free cash flow generation to inflect higher while our capital spending plans remain unchanged."

U.S.

U.S. production averaged 296,000 net barrels of oil equivalent per day (boed) for first quarter 2019, including 177,000 net barrels of oil per day (bopd). Oil production was up 11% from the year-ago quarter on a divestiture-adjusted basis, despite extreme weather conditions experienced during first quarter 2019. U.S. unit production costs were $5.21 per barrel of oil equivalent (boe), down 12% from the year-ago quarter due to ongoing cost reductions across the U.S. resource plays, particularly in the Northern Delaware.

EAGLE FORD: Marathon Oil's Eagle Ford production averaged 105,000 net boed in the first quarter. The Company brought 41 gross Company-operated wells to sales in the quarter with an average 30-day initial production (IP) rate of 1,515 boed (62% oil) at an average completed well cost of $4.4 million.

BAKKEN: Marathon Oil's Bakken production averaged 92,000 net boed in the first quarter. The Company brought 29 gross Company-operated wells to sales with an average 30-day IP rate of 2,500 boed (77% oil) at an average completed well cost of $5.1 million. First quarter 2019 activity was primarily concentrated in Myrmidon. The Company continues to enhance its Williston Basin footprint, recently executing a small bolt-on acquisition and additional leasing that has added more than 50 Company-operated locations to inventory.

OKLAHOMA: Marathon Oil's Oklahoma production averaged 63,000 net boed in the first quarter. The Company brought 18 gross Company-operated wells to sales, with 16 of these wells brought to sales during March. In the STACK, the Company again realized strong over-pressured Meramec infill drilling results through optimized development at the drill spacing unit level. Three infill pads developed at three, six, and eight wells per section equivalent spacing delivered an average 30-day IP rate of 1,870 boed (53% oil), with completed well cost per lateral foot down more than 30% relative to parent wells.

NORTHERN DELAWARE: Marathon Oil's Northern Delaware production averaged 26,000 net boed in the first quarter. The Company brought 15 gross Company-operated wells to sales with an average 30-day IP rate of 1,815 boed (65% oil), or 360 boed per 1,000 foot lateral. First quarter 2019 wells to sales featured a mix of early development and delineation drilling across both the Malaga and Red Hills areas. In Malaga, a four-well pad targeting the Bone Spring, Upper Wolfcamp and Lower Wolfcamp horizons achieved a 30-day IP rate of 2,830 boed (62% oil), or 400 boed per 1,000 foot lateral.

International

International production averaged 92,000 net boed for first quarter 2019. During the quarter, the Company successfully completed its planned triennial turnaround in E.G., with a return to full production levels achieved on schedule in early April. First quarter 2019 International unit production costs averaged $6.22 per boe.

The Company recently signed a definitive agreement to process third-party Alen Unit gas through existing infrastructure located in Punta Europa, E.G., a significant step toward solidifying Punta Europa as a cornerstone component of the E.G. Gas Mega Hub for the potential development of local and regional natural gas. First gas sales from the Alen Unit is expected in 2021, and will utilize available processing capacity not required by the Alba Field. Marathon Oil is the operator and majority shareholder of the integrated gas business at Punta Europa and will maintain market exposure through a combination of both profit sharing and tolling.

The Company signed an agreement for the divestiture of its U.K. business, with an expected close during the second half of 2019, a transaction which will mark a complete country exit. Marathon Oil's U.K. properties include approximately $950 million of asset retirement obligations and are classified as held for sale in the consolidated balance sheet as of March 31. U.K. held for sale assets of $947 million, including $323 million of cash and cash equivalents, will be partially offset at close by sales proceeds of approximately $140 million.

Cash Flow, Development Capital and Resource Capture

Net cash provided by operations was $515 million during first quarter 2019, or $672 million before changes in working capital. First quarter development capital expenditures were $569 million. The Company's 2019 development capital budget remains unchanged at $2.4 billion. Outside of the development capital budget, first quarter resource play leasing and exploration (REx) capital expenditures were $37 million. The Company's 2019 REx capital budget also remains unchanged at $200 million.

Production Guidance

For second quarter 2019, the Company forecasts total oil production of 200,000 to 220,000 net bopd, with U.S. oil production of 180,000 to 190,000 net bopd. Second quarter U.S. oil production is expected to increase 5% sequentially at the midpoint of guidance, reflecting strong operational momentum already achieved early in the quarter. Second quarter 2019 international oil production guidance of 20,000 to 30,000 net bopd reflects continued unscheduled downtime at the non-operated Foinaven complex. Previously provided full-year 2019 production guidance, calling for total Company oil production growth of 10%, with U.S. oil growth of 12%, remains unchanged.

Corporate

The Company has executed $50 million of year-to-date share repurchases, returning additional capital to shareholders beyond the $41 million first quarter dividend payment. Share repurchases have been more than fully funded by post-dividend organic free cash flow, and $750 million remains on current authorization.

Total liquidity as of March 31 was approximately $4.4 billion, which consisted of $1.0 billion in cash and cash equivalents and an undrawn revolving credit facility of $3.4 billion. End of quarter cash and cash equivalents reflect cash balances classified as held for sale associated with U.K. properties, but do not include expected sales proceeds to be received at close. The company is rated investment grade at all three major credit ratings agencies following a recent upgrade by Moody's Investor Services, Inc.

The adjustments to net income for first quarter 2019 totaled $89 million before tax, primarily due to the income impact associated with unrealized losses on derivative instruments, partially offset by a gain on sale related to working interest in the Gulf of Mexico Droshky field. In addition, first quarter adjusted net income of $256 million included a tax benefit and indemnification income totaling $168 million.

As of April 30, the Company's open crude hedge positions for 2019 include an average of 76,691 bopd at a weighted average floor price of $56.48 and a weighted average ceiling price of $73.29, hedged through three-way collars.

Link to Marathon Oil US onshore country profile