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Marathon Oil (NYSE:MRO) Raises Shale Budget

Early Investing Paid Off

Written by Swagato Chakravorty
Posted December 6, 2012

Marathon Oil Corp. (NYSE: MRO) has changed significantly from its days as an integrated oil company focused on international large-scale operations.

Marathon recognized the promise in U.S. shale early on, and today the company sees 18 percent of all petroleum production from domestic reserves like the Eagle Ford in Texas and the Bakken North Dakota.

Tuesday, Marathon stated that it intends to spend more than half its 2013 budget on exploiting U.S. shale reserves. It will increase its capital expenditures budget for 2013 to $5.2 billion, up from 2012’s $5 billion. The company’s expectations of 6-8 percent increases in production will primarily stem from shales in North Dakota, Texas, and Oklahoma.

From Fox Buxiness:

"We can invest substantial amounts of money and see almost immediate results in terms of adding reserves and growing production for the enterprise," Marathon Chief Operating Officer David Roberts said in a recent interview.

Marathon was an early investor in every sense; in 2006, when the Bakken was barely producing, the company bought 200,000 acres in N. Dakota and Montana. Later, Marathon also invested heavily in the Eagle Ford region.

Although these were expensive deals at the time, the long-term payoff has been sweet. Marathon’s target production growth has gone from 3-5 percent to 5-7 percent through 2016.

Q3 production in the Eagle Ford is at 40,000 barrels of oil equivalent per day, and Marathon hopes to increase that to 120,000 by 2016.

But Marathon’s international history is acting against it in some respects. Operations in troubled areas like Libya mean investors are still wary.

Shares closed down 2.5 percent to $30.04 on Tuesday, though they remained relatively flat on Thursday. The company has gained 4 percent this year.


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