USA: Marathon Oil Corporation Reports 2nd Q 2010 Net Income of $709 M
Marathon Oil Corporation today reported second quarter 2010 net income of $709 million, or $1.00 per diluted share. Net income in the second quarter of 2009 was $413 million, or $0.58 per diluted share.
For the second quarter of 2010, net income adjusted for special items was $792 million, or $1.11 per diluted share, compared to net income adjusted for special items of $251 million, or $0.35 per diluted share, for the second quarter of 2009.
“Marathon had a strong financial and operational second quarter. The Company’s continued focus on reliability, as well as the first full-quarter contribution from the expanded Garyville refinery, provided a strong operational performance that allowed us to benefit from higher year-over-year crude oil and natural gas realizations and much-improved margins for refined products,” said Clarence P. Cazalot Jr., Marathon’s president and chief executive officer. “These results represent an impressive team effort, especially considering they were achieved during significant scheduled maintenance and turnaround activity and as we progressed other major projects, including the deepwater Droshky development in the Gulf of Mexico, which began production July 15.”
Total segment income was $817 million in the second quarter of 2010, compared to $388 million in the second quarter of 2009.
Exploration and Production
Exploration and Production (E&P) segment income totaled $432 million in the second quarter of 2010, compared to $208 million in the year-ago quarter. The increase was primarily a result of higher liquid hydrocarbon and natural gas price realizations, partially offset by lower sales volumes.
E&P sales volumes during the quarter averaged 386,000 barrels of oil equivalent per day (boepd), compared to 428,000 boepd for the same period last year. E&P production available for sale in the second quarter of 2010 averaged 375,000 boepd, at the upper end of previous guidance, compared to 405,000 boepd in the same period last year. The decrease from the prior year was primarily the result of normal production declines, a planned turnaround of Marathon’s production facilities in Equatorial Guinea that was completed in April and the sale of the Company’s Permian Basin assets in the second quarter of 2009. The difference between production volumes available for sale and recorded sales volumes was due to the timing of international liftings, primarily in the U.K. and Norway.
United States E&P reported income of $25 million for the second quarter of 2010, compared to a loss of $41 million in the second quarter of 2009. The increase was primarily related to a 28 percent increase in liquid hydrocarbon realizations. Partially offsetting the increase were higher exploration expenses and lower sales volumes due to normal production declines and the Permian Basin divestitures. Depreciation, depletion and amortization (DD&A) expense decreased approximately $99 million as a result of lower volumes and a lower DD&A rate per barrel.
International E&P income was $407 million in the second quarter of 2010, compared to $249 million in the second quarter of 2009. This increase in income was primarily related to a 33 percent increase in liquid hydrocarbon realizations partially offset by lower sales volumes in the U.K. and Equatorial Guinea.
In April, Marathon began drilling the Innsbruck prospect (Mississippi Canyon Block 993, 85 percent working interest and operator) and, in accordance with the federal government’s drilling moratorium, drilling operations on the well were suspended at a depth of 19,800 feet as compared to a proposed total depth of 29,500 feet. The Company released the rig June 16 without penalty.
In the North Dakota Bakken Shale play, the Company added a fifth operated rig during the second quarter, with plans to add a sixth by the end of 2010. Current net production amounts to approximately 12,700 boepd, compared to 9,300 boepd at the end of the second quarter of 2009.
Marathon added three additional onshore exploration licenses with shale gas potential in Poland in July, bringing its total number of licenses to 10 and increasing its total acreage position to approximately 2.1 million net acres. Marathon has a 100 percent interest and is operator of all 10 blocks. As previously stated, the Company is pursuing additional licenses in Poland. Marathon plans to begin geologic studies in Poland during 2010 followed by the acquisition of 2D seismic in 2011.
During the second quarter, Marathon commenced sustained production from the Volund field (65 percent WI and operator) offshore Norway. Volund, a subsea tieback to the Alvheim floating, production, storage and offloading (FPSO) vessel, had been available as a swing producer since September 2009. Production from Volund will help the Alvheim FPSO maintain its current production of approximately 140,000 gross barrels per day (bpd) of liquid hydrocarbons.
In the Gulf of Mexico, the Company reported that its deepwater Droshky development (Green Canyon Block 244, 100 percent WI) began production July 15, on time and under budget. The primary factor contributing to Marathon’s cost savings on Droshky was a well-designed and executed drilling plan by the interdisciplinary team that carried out the major subsea project. Droshky, which consists of four development wells tied back to a third-party platform, is expected to produce approximately 50,000 net boepd at its peak, consisting of approximately 45,000 bpd of liquid hydrocarbons and 30 million cubic feet per day (mmcfd) of natural gas.
In Indonesia, Marathon plans to begin drilling a deepwater exploration well in the Pasangkayu block (70 percent WI and operator) in August.
Marathon estimates third quarter E&P production available for sale will be between 385,000 and 405,000 boepd, excluding the effect of any future acquisitions or dispositions. Anticipated full-year E&P production available for sale remains unchanged at between 390,000 and 410,000 boepd.
Source: Marathon Oil, August 4, 2010: