USA: Marathon Oil Q3 Profit Declines

Marathon Oil Corporation  reported third quarter 2011 net income of $405 million, or $0.57 per diluted share.

Net income in the third quarter of 2010 was $696 million, or $0.98 per diluted share. On June 30, 2011, Marathon Oil completed the spin-off of its Refining, Marketing and Transportation business, which is now reported as discontinued operations and excluded from segment income. As a result, income from continuing operations will be best suited for comparison. For the third quarter of 2011, adjusted income from continuing operations was $421 million, or $0.59 per diluted share, compared to adjusted income from continuing operations of $482 million, or $0.68 per diluted share, for the third quarter of 2010.

“Operationally, we had a strong quarter across our assets,” said Clarence P. Cazalot Jr, Marathon Oil’s chairman, president and CEO. “Our production available for sale from the combined Exploration and Production (E&P) and Oil Sands Mining (OSM) segments was up 2 percent over the second quarter, driven by strong reliability, particularly in Norway and Equatorial Guinea, and a full quarter of the Athabasca Oil Sands Project (AOSP) post-Expansion 1. Operating cash flow remains solid even with the pullback in commodity prices, essentially self-funding our capital program and robust dividend and providing the opportunity to repurchase approximately 12 million shares for $300 million during the quarter. The higher tax rate in the third quarter of 2011 is largely a result of excess foreign tax credits the Company currently does not expect to utilize in the future, which resulted in a non-cash charge of $227 million in the quarter.

“Today, as Marathon Oil closes on the Hilcorp acquisition of 141,000 net acres in the Eagle Ford shale, largely in the core of the play, we already see better performance from these assets than originally anticipated. We begin this first day as operator of these key assets already producing nearly 1,000 net barrels of oil equivalent per day (boepd) more than our originally projected year-end exit rate. We also are closing on or have agreements to acquire additional acreage, also in the core of the play, that are expected to increase our total Eagle Ford position to more than 300,000 net acres by year end. We now expect our 2011 exit rate from the Eagle Ford to be approximately 18,000 net boepd. Combined with our substantial positions in the Bakken and Anadarko Woodford, along with the emerging Niobrara shale play, these assets will provide the greatest amount of the Company’s production growth, enabling us to deliver 5 to 7 percent compound average production growth, 80 percent of which is estimated to be liquids, from 2010 to 2016.

“We now project 2012 production to grow by 5 percent over 2011, excluding any potential Libyan production from both years. In fact, our U.S. production in the lower 48 states, excluding the Gulf of Mexico, is projected to increase from an average 75,000 boepd in the third quarter of 2011 to between 120,000 and 130,000 boepd in the fourth quarter of 2012.

“We remain committed to delivering top quartile total shareholder return and, as part of that commitment, we continue to seek opportunities to high-grade our asset base and sell non-core assets such as the sale of pipeline systems in the Gulf of Mexico just announced. Over the past five years, we have executed sales with approximately $3.5 billion in transaction value. We continue the ongoing review of our global portfolio with a goal of an additional $1.5 billion to $3 billion in divestitures over the next two to three years.”

Integrated Gas

Integrated Gas segment income was $55 million in the third quarter of 2011, compared to $41 million in the third quarter of 2010. Third quarter 2011 income includes the gain on the sale of Marathon Oil’s interest in the Alaska liquefied natural gas (LNG) production facility. In Equatorial Guinea, Atlantic Methanol Production Company’s methanol sales volumes and realizations increased during the third quarter, contributing to segment earnings. The LNG facility in Equatorial Guinea had operational availability of 97.2 percent for the third quarter of 2011.

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Source: Marathon Oi, November 2, 2011