Marathon Oil Shops for Deals in US Shale Patch

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Marathon Oil does not see a deal as essential, but the independent is actively evaluating M&A opportunities in the US onshore. "We will always remain mindful of strategic opportunities in the marketplace," CEO Lee Tillman said Thursday. "That is our job." Marathon reckons it has a decade of high-quality inventory left in its core Eagle Ford and Bakken plays, where it holds a combined 415,000 net acres and roughly 190,000 barrels of oil equivalent per day of production. The company argues the capital efficiency of its assets there can compete with leading Permian pure-play holdings. But that doesn't mean Marathon will sit out the wave of consolidation taking place in the US shale patch -- provided the right opportunity comes along. Tillman said any deal would have to offer more than just scale. A merger or acquisition would need to: (1) be immediately accretive to returns, (2) enhance its ability to generate free cash flow, (3) be "balance sheet neutral" (i.e.: not weaken its debt metrics), and (4) be a clear strategic fit. Notably, Marathon is willing to look beyond the more mature Eagle Ford and Bakken when evaluating deals. "To really meet that criteria, I think you have to keep the aperture wide open," Tillman said. Marathon has struggled to find its footing with investors in a Permian Basin-dominated US shale narrative. The company posted its fourth consecutive quarterly loss on Thursday and has seen its shares fall more than 64% this year, underperforming even the hard-hit S&P Oil and Gas Index and its 55% decline. The company does hold roughly 145,000 net acres in the Texas-New Mexico tight oil play, but it generally lacks the scale and robust economic position of the Permian’s leading producers. Marathon briefly paused activity in the play earlier this year as oil prices tanked, favoring spending in the Eagle Ford and Bakken. The company expressed interest in growing its Permian position via bolt-on acquisitions last year, but might look to strike a larger bite via a corporate deal as consolidation heats up. ConocoPhillips did just that with its agreed acquisition of Permian pure-play Concho Resources, while Permian giant Pioneer Natural Resources is buying out smaller pure-play Parsley Energy (OD Oct.20'20). Casey Merriman, Phoenix Marathon Oil Q3 2020 Results ($ million) Q3'20 Q3'19 %Chg. Q2'20 Revenues $754 $1,345 -44% $272 Operating Cash Flow 1,055 2,049 -49 710 Net Income -317 165 -- -750 Adjusted Income -219 111 -- -477 US Income -135 180 -- -365 International Income $8 $43 -81 $33 US Oil Production ('000 b/d) 159 201 -21 182 Intl Oil Production ('000 b/d) 13 15 -13 15 US Oil & Gas Output ('000 boe/d) 297 339 -12 307 Intl Oil & Gas Output ('000 boe/d) 73 87 -16% 83 Source: Marathon

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