Q1 2024 Earnings Summary
Reported on Feb 18, 2025 (After Market Close)
Pre-Earnings Price$26.09Last close (May 2, 2024)
Post-Earnings Price$26.25Open (May 3, 2024)
Price Change
$0.16(+0.61%)
- Strong performance and potential in the Permian Basin: Marathon Oil has approximately 20-plus years of inventory in the Permian Basin and is increasing capital allocation to this region due to strong results, especially from their Lea County wells. The Permian is expected to be a growth asset for the company moving forward.
- Significant drilling and completion efficiency gains: The company is seeing notable improvements in drilling and completion efficiencies across its operations. In the Permian, their first quarter 3-mile Wolfcamp program drilled wells 40% faster than the peer average, and on the Texas Delaware multi-well pad, their rate of penetration was 25% faster than previous drilling. These efficiency gains enhance the company's confidence in delivering on its full-year guidance.
- Flexibility of multi-basin portfolio to capitalize on market conditions: Marathon Oil's multi-basin approach allows the company to shift capital allocation among assets, focusing on the most profitable areas. Currently, they are able to capitalize on the strong performance of true black oil areas like the Eagle Ford and the Bakken, while minimizing exposure to less favorable gas markets.
- Marathon Oil plans to increase capital allocation to the Permian basin gradually rather than significantly, which may limit its production growth potential compared to peers who are investing more aggressively. CEO Lee Tillman stated that while the Permian is expected to be a growth asset, the company does not anticipate "a step change increase in one given budget cycle" in investment levels.
- There is uncertainty regarding the longer-term production performance of new extended lateral projects, such as the Ajax program. Mike Henderson acknowledged that while initial results are promising, "we probably do need to do more on the longer-term production just to make sure that the shallower declines that we're expecting actually come to fruition." This uncertainty may impact the company's ability to achieve expected returns from these projects.
- Despite improvements in drilling and completion efficiencies, Marathon Oil does not expect a significant increase in wells to sales for the year. Mike Henderson noted, "you shouldn't expect much of a change in terms of wells to sales. It's really just a phasing within the year." This suggests that efficiency gains may not translate into increased production or revenue growth, potentially limiting upside for investors.
Research analysts covering MRO.