MARATHON OIL CORP (MRO)·Q3 2024 Earnings Summary

Executive Summary

• Q3 2024 delivered strong operational execution with oil production 207 mbbl/d and total equivalent 421 mboe/d; net income was $287M ($0.51 EPS) and adjusted net income was $360M ($0.64 EPS) as the company benefited from drilling/completion efficiencies and higher LNG realizations in Equatorial Guinea .
• Free cash flow rose to $659M ($589M adjusted), capital expenditures declined sequentially to $458M, and gross debt was reduced by $545M in the quarter; cash increased by $57M to $134M .
• Full-year production guidance was raised: oil to 192k bopd and oil-equivalent to 393k boed (from prior midpoints 190k/390k), with capex range unchanged; Q4 oil expected to moderate to ~190k bopd with price-normalized FCF expected to increase sequentially .
• The company did not host an earnings call due to its pending merger with ConocoPhillips; share repurchases have been discontinued, and the base dividend ($0.11/share) was maintained per the Merger Agreement .

What Went Well and What Went Wrong

• What Went Well

  • U.S. oil production beat guidance (~200k bopd planned vs. 198k U.S. oil and 207k total company) on strong new well productivity and efficiency gains; U.S. unit costs improved to $5.97/boe .
  • EG LNG realizations increased to $10.76/mcf and international average total natural gas price rose to $5.75/mcf, reflecting the shift to global LNG pricing and optimization of gas flows .
  • Balance sheet progress: $545M sequential gross debt reduction and $57M increase in cash; FCF strengthened to $659M as capex fell to $458M .

• What Went Wrong

  • GAAP EPS was pressured by a $75M deferred tax valuation allowance for expiring foreign tax credits, contributing to the gap between GAAP ($0.51) and adjusted EPS ($0.64) .
  • International sales volumes were below international production due to a 31 mmcfd LNG underlift at Alba (unsold LNG inventory), creating timing effects on reported volumes .
  • No earnings call due to the pending COP merger, limiting real-time management Q&A and potentially reducing transparency vs. typical quarters; share repurchases were discontinued under the Merger Agreement .

Financial Results

Segment breakdown:

KPIs:

Guidance Changes

Earnings Call Themes & Trends

Note: MRO did not host earnings calls for Q2 and Q3 due to the pending COP merger .

Management Commentary

• “We remain fully on track to deliver a 2024 business plan that once again benchmarks at the top of the E&P sector on the metrics that I believe matter most, free cash flow generation, capital efficiency and shareholder returns.” – CEO Lee Tillman .
• “During the first quarter, we realized the long-awaited shift to global LNG pricing for our Alba LNG… these LNG sales at $7.21 per mcf realization drove a significant increase to the international revenue within our consolidated financials.” – CEO Lee Tillman .
• “Extended laterals remain a compelling opportunity to continue enhancing our capital efficiency… consistently realizing well cost savings on a per foot basis of more than 20% versus comparable 2-mile laterals.” – EVP Operations Mike Henderson .

Q&A Highlights

• Refracs economics: cost ~80% of a new well with competitive productivity (Bakken≈industry average; Eagle Ford≈top quartile); refrac output returns to a typical new well decline profile .
• Permian capital allocation: disciplined ramp with proven benches, conservative spacing; multi-basin portfolio allows flexible capital shifts; sustained productivity expected .
• EG optimization: divert gas to higher-margin LNG while maintaining methanol obligations; GSA with AMPCO runs through 2026; broader regional gas aggregation potential .
• Hedging: added Henry Hub two-way collars for 2025 around $2.50–$5.85/MMBtu as opportunistic risk management .

Estimates Context

• We attempted to retrieve Wall Street consensus (S&P Global) for Q3 2024 EPS and revenue, but estimates were unavailable due to a Capital IQ mapping issue for MRO. As a result, a vs-consensus comparison could not be provided at this time (S&P Global data unavailable). We will update when S&P mapping is restored.

Key Takeaways for Investors

• Production outperformance and improved unit costs underpin Q3 operational strength; combined with capex moderation, this sets up a sequentially stronger, price-normalized FCF in Q4 .
• Raised FY 2024 oil and BOE guidance reflects stronger well productivity and efficiency; capex guidance unchanged, supporting capital discipline .
• EG’s LNG pricing transition continues to boost realizations and international profitability; Q3’s $10.76/mcf LNG price evidences favorable macro tailwinds and contract structures .
• Balance sheet strengthening remains a priority; $545M gross debt reduction in Q3 and cash build reinforce financial flexibility amid merger-related constraints on buybacks/dividend increases .
• Merger process with COP continues to shape capital returns (repurchases paused; base dividend maintained); absence of Q3 call reduces near-term qualitative color but core execution trends are positive .
• Near-term trading catalysts: Q4 oil moderation to ~190k bopd alongside expected sequential FCF increase; continued LNG price uplift and EG cash distributions cadence could drive sentiment .
• Medium-term thesis: sustained capital efficiency via extended laterals and refracs, rising Permian competitiveness, and EG Gas Mega Hub progression support durable FCF and shareholder distributions when merger constraints lift .

Non-GAAP notes: Adjusted EPS and adjusted FCF are non-GAAP measures defined and reconciled within MRO’s disclosures **[101778_0000101778-24-000134_ex991mro-20240930xer.htm:2]** **[101778_0001193125-24-195984_d834917dex991.htm:3]** **[101778_0000101778-24-000094_ex991mro-20240331xer.htm:6]**.