Marathon Oil sees profits from more efficient U.S. drilling

Drilling at Marathon Oil Corp.'s operations in the Eagle Ford Shale formation in South Texas. (Marathon Oil)
Drilling at Marathon Oil Corp.’s operations in the Eagle Ford Shale formation in South Texas. (Marathon Oil)

Marathon Oil aims to keep driving down drilling and completion times in the U.S. plays like the Eagle Ford next year as it squeezes more money out of its assets, the company’s chief executive said in a conference call Tuesday.

“We’re making sure we generate the best economics,” in the shale plays and other onshore drilling regions, said Lee Tillman, president and CEO of Marathon Oil, during a call with investors and analysts. “As we look forward to 2014 and begin to look at frac crudes, we still see room there to drive that commercial element down a bit lower as well.”

In the Eagle Ford, the company’s “spud-to-spud” time – the time it takes to drill one well and start in on another – was down to an average of 12 days in the third quarter, Tillman said.

The Houston producer reported Monday that its drilling times in the Eagle Ford dropped off 20 percent from a year ago, as have its drilling and completion costs, even as it doubled its production over the same period. Marathon said it is expecting to pump 100,000 barrels of oil equivalent a day in the Eagle Ford by the end of the year.

Across the industry, U.S. producers have used technological advances to cut costs and increase production as the number of oil wells for every rig has grown in the Bakken, the Eagle Ford, the Haynesville, the Marcellus and the Niobrara shale plays, according to the Energy Information Administration.

As the number of U.S. shale play wells increases – and the number of rigs becomes less important – both oil and gas production have gone up, as well. In the Eagle Ford, for example, oil production from new wells per rig has grown to about from about 250 to 400 barrels per day between early 2012 and November, as the region’s rig count sank from about 300 in 2012 to about 275 last month, according to the EIA.

Tillman’s comments on ramping up wellhead efficiencies comes a day after the company reported $569 million in net income in the third quarter, 26 percent higher than profits in the same year-ago period.

The driver: Big production increases in the U.S. shale plays, especially the Eagle Ford, which doubled its oil production to 66,000 barrels per day over the year. North American oil and gas sales jumped from $107 million to $242 million in the same period. Meanwhile, Marathon’s price per barrel of crude in North America rose from $89.89 a year ago to $101.05 in the third quarter of 2013.

Marathon shares rose 17 cents to $35.67 in New York Stock Exchange trading Tuesday.