Marathon Oil earnings up on U.S. oil output

HOUSTON – Rising shale oil production pushed Marathon Oil Corp.’s profits up 27 percent in the second quarter as the firm worked to improve its hydraulic fracturing in North America.

The Houston oil explorer reported late Monday it collected a profit of $540 million, or 80 cents a share, in the second quarter, compared to a net income of $423 million, or 60 cents a share, in the same April-June period last year.

Revenues dipped 2 percent to $2.9 billion, even as the firm made efforts to cut back its international portfolio in Norway and Angola and grow production from its unconventional resource plays in North America, Lee Tillman, Marathon’s president and CEO, told investors in a conference call early Tuesday.

Investors over the past two years have pressured U.S. independent oil producers to shape up their debt-heavy balance sheets and cut spending on unprofitable projects. Many have been ordered to refocus their efforts on major shale plays in North America.

Tillman said he believes the company is stronger than it was 12 months ago, but also acknowledged “there’s much left to accomplish if we are to be recognized as a premiere independent E&P company.”

In racing terms, “we have our car well set up, we’ve run our qualifying laps, we even got ourselves a spot on the grid, but the race is just starting, and it’s time for Marathon Oil to shift to next gear,” Tillman told investors. “We must continue this shift to align our strategic commitment to rigorous portfolio management, capital discipline and shareholder value.”

Marathon’s daily production increased 9.1 percent to 394,000 barrels of oil equivalent per day. Its Eagle Ford Shale wells in South Texas yielded greater bounties as it increased the density of its multi-well pad drilling and improved its post-drilling processes. Most of the firm’s wells are placed at least 40 acres away from other wells, but it is testing closer spacing as a way to increase production and to reach deeper oil deposits.

“The bulk of that improvement is being driven by optimization of completion designs, a lot of that having to do with our dropping our stage-spacing down to 250 feet and below,” Tillman said.

Its output jumped 29 percent to 170,000 barrels per day in three major plays, the Eagle Ford, the Bakken Shale in North Dakota and in several regions in Oklahoma.

The company brought 76 wells in the Eagle Ford to sale in the second quarter and expects to generate “double-digit production growth” through the rest of the year, Tillman said.

Its average time to drill an Eagle Ford well from spud to total depth in the second quarter was 13 days, the company said.

The company expects to close the $2.7 billion sale of its Norwegian assets in the fourth quarter, and will prioritize organic growth as it looks to redeploy its capital, Tillman said.

“The confidence we have in that organic reinvestment is really underpinned by what we’ve seen in our downspacing and completion optimization in the Eagle Ford and the Bakken,” he said. “We fully expect a further acceleration case across really all of our resource plays will be a key consideration.”

Marathon shares rose 53 cents in pre-market trading Tuesday to $39.75 on the New York Stock Exchange.