Marathon Oil(US:MRO)2020-02-13 20:57Financial Data and Key Metrics Changes - The company reported a normalized cash return on invested capital over 50% higher than in 2017, indicating robust financial performance [9] - Approximately $1.3 billion of post-dividend organic free cash flow generated since the beginning of 2018, with over $400 million delivered during 2019 [10] - The forecast for post-dividend organic free cash flow is around $600 million over the next two years at a flat WTI oil price of $50 per barrel [10][12] Business Line Data and Key Metrics Changes - The capital budget for 2020 is set at $2.4 billion, down 11% from 2019, with $2.2 billion allocated for development capital [17] - Approximately 70% of development capital will be directed to the Eagle Ford and Bakken, reflecting a strategic shift towards higher return assets [19] - The Bakken development program is expected to pay out in 11 months at actual 2019 costs and pricing, with completed well costs averaging below $5 million [21] Market Data and Key Metrics Changes - The company expects a post-dividend organic free cash flow breakeven oil price of $47 per barrel WTI in 2020, with an even lower breakeven in 2021 [10] - The company has a conservative balance sheet that insulates it from temporary downside price volatility [11] - The Eagle Ford is anticipated to deliver strong returns and free cash flow, contributing to oil growth despite a reduction in wells to sell [20] Company Strategy and Development Direction - The company prioritizes corporate returns improvement and sustainable free cash flow generation across a wide range of commodity prices [8] - The strategy includes a focus on disciplined reinvestment across a high-quality multi-basin portfolio to drive corporate returns higher [9] - The company aims to return capital to shareholders through a competitive dividend and share repurchase program, having returned approximately $1.4 billion since 2018 [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategy and sustainability to continue delivering results despite ongoing market volatility [8] - The outlook for 2020 and 2021 includes expectations for continued improvement in capital efficiency and free cash flow generation [12] - Management emphasized that outspending cash flow in 2020 is not an option, and the company will adjust its plans as necessary to protect free cash flow [11] Other Important Information - The company has successfully distinguished itself as one of the few E&P companies generating meaningful free cash flow while returning a significant portion to investors [14] - The company has added over 1000 locations through organic enhancement and acquisitions, representing approximately three years of inventory [16] - The company is transitioning its Oklahoma asset to positive free cash flow generation, benefiting from reduced spending and efficient operations [22] Q&A Session Summary Question: How does the market view Marathon's free cash flow numbers? - Management stated that the company is committed to capital allocation that balances returns improvement with sustainable free cash flow generation, emphasizing a strong track record [33] Question: What are the expectations for the Northern Delaware basin? - Management indicated that while capital allocation to Northern Delaware is slightly down, the area still receives a similar mix of capital, driven by confidence in generating high returns [35] Question: How is capital efficiency expected to improve in 2021? - Management noted that improvements in well productivity and completed well costs are contributing to capital efficiency gains in both 2020 and 2021 [42] Question: What are the expectations for the Louisiana Austin Chalk? - Management confirmed that the Western fairway of the Louisiana Austin Chalk is expected to have strong wellhead pressure, consistent with initial expectations [44] Question: How does the company view inorganic opportunities relative to the REx program? - Management explained that the resource capture framework includes organic enhancement, small bolt-ons, and the REx program, with a focus on generating success across all three dimensions [49] Question: What is the outlook for the Equatorial Guinea business unit? - Management expressed confidence that the Equatorial Guinea asset will continue to generate strong free cash flow, with minimal reinvestment required [63] Question: How does the company balance shareholder returns with exploration capital spend? - Management emphasized the importance of striking a balance between short-term returns and longer-term value creation through the resource capture framework [83]