Returned $3
Billion of Capital to Shareholders in 2022
HOUSTON, Feb. 15,
2023 /PRNewswire/ -- Marathon Oil Corporation
(NYSE: MRO) reported full year 2022 net income of $3,612 million, or $5.26 per diluted share, which includes the
impact of certain items not typically represented in analysts'
earnings estimates and that would otherwise affect comparability of
results. Adjusted net income was $3,078
million, or $4.48 per diluted
share. Net operating cash flow was $5,428
million, or $5,410 million
before changes in working capital (adjusted CFO). Free cash flow
was $3,978 million, or $3,947 million before changes in working capital
and including Equatorial Guinea
(E.G.) distributions (adjusted FCF).
Marathon Oil reported fourth quarter 2022 net income of
$525 million, or $0.82 per diluted share, which includes the
impact of certain items not typically represented in analysts'
earnings estimates and that would otherwise affect comparability of
results. Adjusted net income was $563
million, or $0.88 per diluted
share. Net operating cash flow was $1,127
million, and adjusted CFO was $1,104
million. Free cash flow was $794
million, and adjusted FCF was $763
million.
Highlights
- Returned 55% of adjusted CFO to shareholders in 2022 (75% of
adjusted FCF), significantly exceeding minimum 40% Return of
Capital Framework commitment
-
- Delivered total shareholder returns of $3.0 billion, representing a distribution yield
of 17% on current market capitalization, including $338 million during fourth quarter
- Executed $2.8 billion of share
repurchases, driving a 15% reduction to outstanding share count,
including $280 million during fourth
quarter
- Achieved outstanding full year 2022 and fourth quarter
financial and operational results
-
- Reported full year 2022 adjusted FCF of $3,947 million at 27% reinvestment rate; fourth
quarter adjusted FCF of $763 million
at 31% reinvestment rate
- Reported full year 2022 oil and oil-equivalent production of
169,000 net bopd and 343,000 net boed; fourth quarter oil and
oil-equivalent production of 166,000 net bopd and 333,000 net
boed
- Increased year-end 2022 proved reserves to 1,338 million
barrels of oil equivalent (mmboe), an addition of 232 mmboe, or
21%, in comparison to year-end 2021
- Successfully closed Ensign Natural Resources acquisition during
fourth quarter, materially increasing Eagle Ford scale
-
- Accretive to key financial metrics, Return of Capital
Framework, and inventory life with locations that immediately
compete for capital
- Cash flow growth from acquisition supports recently announced
11% base dividend increase; seventh increase in last eight
quarters
- Integration progressing ahead of schedule with strong initial
well performance
- E.G. integrated gas business achieved 2022 equity earnings of
$613 million
-
- Progressing agreements to secure increased exposure to global
LNG market in 2024; expected to drive significant improvement to
E.G. earnings and cash flow
- 2023 capital budget prioritizes FCF generation and meaningful
return of capital to shareholders
-
- Expect $1.9 to $2.0 billion capital program to deliver
$2.6 billion of adjusted FCF at
reinvestment rate of approximately 40%, assuming $80/bbl WTI, $3.00/MMBtu Henry Hub, and $20/MMBtu TTF
- Expect to return at least 40% of adjusted CFO to shareholders
in 2023, equating to minimum shareholder return of $1.8 billion at referenced commodity price
assumptions
- Expect total Company maintenance-level oil production of
190,000 net bopd at midpoint of guidance and oil-equivalent
production of 395,000 net boed at midpoint of guidance
"2022 marked another year of impressive delivery against every
dimension of our Framework for Success," said chairman, president,
and CEO Lee Tillman. "We generated
approximately $4 billion of free cash
flow and returned $3 billion of
capital back to our shareholders. We reduced our outstanding share
count by 15% through accretive share repurchases, contributing to
significant growth in per-share metrics, and we raised our
base dividend three times. With 55% of our adjusted CFO returned to
shareholders, our Return of Capital framework remains
differentiated among our peers, particularly in an inflationary
environment. We materially strengthened our portfolio by enhancing
our Eagle Ford scale through the Ensign acquisition, checking every
box of our disciplined acquisition criteria, including accretion to
key financial metrics, our Return of Capital Framework, and our
high-quality inventory life. Most importantly, we achieved these
outstanding results while holding true to our core values, keeping
our workforce safe, and delivering comprehensive ESG
excellence."
"Looking ahead to 2023 and beyond," continued Mr. Tillman, "I
expect more of the same from our Company. The combination of our
high-quality U.S. multi-basin portfolio and unique E.G. integrated
gas business with increasing global LNG exposure leaves us
well-positioned to deliver financial and operational results that
compete not only with the best of our energy peers, but with the
very best companies in the S&P 500."
Return of Capital Overview
Marathon Oil's percentage
of CFO return of capital framework provides clear visibility to
shareholder returns, ensuring the shareholder gets the first call
on cash flow generation and protecting shareholder distributions
from capital inflation. In a $60/bbl
WTI or higher price environment, the Company targets returning a
minimum of 40% of adjusted CFO to equity investors.
During 2022, Marathon Oil meaningfully exceeded its framework
minimum, returning 55% of adjusted CFO (approximately $3.0 billion) to equity holders in the form of
base dividends and share repurchases. Marathon Oil executed
approximately $2.8 billion of share
repurchases during 2022, driving a 15% reduction to outstanding
share count and contributing to significant underlying improvement
in all per-share metrics. Since Marathon Oil re-initiated its share
repurchase program in October 2021,
the Company has reduced its outstanding share count by more than
20%.
Following the recent close of the Ensign Eagle Ford acquisition,
the Company announced an 11% quarterly base dividend increase to
$0.10 per share. The dividend
increase is fully supported by incremental cash flow generation
capacity from the Ensign acquisition. Marathon Oil has raised its
base dividend seven times in the trailing eight quarters,
representing a cumulative increase of over 230% since the beginning
of 2021, fully consistent with the Company's commitment to pay a
competitive and sustainable base dividend.
For 2023, consistent with its framework, Marathon Oil expects to
return at least 40% of adjusted CFO to shareholders, equating to a
minimum shareholder return of $1.8
billion, assuming $80/bbl WTI,
$3.00/MMBtu Henry Hub, and
$20/MMBtu TTF commodity pricing.
2023 Capital Budget and Guidance
Marathon Oil
announced a $1.9 to $2.0 billion capital expenditure budget for 2023,
fully consistent with the Company's disciplined capital allocation
framework that prioritizes corporate returns and FCF
generation.
The 2023 program is expected to deliver $2.6 billion of adjusted FCF at a reinvestment
rate of approximately 40%, assuming $80/bbl WTI, $3.00/MMBtu Henry Hub, and $20/MMBtu TTF.
Marathon Oil expects to deliver maintenance-level total Company
oil production of 190,000 net bopd at the midpoint of its 2023
guidance range. Total Company oil-equivalent production is expected
to be 395,000 net boed at the midpoint of guidance, inclusive of
downtime associated with a planned second quarter E.G.
turnaround.
During 2023, Marathon Oil plans to average approximately nine
rigs and three to four frac crews, excluding joint venture-related
activity. The Company expects to run approximately four rigs and
two frac crews in the Eagle Ford, including on its newly acquired
acreage from Ensign.
Marathon Oil has not assumed any U.S. cash federal income tax
payments in its 2023 financial guidance.
4Q22 Operations
UNITED
STATES (U.S.): U.S. production averaged 278,000 net
barrels of oil equivalent per day (boed) for fourth quarter 2022.
Oil production averaged 156,000 net barrels of oil per day (bopd).
Winter Storm Elliot negatively
affected fourth quarter oil production by approximately 5,000
net bopd, with the impact primarily concentrated in the Bakken.
U.S. unit production costs were $6.29
per boe for fourth quarter.
The Company brought a total of 22 gross Company-operated wells
to sales during fourth quarter. Marathon Oil's fourth quarter
production in the Eagle Ford averaged 91,000 net boed, including
62,000 net bopd of oil, with 12 gross Company-operated wells to
sales. In the Bakken, production averaged 94,000 net boed,
including oil production of 59,000 net bopd, with four gross
Company-operated wells to sales. Oklahoma production averaged 50,000 net boed,
including oil production of 11,000 net bopd. Northern Delaware production averaged 33,000
net boed, including oil production of 20,000 net bopd, with six
gross company-operated wells to sales.
ENSIGN NATURAL RESOURCES ACQUISITION: As previously announced,
Marathon Oil closed on the acquisition of the Eagle Ford assets of
Ensign Natural Resources on Dec. 27,
2022. The acquisition is expected to be immediately and
significantly accretive to Marathon Oil's key financial metrics and
Return of Capital Framework; adds more than 600 high-quality
undrilled locations, representing an inventory life greater than 15
years; and materially increases Marathon Oil's Eagle Ford scale.
Early integration of the asset is progressing ahead of schedule,
and initial well performance is exceeding expectations. Since
acquisition close, Marathon Oil has brought nine wells to sales
with average 30-day initial production rates delivering top decile
oil productivity in the Eagle Ford.
INTERNATIONAL: E.G. production averaged 55,000 net boed for
fourth quarter, including 10,000 net bopd of oil. Unit production
costs averaged $3.94 per boe. Fourth
quarter net income from equity method investees totaled
$144 million while total dividends
from equity method companies amounted to $136 million.
Corporate Overview
2022 RESERVES: Year-end 2022 proved
reserves totaled 1,338 million barrels of oil equivalent (mmboe),
an increase of 232 mmboe, or 21%, compared to year-end 2021
proved reserves. 2022 proved reserve additions were primarily
attributable to acquisitions, the expansion of proved areas, higher
commodity prices, and 5-year plan optimization. Oil and liquids
accounted for 48% and 71% of the Company's year-end 2022 proved
reserves, respectively.
BALANCE SHEET AND LIQUIDITY: Marathon Oil ended fourth quarter
with total liquidity of $2.4 billion,
including $334 million of cash and
cash equivalents and available borrowings on the Company's
revolving credit facility that has been extended to 2027.
FOURTH QUARTER ADJUSTMENTS TO NET INCOME: The adjustments to net
income for fourth quarter totaled $38
million, primarily due to net losses on asset sales,
transaction fees associated with the Ensign acquisition, and other
non-core expenses, partially offset by the income impact related to
net unrealized gains on derivative instruments.
ESG Excellence
SAFETY: Marathon Oil holds safety as a
core value and a key component of its ESG commitment. The Company
strives to provide safe, healthy, and secure workplaces by
maintaining strong safety performance, as measured by Total
Recordable Incident Rate1 (TRIR) for employees and
contractors. During 2022, Marathon Oil achieved a TRIR of 0.30.
Marathon Oil's safety performance remains a key element of its
executive compensation scorecard, underscoring the Company's
commitment to keeping its employees and contractors safe.
ENVIRONMENTAL: Marathon Oil aims to help meet global oil and gas
demand with strong environmental performance by driving significant
improvement to both the greenhouse gas (GHG) and methane intensity
of its operations, consistent with the trajectory of the Paris
Climate Agreement. The Company continues to execute against a
combination of near-term (2023), medium-term (2025), and
longer-term (2030) goals covering GHG intensity, methane intensity,
natural gas capture, and zero routine flaring. The Company's annual
GHG intensity remains a key element of its executive compensation
scorecard.
SOCIAL: Marathon Oil is committed to promoting a diverse and
inclusive workplace, respecting human rights, and making strategic
investments to build healthier, safer, more resilient, and stronger
local communities. During 2022, Marathon Oil published its Equal
Opportunity and Employment (EEO-1) data and released a new Human
Rights Policy to further acknowledge its longstanding commitment to
the dignity and rights of all people. Key strategic social
investments during 2022 included: ongoing support of Equatorial Guinea's Bioko Island Malaria
Elimination Project; partnership with the National Fish and
Wildlife Foundation on grassland restoration projects in the
Bakken; awarding grants to teachers across operating areas through
the Unconventional Thinking in Teaching Program; and continued
support of the Barbara Bush Houston Literacy Foundation My Home
Library Program.
GOVERNANCE: Marathon Oil believes best-in-class governance
is foundational to delivering shareholder value. The Company is
especially focused on displaying industry leadership in aligning
executive compensation with the most critical drivers of
shareholder value and on maintaining an independent and diverse
board of directors with strong skills and experience. During 2022,
Marathon Oil continued to enhance its board of director oversight
through its focus on refreshment, independence, and diversity. The
Company elected two new board members in 2022. Eight of nine
directors are independent, average director tenure remains below
the S&P 500 average while maintaining a diverse mix of short
and longer-tenured directors, three directors are female (including
the lead director), and two directors self-identify as
ethnically/racially diverse.
A slide deck and Quarterly Investor Packet will be posted to the
Company's website following this release today, February 15. On Thursday,
February 16, at 9:00 a.m. ET,
the Company will conduct a question-and-answer webcast/call, which
will include forward-looking information. The live webcast, replay
and all related materials will be available at
https://ir.marathonoil.com/.
Media Relations Contact:
Karina Brooks: 713-296-2191
Investor Relations Contacts:
Guy Baber: 713-296-1892
John Reid: 713-296-4380
Footnotes:
1 Total recordable incident rate (TRIR)
measures combined employee and contractor workforce incidents per
200,000 work hours
About Marathon Oil
Marathon Oil Corporation (NYSE:
MRO) is an independent oil and gas exploration and production
(E&P) company focused on four of the most competitive resource
plays in the U.S. - Eagle Ford, Texas; Bakken, North Dakota; STACK and
SCOOP in Oklahoma and Permian in
New Mexico and Texas; complemented by a world-class
integrated gas business in Equatorial
Guinea. The Company's Framework for Success is founded on a
strong balance sheet, ESG excellence and the competitive advantages
of a high-quality multi-basin portfolio. For more information,
please visit www.marathonoil.com.
Non-GAAP Measures
In analyzing and planning for its business, Marathon Oil
supplements its use of GAAP financial measures with non-GAAP
financial measures, including adjusted net income (loss), adjusted
net income (loss) per share, net cash provided by operating
activities before changes in working capital (adjusted CFO), free
cash flow, adjusted free cash flow, capital expenditures (accrued)
and reinvestment rate.
Our presentation of adjusted net income (loss) and adjusted
net income (loss) per share is a non-GAAP measure. Adjusted net
income (loss) is defined as net income (loss) adjusted for gains or
losses on dispositions, impairments of proved and certain unproved
properties, goodwill and equity method investments, changes in our
valuation allowance, unrealized derivative gains or losses on
commodity and interest rate derivative instruments, effects of
pension settlements and curtailments and other items that could be
considered "non-operating" or "non-core" in nature. Management
believes this is useful to investors as another tool to
meaningfully represent our operating performance and to compare
Marathon to certain competitors. Adjusted net income (loss) and
adjusted net income (loss) per share should not be considered in
isolation or as an alternative to, or more meaningful than, net
income (loss) or net income (loss) per share as determined in
accordance with U.S. GAAP.
Our presentation of adjusted CFO is defined as net cash
provided by operating activities adjusted for changes in working
capital and is a non-GAAP measure. Management believes this is
useful to investors as an indicator of Marathon's ability to
generate cash quarterly or year-to-date by eliminating differences
caused by the timing of certain working capital items. Adjusted CFO
should not be considered in isolation or as an alternative to, or
more meaningful than, net cash provided by operating activities as
determined in accordance with U.S. GAAP.
Our presentation of free cash flow is a non-GAAP measure.
Free cash flow is defined as net cash provided by operating
activities and cash additions to property, plant and equipment.
Management believes this is useful to investors as a measure of
Marathon's ability to fund its capital expenditure programs,
service debt, and fund other distributions to stockholders. Free
cash flow should not be considered in isolation or as an
alternative to, or more meaningful than, net cash provided by
operating activities as determined in accordance with U.S.
GAAP.
Our presentation of adjusted free cash flow is a non-GAAP
measure. Adjusted free cash flow before dividend ("adjusted free
cash flow") is defined as adjusted CFO, capital expenditures
(accrued), and EG return of capital and other. Management believes
this is useful to investors as a measure of Marathon's ability to
fund its capital expenditure programs, service debt, and fund other
distributions to stockholders. Adjusted free cash flow should not
be considered in isolation or as an alternative to, or more
meaningful than, net cash provided by operating activities as
determined in accordance with U.S. GAAP.
Our presentation of capital expenditures (accrued) is a
non-GAAP measure. Capital expenditures (accrued) is defined as cash
additions to property, plant and equipment adjusted for the change
in capital accrual and additions to other assets. Management
believes this is useful to investors as an indicator of Marathon's
commitment to capital expenditure discipline by eliminating
differences caused by the timing of capital accrual and other
items. Capital expenditures (accrued) should not be considered in
isolation or as an alternative to, or more meaningful than, cash
additions to property, plant and equipment as determined in
accordance with U.S. GAAP.
Our presentation of reinvestment rate is a non-GAAP measure.
The reinvestment rate in the context of adjusted free cash flow is
defined as capital expenditures (accrued) divided by adjusted CFO.
The reinvestment rate in the context of free cash flow is defined
as cash additions to property, plant and equipment divided by net
cash provided by operating activities. Management believes the
reinvestment rate is useful to investors to demonstrate the
Company's commitment to generating cash for use towards
investor-friendly purposes (which includes balance sheet
enhancement, base dividend and other return of capital).
These non-GAAP financial measures reflect an additional way
of viewing aspects of the business that, when viewed with GAAP
results may provide a more complete understanding of factors and
trends affecting the business and are a useful tool to help
management and investors make informed decisions about Marathon
Oil's financial and operating performance. These measures should
not be considered in isolation or as an alternative to their most
directly comparable GAAP financial measures. A reconciliation
to their most directly comparable GAAP financial measures can be
found in our investor package on our website at
https://ir.marathonoil.com/ and in the tables below.
Marathon Oil strongly encourages investors to review the
Company's consolidated financial statements and publicly filed
reports in their entirety and not rely on any single financial
measure.
Forward-looking Statements
This release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. All statements, other
than statements of historical fact, including without limitation
statements regarding the Company's future capital budgets and
allocations, future performance (both absolute and relative), the
anticipated benefits of the Ensign acquisition (including accretion
to key financial metrics, Return of Capital Framework and
inventory); expected adjusted free cash flow, reinvestment rates,
returns to investors (including dividends and share repurchases,
and the timing thereof), business strategy, capital expenditure
guidance, production guidance, rig counts, future E.G. earnings and
cash flow, E.G. equity method income guidance, tax assumptions and
other statements regarding management's plans and objectives for
future operations, are forward-looking statements. Words such as
"anticipate," "believe," "continue," "could," "estimate," "expect,"
"forecast," "future," "guidance," "intend," "may," "outlook,"
"plan," "positioned," "project," "seek," "should," "target,"
"will," "would," or similar words may be used to identify
forward-looking statements; however, the absence of these words
does not mean that the statements are not forward-looking. While
the Company believes its assumptions concerning future events are
reasonable, a number of factors could cause actual results to
differ materially from those projected, including, but not limited
to: conditions in the oil and gas industry, including supply/demand
levels for crude oil and condensate, NGLs and natural gas and the
resulting impact on price; changes in expected reserve or
production levels; changes in political or economic conditions in
the U.S. and Equatorial Guinea,
including changes in foreign currency exchange rates, interest
rates, inflation rates and global and domestic market conditions;
actions taken by the members of the Organization of the Petroleum
Exporting Countries (OPEC) and Russia affecting the production and pricing of
crude oil and other global and domestic political, economic or
diplomatic developments; capital available for exploration and
development; risks related to the Company's hedging activities;
voluntary or involuntary curtailments, delays or cancellations of
certain drilling activities; well production timing; liabilities or
corrective actions resulting from litigation, other proceedings and
investigations or alleged violations of law or permits; drilling
and operating risks; lack of, or disruption in, access to storage
capacity, pipelines or other transportation methods; availability
of drilling rigs, materials and labor, including the costs
associated therewith; difficulty in obtaining necessary approvals
and permits; the availability, cost, terms and timing of issuance
or execution of, competition for, and challenges to, mineral
licenses and leases and governmental and other permits and
rights-of-way, and our ability to retain mineral licenses and
leases; non-performance by third parties of contractual or legal
obligations, including due to bankruptcy; unexpected events that
may impact distributions from our equity method investees; changes
in our credit ratings; hazards such as weather conditions, a health
pandemic (including COVID-19), acts of war or terrorist acts and
the government or military response thereto; the impacts of supply
chain disruptions that began during the COVID-19 pandemic and the
resulting inflationary environment; security threats, including
cybersecurity threats and disruptions to our business and
operations from breaches of our information technology systems, or
breaches of the information technology systems, facilities and
infrastructure of third parties with which we transact business;
changes in safety, health, environmental, tax and other
regulations, requirements or initiatives, including initiatives
addressing the impact of global climate change, air emissions, or
water management; our ability to achieve, reach or otherwise meet
initiatives, plans, or ambitions with respect to ESG matters; our
ability to pay dividends and make share repurchases; our ability to
secure increased exposure to the global LNG market in 2024; impacts
of the Inflation Reduction Act of 2022; and our assumptions
relating thereto; the risk that the Ensign assets do not perform
consistent with our expectations, including with respect to future
production or drilling inventory; other geological, operating and
economic considerations; and the risk factors, forward-looking
statements and challenges and uncertainties described in the
Company's 2021 Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and other public filings and press releases, available at
https://ir.marathonoil.com/. Except as required by law, the Company
undertakes no obligation to revise or update any forward-looking
statements as a result of new information, future events or
otherwise.
Consolidated
Statements of Income (Unaudited)
|
Three Months
Ended
|
Year
Ended
|
|
Dec.
31
|
Sept.
30
|
Dec.
31
|
Dec.
31
|
Dec.
31
|
(In millions, except
per share data)
|
2022
|
2022
|
2021
|
2022
|
2021
|
Revenues and other
income:
|
|
|
|
|
|
Revenues from
contracts with customers
|
$
1,603
|
$
2,008
|
$
1,732
|
$
7,540
|
$
5,601
|
Net gain (loss) on
commodity derivatives
|
15
|
41
|
15
|
(114)
|
(383)
|
Income from equity
method investments
|
144
|
190
|
74
|
613
|
253
|
Net gain (loss) on
disposal of assets
|
(39)
|
2
|
(27)
|
(38)
|
(19)
|
Other
income
|
10
|
6
|
6
|
35
|
15
|
Total revenues and
other income
|
1,733
|
2,247
|
1,800
|
8,036
|
5,467
|
Costs and
expenses:
|
|
|
|
|
|
Production
|
181
|
193
|
156
|
690
|
534
|
Shipping, handling and
other operating
|
158
|
199
|
189
|
733
|
727
|
Exploration
|
18
|
73
|
27
|
110
|
136
|
Depreciation,
depletion and amortization
|
434
|
460
|
516
|
1,753
|
2,066
|
Impairments
|
3
|
2
|
—
|
7
|
60
|
Taxes other than
income
|
103
|
137
|
109
|
484
|
345
|
General and
administrative
|
88
|
79
|
64
|
308
|
291
|
Total costs and
expenses
|
985
|
1,143
|
1,061
|
4,085
|
4,159
|
Income from
operations
|
748
|
1,104
|
739
|
3,951
|
1,308
|
Net interest and
other
|
(60)
|
(52)
|
(59)
|
(188)
|
(188)
|
Other net periodic
benefit credits
|
2
|
5
|
3
|
16
|
5
|
Loss on early
extinguishment of debt
|
—
|
—
|
—
|
—
|
(121)
|
Income before income
taxes
|
690
|
1,057
|
683
|
3,779
|
1,004
|
Provision for income
taxes
|
165
|
240
|
34
|
167
|
58
|
Net
income
|
$
525
|
$
817
|
$
649
|
$
3,612
|
$
946
|
Adjusted Net
Income
|
|
|
|
|
|
Net
income
|
$
525
|
$
817
|
$
649
|
$
3,612
|
$
946
|
Adjustments for special
items (pre-tax):
|
|
|
|
|
|
Net (gain) loss on
disposal of assets
|
39
|
(2)
|
27
|
38
|
19
|
Proved property
impairments
|
3
|
2
|
—
|
7
|
60
|
Exploratory dry well
costs, unproved property impairments
and other
|
12
|
62
|
16
|
74
|
71
|
Pension
settlement
|
2
|
—
|
1
|
2
|
9
|
Unrealized (gain) loss
on derivative instruments
|
(22)
|
(67)
|
(146)
|
(18)
|
(16)
|
Unrealized (gain) loss
on interest rate swaps
|
—
|
—
|
43
|
27
|
(14)
|
Reduction in
workforce
|
—
|
—
|
—
|
—
|
12
|
Loss on early
extinguishment of debt
|
—
|
—
|
—
|
—
|
121
|
Acquisition
transaction costs
|
18
|
—
|
—
|
18
|
—
|
Other
|
(2)
|
23
|
5
|
46
|
36
|
Provision (benefit) for
income taxes related to special items (a)
|
(12)
|
(3)
|
(3)
|
(43)
|
(3)
|
Valuation
allowance
|
—
|
—
|
—
|
(685)
|
—
|
Adjustments for
special items
|
38
|
15
|
(57)
|
(534)
|
295
|
Adjusted net income
(b)
|
$
563
|
$
832
|
$
592
|
$
3,078
|
$
1,241
|
Per diluted
share:
|
|
|
|
|
|
Net income
|
$
0.82
|
$
1.22
|
$
0.84
|
$
5.26
|
$
1.20
|
Adjusted net income
(b)
|
$
0.88
|
$
1.24
|
$
0.77
|
$
4.48
|
$
1.57
|
Weighted average
diluted shares
|
637
|
672
|
773
|
687
|
788
|
|
|
(a)
|
In 2022, we applied the
estimated U.S. and state statutory rate of 22% to our special
items. The remaining special items in the year of 2021 pertain to
our U.S. operations and did not incur a tax provision/benefit as we
maintained a full valuation allowance on our net federal deferred
tax assets.
|
(b)
|
Non-GAAP financial
measure. See "Non-GAAP Measures" above for further
discussion.
|
Supplemental Data
(Unaudited)
|
Three Months
Ended
|
Year
Ended
|
|
Dec.
31
|
Sept.
30
|
Dec.
31
|
Dec.
31
|
Dec.
31
|
(Per
share)
|
2022
|
2022
|
2021
|
2022
|
2021
|
Adjusted Net Income
Per Diluted Share
|
|
|
|
|
|
Net
income
|
$
0.82
|
$
1.22
|
$
0.84
|
$
5.26
|
$
1.20
|
Adjustments for special
items (pre-tax):
|
|
|
|
|
|
Net (gain) loss on
disposal of assets
|
0.06
|
—
|
0.03
|
0.06
|
0.02
|
Proved property
impairments
|
—
|
—
|
—
|
0.01
|
0.08
|
Exploratory dry well
costs, unproved property
impairments and other
|
0.02
|
0.09
|
0.02
|
0.11
|
0.09
|
Pension
settlement
|
—
|
—
|
—
|
—
|
0.01
|
Unrealized (gain) loss
on derivative instruments
|
(0.03)
|
(0.10)
|
(0.19)
|
(0.03)
|
(0.02)
|
Unrealized (gain) loss
on interest rate swaps
|
—
|
—
|
0.06
|
0.04
|
(0.02)
|
Reduction in
workforce
|
—
|
—
|
—
|
—
|
0.02
|
Loss on early
extinguishment of debt
|
—
|
—
|
—
|
—
|
0.15
|
Acquisition
transaction costs
|
0.03
|
—
|
—
|
0.03
|
—
|
Other
|
—
|
0.03
|
0.01
|
0.06
|
0.04
|
Provision (benefit) for
income taxes related to special items
|
(0.02)
|
—
|
—
|
(0.06)
|
—
|
Valuation
allowance
|
—
|
—
|
—
|
(1.00)
|
—
|
Adjustments for
special items
|
0.06
|
0.02
|
(0.07)
|
(0.78)
|
0.37
|
Adjusted net income
per share (a)
|
$
0.88
|
$
1.24
|
$
0.77
|
$
4.48
|
$
1.57
|
|
|
(a)
|
Non-GAAP financial
measure. See "Non-GAAP Measures" above for further
discussion.
|
Supplemental Data
(Unaudited)
|
Three Months
Ended
|
Year
Ended
|
|
Dec.
31
|
Sept.
30
|
Dec.
31
|
Dec.
31
|
Dec.
31
|
(In
millions)
|
2022
|
2022
|
2021
|
2022
|
2021
|
Segment
income
|
|
|
|
|
|
United
States
|
$
510
|
$
723
|
$
553
|
$ 2,740
|
$ 1,277
|
International
|
129
|
181
|
106
|
585
|
317
|
Not allocated to
segments
|
(114)
|
(87)
|
(10)
|
287
|
(648)
|
Net
income
|
$
525
|
$
817
|
$
649
|
$ 3,612
|
$
946
|
|
|
|
|
|
|
Net operating cash
flow before changes in working
capital (Adjusted CFO)
|
|
|
|
|
|
Net cash provided by
operating activities
|
$ 1,127
|
$ 1,556
|
$ 1,146
|
$ 5,428
|
$ 3,239
|
Changes in working
capital
|
(23)
|
(116)
|
(45)
|
(18)
|
(25)
|
Adjusted CFO
(a)
|
$ 1,104
|
$ 1,440
|
$ 1,101
|
$ 5,410
|
$ 3,214
|
|
|
|
|
|
|
Free cash
flow
|
|
|
|
|
|
Net cash provided by
operating activities
|
$ 1,127
|
$ 1,556
|
$ 1,146
|
$ 5,428
|
$ 3,239
|
Cash additions to
property, plant and equipment
|
(333)
|
(430)
|
(274)
|
(1,450)
|
(1,046)
|
Free cash
flow
|
$
794
|
$ 1,126
|
$
872
|
$ 3,978
|
$ 2,193
|
|
|
|
|
|
|
Adjusted free cash
flow
|
|
|
|
|
|
Adjusted CFO
|
$ 1,104
|
$ 1,440
|
$ 1,101
|
$ 5,410
|
$ 3,214
|
Adjustments:
|
|
|
|
|
|
Capital expenditures
(accrued)
|
(344)
|
(413)
|
(251)
|
(1,480)
|
(1,032)
|
EG return of capital
and other
|
3
|
4
|
48
|
17
|
57
|
Adjusted free cash
flow (a)
|
$
763
|
$ 1,031
|
$
898
|
$ 3,947
|
$ 2,239
|
Reinvestment rate
(a)
|
31 %
|
29 %
|
22 %
|
27 %
|
32 %
|
|
|
|
|
|
|
Capital expenditures
(accrued)
|
|
|
|
|
|
Cash additions to
property, plant and equipment
|
$
(333)
|
$
(430)
|
$
(274)
|
$
(1,450)
|
$
(1,046)
|
Change in capital
accrual
|
(11)
|
17
|
23
|
(30)
|
14
|
Capital
expenditures (accrued) (a)
|
$
(344)
|
$
(413)
|
$
(251)
|
$
(1,480)
|
$
(1,032)
|
|
|
(a)
|
Non-GAAP financial
measure. See "Non-GAAP Measures" above for further
discussion.
|
Supplemental Data
(Unaudited)
|
2023 Adjusted
Free
Cash Flow Outlook (a)
|
(In
millions)
|
Expected adjusted
CFO
|
|
Net cash provided by
operating activities
|
$
4,500
|
Changes in working
capital
|
—
|
Expected adjusted
CFO (b)
|
$
4,500
|
|
|
Expected adjusted
free cash flow
|
|
Expected adjusted
CFO
|
$
4,500
|
Adjustments:
|
|
Capital expenditures
(accrued)
|
(1,900) -
(2,000)
|
EG return of capital
and other
|
—
|
Expected adjusted
free cash flow (b)
|
$
2,600
|
Expected
reinvestment rate (b)
|
43 %
|
|
|
(a)
|
Based upon an $80/bbl
WTI, $3.00/MMbtu Henry Hub and $20/MMbtu TTF price
assumption.
|
(b)
|
Non-GAAP financial
measure. See "Non-GAAP Measures" above for further
discussion.
|
Supplemental
Statistics (Unaudited)
|
Three Months
Ended
|
Year
Ended
|
|
Dec.
31
|
Sept.
30
|
Dec.
31
|
Dec.
31
|
Dec.
31
|
Net
Production
|
2022
|
2022
|
2021
|
2022
|
2021
|
Equivalent
Production (mboed)
|
|
|
|
|
|
United
States
|
278
|
295
|
304
|
284
|
287
|
International
|
55
|
57
|
49
|
59
|
61
|
Total net
production
|
333
|
352
|
353
|
343
|
348
|
Oil Production
(mbbld)
|
|
|
|
|
|
United
States
|
156
|
166
|
172
|
159
|
162
|
International
|
10
|
10
|
9
|
10
|
11
|
Total net
production
|
166
|
176
|
181
|
169
|
173
|
Supplemental
Statistics (Unaudited)
|
Three Months
Ended
|
Year
Ended
|
|
Dec.
31
|
Sept.
30
|
Dec.
31
|
Dec.
31
|
Dec.
31
|
|
2022
|
2022
|
2021
|
2022
|
2021
|
United States - net
sales volumes
|
|
|
|
|
|
Crude oil and
condensate (mbbld)
|
156
|
166
|
171
|
159
|
161
|
Eagle Ford
|
62
|
61
|
60
|
57
|
58
|
Bakken
|
59
|
75
|
81
|
71
|
74
|
Oklahoma
|
10
|
12
|
13
|
12
|
12
|
Northern
Delaware
|
20
|
13
|
12
|
14
|
13
|
Other United
States
|
5
|
5
|
5
|
5
|
4
|
Natural gas liquids
(mbbld)
|
59
|
69
|
70
|
64
|
62
|
Eagle Ford
|
14
|
16
|
17
|
15
|
15
|
Bakken
|
22
|
27
|
27
|
25
|
23
|
Oklahoma
|
15
|
19
|
19
|
17
|
17
|
Northern
Delaware
|
6
|
5
|
5
|
5
|
5
|
Other United
States
|
2
|
2
|
2
|
2
|
2
|
Natural gas
(mmcfd)
|
371
|
363
|
379
|
363
|
379
|
Eagle Ford
|
93
|
82
|
94
|
86
|
97
|
Bakken
|
80
|
94
|
95
|
87
|
90
|
Oklahoma
|
143
|
140
|
146
|
140
|
147
|
Northern
Delaware
|
40
|
34
|
30
|
34
|
32
|
Other United
States
|
15
|
13
|
14
|
16
|
13
|
Total United States
(mboed)
|
277
|
295
|
304
|
284
|
286
|
International - net
sales volumes
|
|
|
|
|
|
Crude oil and
condensate (mbbld)
|
11
|
11
|
13
|
10
|
11
|
Equatorial
Guinea
|
11
|
11
|
13
|
10
|
11
|
Natural gas liquids
(mbbld)
|
6
|
7
|
5
|
7
|
7
|
Equatorial
Guinea
|
6
|
7
|
5
|
7
|
7
|
Natural gas
(mmcfd)
|
235
|
241
|
207
|
252
|
259
|
Equatorial
Guinea
|
235
|
241
|
207
|
252
|
259
|
Total International
(mboed)
|
56
|
58
|
53
|
59
|
61
|
Total Company - net
sales volumes (mboed)
|
333
|
353
|
357
|
343
|
347
|
Net sales volumes of
equity method investees
|
|
|
|
|
|
LNG (mtd)
|
1,653
|
2,536
|
2,213
|
2,565
|
2,941
|
Methanol
(mtd)
|
1,328
|
956
|
1,148
|
1,058
|
1,140
|
Condensate and LPG
(boed)
|
7,540
|
7,060
|
6,123
|
7,969
|
8,560
|
Supplemental
Statistics (Unaudited)
|
Three Months
Ended
|
Year
Ended
|
|
Dec.
31
|
Sept.
30
|
Dec.
31
|
Dec.
31
|
Dec.
31
|
|
2022
|
2022
|
2021
|
2022
|
2021
|
United States -
average price realizations (a)
|
|
|
|
|
|
Crude oil and
condensate ($ per bbl) (b)
|
$
84.29
|
$
93.67
|
$
77.03
|
$
95.58
|
$
66.88
|
Eagle Ford
|
84.26
|
94.05
|
77.68
|
95.73
|
68.26
|
Bakken
|
84.93
|
94.01
|
76.49
|
96.40
|
65.86
|
Oklahoma
|
82.36
|
92.48
|
77.39
|
95.26
|
66.82
|
Northern
Delaware
|
84.21
|
91.81
|
77.70
|
92.25
|
66.99
|
Other United
States
|
81.74
|
91.70
|
75.26
|
91.74
|
65.73
|
Natural gas liquids
($ per bbl)
|
$
26.02
|
$
34.00
|
$
34.99
|
$
34.55
|
$
28.89
|
Eagle Ford
|
26.47
|
34.25
|
34.26
|
34.12
|
29.34
|
Bakken
|
23.17
|
33.06
|
34.79
|
33.80
|
28.94
|
Oklahoma
|
30.14
|
35.92
|
36.42
|
37.09
|
29.28
|
Northern
Delaware
|
25.82
|
31.85
|
33.79
|
31.75
|
26.22
|
Other United
States
|
24.55
|
32.63
|
33.85
|
33.30
|
28.14
|
Natural gas ($ per
mcf)
|
$
4.93
|
$
7.84
|
$
5.24
|
$
6.11
|
$
4.57
|
Eagle Ford
|
4.99
|
7.35
|
5.25
|
5.94
|
4.50
|
Bakken
|
5.55
|
7.74
|
5.58
|
6.23
|
3.63
|
Oklahoma
|
4.95
|
8.25
|
5.08
|
6.27
|
5.22
|
Northern
Delaware
|
3.83
|
7.39
|
4.68
|
5.65
|
4.70
|
Other United
States
|
3.96
|
8.31
|
5.65
|
5.89
|
3.93
|
International -
average price realizations
|
|
|
|
|
|
Crude oil and
condensate ($ per bbl)
|
$
59.27
|
$
74.01
|
$
71.29
|
$
68.67
|
$
57.46
|
Equatorial
Guinea
|
59.27
|
74.01
|
71.29
|
68.67
|
57.46
|
Natural gas liquids
($ per bbl)
|
$
1.00
|
$
1.00
|
$
1.00
|
$
1.00
|
$
1.00
|
Equatorial Guinea
(c)
|
1.00
|
1.00
|
1.00
|
1.00
|
1.00
|
Natural gas ($ per
mcf)
|
$
0.24
|
$
0.24
|
$
0.24
|
$
0.24
|
$
0.24
|
Equatorial Guinea
(c)
|
0.24
|
0.24
|
0.24
|
0.24
|
0.24
|
Benchmark
|
|
|
|
|
|
WTI crude oil (per
bbl)
|
$
82.64
|
$
91.43
|
$
77.10
|
$
94.33
|
$
68.11
|
Brent (Europe) crude
oil (per bbl) (d)
|
$
88.56
|
$
100.71
|
$
79.59
|
$
100.78
|
$
70.68
|
Mont Belvieu NGLs (per
bbl) (e)
|
$
27.18
|
$
36.08
|
$
35.39
|
$
35.78
|
$
29.17
|
Henry Hub natural gas
(per mmbtu) (f)
|
$
6.26
|
$
8.20
|
$
5.83
|
$
6.64
|
$
3.84
|
TTF natural gas (per
mmbtu)
|
$
37.18
|
$
60.68
|
$
32.31
|
$
40.85
|
$
16.25
|
|
|
(a)
|
Excludes gains or
losses on commodity derivative instruments.
|
(b)
|
Inclusion of realized
gains (losses) on crude oil derivative instruments would have
decreased average price realizations by $0.40 for the fourth
quarter 2022, by $0.85 for the third quarter 2022, by $4.86 for the
fourth quarter of 2021, by $1.90 for the year ended December 31,
2022 and $4.76 for the year ended December 31, 2021.
|
(c)
|
Represents fixed prices
under long-term contracts with Alba Plant LLC, Atlantic Methanol
Production Company LLC and/or Equatorial Guinea LNG Holdings
Limited, which are equity method investees. The Alba Plant LLC
processes the NGLs and then sells secondary condensate, propane,
and butane at market prices. Marathon Oil includes its share of
income from each of these equity method investees in the
International segment.
|
(d)
|
Average of monthly
prices obtained from Energy Information Administration
website.
|
(e)
|
Bloomberg Finance LLP:
Y-grade Mix NGL of 55% ethane, 25% propane, 5% butane, 8%
isobutane and 7% natural gasoline.
|
(f)
|
Settlement date average
per mmbtu.
|
The following table sets forth outstanding derivative contracts
as of February 13, 2023 and the weighted average prices for
those contracts:
|
|
2023
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Natural
Gas
|
|
|
|
|
|
|
|
|
Henry Hub Two-Way
Collars
|
|
|
|
|
|
|
|
|
Volume
(MMBtu/day)
|
|
50,000
|
|
—
|
|
—
|
|
—
|
Weighted average price
per MMBtu:
|
|
|
|
|
|
|
|
|
Ceiling
|
|
$
19.28
|
|
$
—
|
|
$
—
|
|
$
—
|
Floor
|
|
$
5.00
|
|
$
—
|
|
$
—
|
|
$
—
|
Henry Hub
Three-Way Collars
|
|
|
|
|
|
|
|
|
Volume
(MMBtu/day)
|
|
50,000
|
|
50,000
|
|
50,000
|
|
50,000
|
Weighted average price
per MMBtu:
|
|
|
|
|
|
|
|
|
Ceiling
|
|
$
11.14
|
|
$
11.14
|
|
$
11.14
|
|
$
11.14
|
Floor
|
|
$
4.00
|
|
$
4.00
|
|
$
4.00
|
|
$
4.00
|
Sold put
|
|
$
2.50
|
|
$
2.50
|
|
$
2.50
|
|
$
2.50
|
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SOURCE Marathon Oil Corporation