The Marathon Oil First Quarter 2024 Earnings Conference Call is about to begin, and Guy Baber, Vice President of Investor Relations, will be leading the call. He introduces the other members of the team, including Lee Tillman, Chairman, President, and CEO, and Dane Whitehead, the new EVP and CFO. The call will contain forward-looking statements and non-GAAP terms, and the team will provide prepared remarks before moving on to a question-and-answer session. Lee Tillman thanks the employees and contractors for their hard work.

The company has a strong track record of execution excellence and has consistently generated sustainable free cash flow, returned capital to shareholders, and maintained strong safety and environmental standards. The first quarter of the year was another successful one, with the company meeting its targets and generating solid free cash flow despite not receiving any cash distributions from equity affiliates. This is expected to improve in the second quarter, as the company anticipates an increase in oil production and a decrease in capital spending.

Marathon Oil is focused on improving its asset base through extended lateral drilling, refracs, and redevelopment. They have identified over 600 opportunities for growth in the Bakken and Eagle Ford, with 30% of these opportunities located in recently acquired acreage. The company also continues to progress their EG Gas Mega Hub, which has already seen success with the shift to global LNG pricing. This progress is expected to lead to sustained financial performance. Overall, Marathon Oil is on track to deliver a strong 2024 business plan that will put them at the top of the E&P sector in key metrics.

Marathon Oil's first quarter performance demonstrates their strong free cash flow generation, capital efficiency, and commitment to shareholder returns. This is highlighted in their presentation slides and sets them apart from their peers. They are expecting $2.2 billion in free cash flow this year and plan to return at least 40% of their CFO to investors through dividends and share repurchases. They also emphasize their sustainable results in both their U.S. multi-basin portfolio and Integrated Gas business. The company's outgoing CFO, Dane Whitehead, is recognized for his contributions to their success and his leadership qualities.

The writer reflects on their time at Marathon Oil and expresses confidence in their successor, Rob. Rob will be discussing the company's financial performance and priorities for the year, including solid cash flow and free cash flow generation. They expect an improvement in free cash flow as the year progresses due to increased production and a decrease in capital spending.

The company's key financial priority for the year is to return at least 40% of its cash flow from operations to shareholders, which translates to $1.7 billion at a WTI price of $80 per barrel. They have a strong commitment to shareholder returns and have returned a total of $5.8 billion to equity holders in the past 10 quarters. Share repurchases are seen as the preferred return vehicle and are value accretive. The company also plans to continue enhancing their investment-grade balance sheet through gross debt reduction.

The company had a successful year in 2020, returning capital to shareholders and reducing gross debt by $500 million. They expect to see similar results in 2024. They also strengthened their financial flexibility by completing a bond offering and using the proceeds to pay off a term loan, resulting in annual interest savings. The company plans to remarket their tax-exempt bonds and has minimal bond maturities in the next 5 years. They have a strong balance sheet and are committed to meeting their shareholder return commitment and reducing debt. The focus now turns to operational highlights, which were consistent with the company's plan.

The company has not changed its annual guidance and is on track to deliver its 2024 program. They have achieved top benchmarks in the industry for free cash flow generation, capital efficiency, and shareholder returns. The first quarter saw strong performance in oil production and capital expenditures, particularly in the Eagle Ford and Bakken regions. The Permian team had another excellent quarter with significant production growth and a track record of successful execution. Their Upper Wolfcamp wells in core Red Hills are outperforming and the team has consistently delivered competitive results with their drilling and completion execution.

After a 2-year break in the Permian due to the pandemic, the company now has a strong acreage position and a large inventory of drilling opportunities. They plan to increase capital investment in the Permian while maintaining disciplined spending. The company's annual guidance for production and capital expenditures remains unchanged and they are confident in meeting their full year commitments. The 2024 capital program will be heavily weighted in the first half of the year, resulting in a slight increase in capital spending and oil production in the second quarter. The company will also focus on enhancing capital efficiency and the strength of their assets through extended laterals and other initiatives. Extended laterals are expected to improve returns and NPV compared to shorter laterals.

The company's initial cohort of 12, 3-mile wells is delivering positive results, with cost savings of over 20% compared to 2-mile laterals. The company's first 3-mile pad in the Permian Basin is performing exceptionally well and is expected to be one of the strongest in the basin's history. The company also has approximately 600 high-quality refrac and redevelopment opportunities in the Bakken and Eagle Ford, with 30% of these opportunities located in the Ensign acreage in the Eagle Ford. These opportunities are complementary to the company's primary drilling inventory and have been rigorously tested and developed over the past 5 years. The company's organic enhancement program, which allocates 5-10% of the total capital budget, focuses on enhancing returns and resource recovery through targeted testing and integration into the primary plan of development.

The company has successfully brought online over 100 refracs and 50 redevelopment wells in the Bakken and Eagle Ford, resulting in a rich technical data set and operational understanding. They have identified 600 future opportunities that are strongly economic and competitive with Tier 1 primary development inventory. Around 20 opportunities are brought online per year, accounting for 10% of their activity in the Bakken and Eagle Ford. These opportunities are integrated into their primary plan of development, resulting in strong recent results and proving their economic attractiveness. In the Bakken, most opportunities are refracs, which have delivered competitive productivity and cost savings compared to industry averages. In the Eagle Ford, the opportunity set is more balanced between refracs and redevelopment.

The company's refrac and redevelopment programs in the Bakken and Eagle Ford have been more productive than the industry average and have positively impacted their bottom line results. These programs represent a valuable opportunity to extend the life of their existing resource base. In their EG operations, the company has transitioned to directly marketing their share of Alba LNG, which has resulted in an increase in international revenue and improved transparency into their integrated gas business. Their 2024 guidance remains unchanged.

The company has seen a significant increase in EBITDAX generation and expects this trend to continue due to their focus on the EG Gas Mega Hub concept. The 5-year outlook for EBITDAX is strong and will be sustained through various factors. The company has sanctioned a new Alba infill program, which will mitigate base decline and contribute to a flat production profile. The program is low risk and has competitive returns. The company has been delivering strong financial performance and expects to continue this trend in 2024.

The paragraph discusses the company's high-quality portfolio and integrated global gas business, which generates strong free cash flow and provides shareholders with consistent returns. The company's strategy is sustainable and resilient through the commodity cycle, thanks to its U.S. multi-basin portfolio and integrated gas business. The company is committed to its strategy and has a track record of success. The speaker also mentions the refracturing of wells, which is a cost-effective way to increase production in the Bakken and Eagle Ford regions.

Marathon Oil discusses the cost and productivity of refractured wells in the Bakken and Eagle Ford, stating that they are comparable to new wells and even outperforming in the Eagle Ford. They also mention their significant inventory in the Permian and potential for increased investment in the future.

The company has been strategic and methodical in their approach to the Permian basin, which is now competing with their other top-performing assets. They plan to continue investing in the Permian, which has a strong inventory and potential for extended lateral drilling. The team has earned their spot in capital allocation and has been disciplined in their approach to mitigate execution risk and incorporate learnings.

The company is shifting its focus to the Wolfcamp in the Permian and plans to target proven benches with conservative well spacing. The multi-basin portfolio allows for flexibility in capital allocation. The company is currently refracking 25 wells and expects them to have similar value as new drills. There are 600 potential refrac opportunities across the Bakken and Eagle Ford.

The speaker discusses the potential for volume uplift in the Eagle Ford due to refracs and redevelopment, which are highly competitive with new drills. They also mention that 30% of these opportunities lie in the Ensign acreage, which was acquired with no value ascribed to refrac and redevelopment. The fact that 10% of their budget is allocated to these activities speaks to the quality of their existing primary inventory. The speaker also mentions changes in accounting for EG and plans to discuss this further with Guy.

The speaker clarifies that the accounting situation should not overshadow the positive results of the company's assets. He then hands over to the accounting team to address a question about the impact on cash flow reporting. The team explains that there may be a positive difference in cash flow due to the consolidation of business, which eliminates timing issues with dividends. The speaker then thanks a departing team member for their help and support.

Betty Jiang from Barclays asks about the value maximization efforts at EG integrated gas assets and the potential for redirecting volumes into the methanol plant instead of LNG sales. Lee Tillman explains that the overall approach in EG has been comprehensive and they are always looking to drive more opportunities. He mentions that diverting gas into the methanol facility makes sense for their partners and the state, and the Gas Sales Agreement with the methanol plant ends in 2026. After that, they will have to make a strategic decision about the future of the facility, but for now, they are taking advantage of the arbitrage while also meeting their marketing obligations. Betty then asks another question about the Permian.

The speaker is pleased with the strong results from the wells in the Permian basin, but is curious about the sustainability of this level of productivity. The response is that the company has over 20 years of inventory at the current drilling pace and will continue to target proven benches at conservative well spacing. They expect the capital efficiency to remain consistent and potentially even ramp up in the future. The company's acreage position is lightly developed, providing a lot of running room with high-quality inventory. In terms of capital allocation, the speaker is asked about the current value of the company's stock compared to potential assets in the market.

The speaker talks about their company's share repurchase program and how it is still a preferred method for returning cash to shareholders. They also mention their strict criteria for potential acquisitions and how it has become even higher due to recent developments in their portfolio. However, they see these as two separate decisions and prioritize returning cash to shareholders through their base dividend and share repurchases.

The company is open to potential M&A opportunities, but will carefully evaluate each one based on specific criteria. They also see opportunities for expansion in the EG region, particularly in terms of gas aggregation and cross-border opportunities. The Gas Mega Hub project is progressing in phases, with the company currently negotiating the ethane gas processing stage. This will help extend the lifespan of their existing infrastructure.

The speaker discusses the benefits of extending a runway and how it will create more opportunities for the company. They mention the potential for indigenous and cross-border gas, and how the facility will serve as a natural aggregation point for regional gas. The next question is about the company's long laterals in the Eagle Ford, Bakken, and Permian. The speaker explains that the company is moving towards longer laterals and is seeing efficiency and cost benefits from this approach. They also mention that other operators are following a similar strategy and that they are consolidating and driving towards extended laterals in their operated acreage.

Michael Henderson, a company executive, praises the land team for their efficient work and mentions the possibility of doing deals with offset operators to extend the average length of land. Another executive, Pat, explains the company's hedging strategy and the recent decision to hedge gas exposure due to a unique opportunity in the market.

The speaker asks about the success of the Ajax development program and its return profile compared to the Vector program. The response notes a reduction in PwC per foot savings and solid initial production, but suggests that longer-term production needs to be monitored. The speaker also discusses efficiency gains in drilling and completion, but does not anticipate a change in the wells to sales range.

The company has seen improvements in rate of penetration in the D and C side, particularly in the Eagle Ford. They have found ways to drive execution and efficiency in both drilling and fracking. Despite winter weather challenges, they have maintained efficiencies in the Bakken and have drilled wells 40% faster than the peer average in the Permian. This is due to high grading in certain areas, preplanning, and implementing changes with longer-term program contracts.

Marathon Oil is finding success in drilling longer laterals with a single trip, which has helped them manage their directional plan more effectively. They are off to a solid start this year and have high confidence in meeting their full year guidance. CEO Lee Tillman thanks employees and contractors for their commitment and also acknowledges the departure of Dane Whitehead. The conference call has now concluded.

This summary was generated with AI and may contain some inaccuracies.