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Marathon Oil Sets 2011 Capital Budget
Marathon Oil (NYSE:MRO) announced a $5.3 billion capital budget for 2011, including a major increase in upstream spending on oil and liquids development in North America. The company is targeting various growth areas in the onshore United States, along with global "high impact" exploration.
IN PICTURES: 4 Biggest Investor Errors
2011 Capital Budget
Marathon Oil has allocated $3.4 billion for its exploration and production budget in 2011, with the funds spread across its base and growth assets and what the company calls high impact exploration. This is 29% more than the company spent in 2010.
Growth Assets
Marathon Oil is putting $1.9 billion in 2011 into growth areas in North America, with slightly more than half that amount being put into the various onshore oil and liquids plays that has come to dominate drilling in the United States. The company's development plans for 2011 include between 120 and 145 wells in the Bakken in North Dakota and between 45 and 75 wells into the Anadarko Woodford. The company also plans an unspecified amount to develop the Eagle Ford Shale in Texas.
Although the Anadarko Woodford might be the least known of these onshore plays, many other exploration and production companies are active here. Devon Energy (NYSE:DVN) reported average daily production of 117 million cubic feet per day during the third quarter. Wells here produce a mix of natural gas, condensate and natural gas liquids. Continental Resources (NYSE:CLR) is also operating here and has more than 250,000 net acres under lease.
Other Assets
Marathon Oil is also investing $1 billion into developing the company's bases assets, including properties in the Gulf of Mexico, Norway, conventional oil plays in the United States, and Equatorial Guinea. The company also has an extensive inventory of exploratory wells and plans to spend $465 million to drill as many as 15 wells in 2011.
Oil Sands
Marathon Oil has allocated $300 million to spend on the oil sands in Canada. The company has a 20% interest in the Athabasca Oil Sands Project, which is ramping up production in early 2011 to use recently added capacity. Royal Dutch Shell (NYSE:RDS) has a 60% interest in the project, along with Chevron (NYSE:CVX), which owns 20%.
Downstream
Marathon Oil budgeted $1.2 billion in the downstream portion of the company operations in 2011. Much of this spending will go towards the expansion of a refinery in Detroit, Michigan, where 15,000 barrels per day of capacity will be added by 2012. The facility is also being upgraded to accept heavy crude oil from Canada. This will be the last downstream budget for the company, which is spinning off its downstream assets into Marathon Petroleum Corporation (NYSE:MPC) by June 2011.
Unfortunately, all this investment will not lead to production growth in the short term. The company estimates that 2011 production available for sale will be between 380,000 and 400,000 barrels of oil equivalent (BOE) per day. Marathon Oil reported average production available for sale of 391,000 BOE per day in 2010.
The Bottom Line
Marathon Oil's capital budget for 2011 contains funds for the development of the Bakken, Woodford and Eagle Ford formations, along with high impact exploration in various parts of its domestic and international portfolio. (For related reading, take a look at How Does Crude Oil Affect Gas Prices?)
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IN PICTURES: 4 Biggest Investor Errors
2011 Capital Budget
Marathon Oil has allocated $3.4 billion for its exploration and production budget in 2011, with the funds spread across its base and growth assets and what the company calls high impact exploration. This is 29% more than the company spent in 2010.
Growth Assets
Marathon Oil is putting $1.9 billion in 2011 into growth areas in North America, with slightly more than half that amount being put into the various onshore oil and liquids plays that has come to dominate drilling in the United States. The company's development plans for 2011 include between 120 and 145 wells in the Bakken in North Dakota and between 45 and 75 wells into the Anadarko Woodford. The company also plans an unspecified amount to develop the Eagle Ford Shale in Texas.
Although the Anadarko Woodford might be the least known of these onshore plays, many other exploration and production companies are active here. Devon Energy (NYSE:DVN) reported average daily production of 117 million cubic feet per day during the third quarter. Wells here produce a mix of natural gas, condensate and natural gas liquids. Continental Resources (NYSE:CLR) is also operating here and has more than 250,000 net acres under lease.
Marathon Oil is also investing $1 billion into developing the company's bases assets, including properties in the Gulf of Mexico, Norway, conventional oil plays in the United States, and Equatorial Guinea. The company also has an extensive inventory of exploratory wells and plans to spend $465 million to drill as many as 15 wells in 2011.
Oil Sands
Marathon Oil has allocated $300 million to spend on the oil sands in Canada. The company has a 20% interest in the Athabasca Oil Sands Project, which is ramping up production in early 2011 to use recently added capacity. Royal Dutch Shell (NYSE:RDS) has a 60% interest in the project, along with Chevron (NYSE:CVX), which owns 20%.
Downstream
Marathon Oil budgeted $1.2 billion in the downstream portion of the company operations in 2011. Much of this spending will go towards the expansion of a refinery in Detroit, Michigan, where 15,000 barrels per day of capacity will be added by 2012. The facility is also being upgraded to accept heavy crude oil from Canada. This will be the last downstream budget for the company, which is spinning off its downstream assets into Marathon Petroleum Corporation (NYSE:MPC) by June 2011.
Unfortunately, all this investment will not lead to production growth in the short term. The company estimates that 2011 production available for sale will be between 380,000 and 400,000 barrels of oil equivalent (BOE) per day. Marathon Oil reported average production available for sale of 391,000 BOE per day in 2010.
The Bottom Line
Marathon Oil's capital budget for 2011 contains funds for the development of the Bakken, Woodford and Eagle Ford formations, along with high impact exploration in various parts of its domestic and international portfolio. (For related reading, take a look at How Does Crude Oil Affect Gas Prices?)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
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