Marathon Oil (NYSE:MRO) raised the company's estimate of future production growth from the Bakken formation, as the company finds this domestic play even more productive than expected. The company is also benefiting from the rapid development of its Eagle Ford Shale properties.

Bakken Production Growth
Marathon Oil has approximately 413,000 net acres under lease in the Bakken, and is currently operating eight rigs in this play in North Dakota. The company exited 2011 producing 24,000 net barrels of oil equivalent (BOE) per day from this formation.

Marathon Oil now estimates that net production in 2012 from the Bakken will average 27,500 BOE per day in 2012, and reach 38,000 BOE per day in 2016. The previous estimate for 2016 production was 33,000 BOE per day.

Marathon Oil is using a 30 stage hydraulic fracturing operation for wells in the Bakken and is averaging a 24 hour initial production rate in 2012 of 1,352 BOE per day. The company reported two wells with initial production rates above 2,000 BOE per day.

Marathon Oil is also testing the Three Forks formation, which is present on much of the same acreage. The company has reported 13 successful test wells into the Three Forks play.

SEE: Check out The Strategic Oil Reserves Explained

Other Bakken Players
Continental Resources (NYSE:CLR) is one of the largest operators in the Bakken and just announced the purchase of additional acreage here for $340 million. The company added 37,900 net acres spread across Montana and North Dakota.

MDU Resources (NYSE:MDU) also has acreage exposed to the Bakken in North Dakota and Montana, and plans to spend $160 million in 2012 to develop its properties.

Total Company Production
The higher production growth from the Bakken will help Marathon Oil achieve its long term production goals. The company estimates that overall company production will grow at a 5% to 7% compound annual growth rate from 2010 to 2016.

SEE: What Determines Oil Prices?

Eagle Ford Shale
Marathon Oil has approximately 305,000 net acres under lease in south Texas that is prospective for the Eagle Ford Shale and is currently operating 17 rigs in this play. The company estimates that it will spend approximately $1.5 billion annually to develop its properties here.

Marathon Oil is using a well design in the Eagle Ford Shale that incorporates 15 stage hydraulic fracturing and is seeing initial production rates above 1,000 BOE per day. The company estimates that net production from the Eagle Ford Shale will average 30,000 BOE per day in 2012.

Murphy Oil (NYSE:MUR) is also active in the Eagle Ford Shale and has more than 230,000 net acres under lease. The company has drilled 74 horizontal wells to date on its properties and is currently producing approximately 9,000 BOE per day.

SEE: Peak Oil: What To Do When The Wells Run Dry

The Bottom Line
Marathon Oil's decision to separate the company's downstream operations into a standalone public company has freed the company to pursue a more aggressive development program in the Bakken and Eagle Ford Shale plays. The result is better than expected long term production growth for the company.

SEE: A Guide to Investing in Oil Marlkets

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  3. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  4. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  5. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  6. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  7. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  8. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  9. Stock Analysis

    Is Walmart's Rally Sustainable? (WMT)

    Walmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
  10. Stock Analysis

    GoPro's Stock: Can it Fall Much Further? (GPRO)

    As a company that primarily sells discretionary products, GoPro and its potential falls right in line with consumer trends. Is that good or bad?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center