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.
Mutual Funds & ETFsLearn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
Investing NewsWill Ferrari's shares move fast off the line only to sputter later?
InvestingCommodity prices have been heading lower for more than four years, being the worst performing asset class of 2015 with more losses in cyclical commodities.
Stock AnalysisHere are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
InvestingThe further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
InvestingWest Texas Intermediate oil futures have recently made pronounced movements. What do they bode for the world market?
Fundamental AnalysisOptions market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
Stock AnalysisCan these two oil stocks buck the trend?
Investing NewsAlcoa plans to split into two companies. Is this a bullish catalyst for investors?
Stock AnalysisIf you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
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 >>
A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
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 >>
The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>