Profile: Marathon Oil Corp (MRO)
6 Dec 2013
Marathon Oil Corporation (Marathon Oil) , incorporated on May 30,2001, is an international energy company engaged in exploration and production, oil sands mining and integrated gas with operations in the United States, Angola, Canada, Equatorial Guinea.(E.G.), Ethiopia, Gabon, Kenya, the Kurdistan Region of Iraq, Libya, Norway, Poland and the United Kingdom. The Company operates in three business segments: Exploration and Production Segment, explores for, produces and markets liquid hydrocarbons and natural gas on a worldwide basis; Oil sands mining segment, mines, extracts and transports bitumen from oil sands deposits in Alberta, Canada, and upgrades the bitumen to produce and market synthetic crude oil and vacuum gas oil, and integrated gas, produces and markets products manufactured from natural gas, such as LNG and methanol, in E.G.
In February 2013, the Company sold its 34 % non-operated interest in the Neptune gas plant that is located onshore Louisiana. During the year ended December 31, 2012 , the Company acquired approximately 25,000 net acres in the core of the Eagle Ford shale.
Exploration and Production Segment
As of December 31, 2012 the Company had 230,000 net acres in the core of the Eagle Ford shale, with an additional 100,000 non-core acres. As of December 31, 2012, it had 379 gross (262 net) producing wells in the Eagle Ford shale. Eagle Ford average net sales for 2012 were 34thousand barrels of oil per day (mboed), composed of 23 mbbld of crude oil, five thousand barrels (mbbld )of natural gas liquids (NGLs) and 37million cubic feet per day (mmcfd) of natural gas. The Company continues build infrastructure to support its liquid hydrocarbon and natural gas production growth across the operating area. Approximately 370 miles of gathering lines were installed in 2012, and 12 central gathering and treating facilities were commissioned, with seven additional facilities in various stages of planning or construction. It also owns and operates the Sugarloaf gathering system, a 42-mile natural gas pipeline through the heart of its acreage in Karnes, Atascosa, and Bee Counties of south Texas.
The Company holds hold approximately 410,000 net acres in the Bakken shale oil play in North Dakota and eastern Montana. It continued selective acreage acquisitions and leasing, further expanding a new prospect area. It moved from 20-stage to 30-stage hydraulic fracturing in 2011 to increase both production rates and estimated ultimate recovery from its Bakken shale wells. It also continued to alter completion techniques seeking continuous improvement in well performance. It reached total depth (TD) on 88 gross (76 net) operated wells and brought to sales 98 gross (84 net) operated wells in 2012. Its Bakken shale program includes plans to drill 190 - 220 gross (65 - 70 net) wells in 2013, of which 60 - 70 net wells will be operated by them. The net sales from the Bakken shale averaged 29 mboed, composed of 27 mbbld of crude oil, one mbbld NGLs and eight mmcfd of natural gas.
The Company’s assets include operated and non-operated interests in 10 natural gas fields in the Cook Inlet and adjacent Kenai Peninsula of Alaska and majority ownership in four operated natural gas pipelines totaling 140 miles. It holds with natural gas production in the Piceance Basin of Colorado, located in the Greater Grand Valley field complex and 154,000 net acres in the liquids-rich Niobrara shale located in the DJ Basin of northern Colorado, southeastern Wyoming and Nebraska. It drilled 17 gross (12 net) operated wells in the DJ Basin during the year ended December 31, 2012. It has long-established operated and non-operated conventional production in several Oklahoma fields from which 2012 sales averaged two mbbld of liquid hydrocarbons and 51 mmcfd of natural gas.
On December 31, 2012, the Company held material interests in seven producing fields, four of which are company-operated. Average net sales for 2012 from the Gulf of Mexico were 22 mbbld of liquid hydrocarbons and 19 mmcfd of natural gas. It operates and has a 65 % working interest in the Ewing Bank Block 873 platform which is located 130 miles south of New Orleans, Louisiana. It holds a 30 % working interest in the non-operated Neptune field located on Atwater Valley Block 575, 120 miles off the coast of Louisiana. It has a 100 % operated working interest in the Droshky development located on Green Canyon Block 244 and a 68 % operated working interest in Ozona. It has 100 % operated working interest in the Madagascar prospect located on DeSoto Canyon Block 757.
In Africa, the Company owns a 63 % operated working interest under a PSC in the Alba field which is offshore E.G. It holds 63 % operated working interest in the Deep Luba discovery on the Alba Block and an 80 % operated working interest in the Corona well on Block D. It also own a 52 % interest in Alba Plant LLC, an equity method investee that operates an onshore LPG processing plant located on Bioko Island. Alba field natural gas is processed by the LPG plant. As part of its IG segment, it owns 45 % of AMPCO and 60 % of EGHoldings, both of which are accounted for as equity method investments. AMPCO operates a methanol plant and EGHoldings operates an LNG production facility, both located on Bioko Island. Dry natural gas from the Alba field, which remains after the condensate and LPG are removed by Alba Plant LLC, is supplied to both of these facilities under long-term contracts at fixed prices.
The Company holds a 16 % working interest in the Waha concessions, which encompass almost 13 million acres located in the Sirte Basin of eastern Libya. It had 10 % working interests in Blocks 31 and 32, both of which are non-operated. The discoveries on Blocks 31 and 32 represent several potential development hubs. It hold a 21 % non-operated working interest in the Diaba License G4-223 and its related permit offshore Gabon, which covers 2.2 million gross (467,500 net) acres. It holds a 50 % non-operated working interest in Block 9 and a 15 % non-operated working interest in Block 12A which are located in northwest Kenya, covering 12.3 million gross (4.4 million net) acres. Seismic has been acquired on Block 9 and seismic acquisition on Block 12A is underway.
As of December 31, 2012, the Company operated 10 licenses and held interests in six non-operated licenses, which encompass approximately 240,000 net acres on the offshore Norwegian continental shelf. In 2012, net sales from Norway averaged 81 mbbld of liquid hydrocarbons and 53 mmcfd of natural gas. The Alvheim development is comprised of the Kameleon, East Kameleon and Kneler fields (PL 036C, PL 088BS and PL 203), in each of which it had 65 % working interest, and the Boa field, in which it had 58 % working interest. In October 2012, it took over operatorship of the nearby Vilje field (PL 036D), in which it owns a 47 % working interest, which began producing through the Alvheim complex. The Volund development, in which the Company owns a 65 % operated working interest, consists of three production wells and one water injection well at December 31, 2012. In the U.K. Atlantic Margin west of the Shetland Islands, it owns an average 30 % working interest in the non-operated Foinaven area complex, consisting of a 28 % working interest in the main Foinaven field, a 47 % working interest in East Foinaven and a 20 % working interest in the T35 and T25 fields.
As of December 31, 2012, the Company holds a 51 % working interest in 9 concessions, an 85 % working interest in one concession and a 100 % interest in one concession for a total of approximately 1.2 million net acres. In 2012, the Company reached TD on five gross (3 net) operated wells and in 2013 have reached TD on one more gross (0.85 net) well. Since late 2011, it had conducted a continuous drill, core and diagnostic fluid injection test program (DFIT). Following these DFIT evaluations, It plans to hydraulically fracture select wells.
In Canada, the Company hold interests in both operated and non-operated exploration stage oil sand leases in Alberta, Canada, which would be developed using in-situ methods of extraction. These leases cover approximately 143,000 gross acres (52,000 net) in four project areas: Namur, in which it holds a 60 %operated interest; Birchwood, in which it holds a 100% operated interest; Ells River, in which it holds a 20 %non-operated interest and Saleski in which it holds a 33% non-operated interest. As of December 31, 2012, it submitted a regulatory application for a proposed 12 mbbld steam assisted gravity drainage (SAGD) project at Birchwood.
The Company has an aggregate access to approximately 215,000 net acres in the Kurdistan Region of Iraq. It has interests in two non-operated blocks located north-northwest of Erbil: Atrush, in which its working interest is 20 %, and Sarsang, in which its working interest is 25 %. Through December 31, 2012, discoveries have been made in each block and appraisal wells were drilled and tested on both blocks during 2012, including the discovery of additional hydrocarbon-bearing zones. Additional exploration drilling is proceeding on the Sarsang block.
The Company also has Production sharing contract (PSCs) for operatorship of the Harir and Safen blocks located northeast of Erbil. After selling down a portion of its interest in the third quarter of 2012 to balance its portfolio, its working interest is 45 % in each block. The Company has completed two- dimensional (2-D) seismic program on both blocks.
Oil Sands Mining Segment
The Oil sands mining segment (OSM) produces and sells various qualities of synthetic crude oil. Output mix can be impacted by operational problems or planned unit outages at the mines or upgrader. Sales prices for roughly two-thirds of the normal output mix will track movements in West Texas Intermediate crude oil (WTI) and one-third will track movements in the Canadian heavy sour crude oil marker, primarily Western Canadian Select (WCS). In 2012, the WCS discount from WTI had increased, putting downward pressure on its average realizations.
The operating cost structure of the OSM operations is predominantly fixed and therefore many of the costs incurred in times of full operation continue during production downtime. Per-unit costs are sensitive to production rates. Key variable costs are natural gas and diesel fuel, which track commodity markets such as the Canadian Alberta Energy Company (AECO) natural gas sales index and crude oil prices.
The Company holds a 20 % non-operated interest in the Athabasca Oil Sands Project( AOSP), an oil sands mining and upgrading joint venture located in Alberta, Canada. The joint venture produces bitumen from oil sands deposits in the Athabasca region utilizing mining techniques and upgrades the bitumen to synthetic crude oils and vacuum gas oil. The AOSP’s mining and extraction assets are located near Fort McMurray, Alberta and include the Muskeg River and the Jackpine mines. Gross design capacity of the combined mines is 255,000 (51,000 net to its interest) barrels of bitumen per day. The AOSP base and expansion 1 Scotford upgrader is at Fort Saskatchewan, northeast of Edmonton, Alberta. As of December 31, 2012, it owns or have rights to participate in developed and undeveloped leases totaling approximately 216,000 gross (43,000 net) acres. The underlying developed leases are held for the duration of the project, with royalties payable to the province of Alberta.
The Company’s AOSP operations use established processes to mine oil sands deposits from an open-pit mine, extract the bitumen and upgrade it into synthetic crude oils. Ore is mined using traditional truck and shovel mining techniques. The mined ore passes through primary crushers to reduce the ore chunks in size and is then sent to rotary breakers where the ore chunks are further reduced to smaller particles. The particles are combined with hot water to create slurry. The slurry moves through the extraction process where it separates into sand, clay and bitumen-rich froth. A solvent is added to the bitumen froth to separate out the remaining solids, water and heavy asphaltenes. The solvent washes the sand and produces clean bitumen that is required for the upgrader to run efficiently. The process yields a mixture of solvent and bitumen which is then transported from the mine to the Scotford upgrader via the approximately 300 mile Corridor Pipeline.The Company has engaged in discussions with respect to a potential sale of a portion of its 20 % interest in the AOSP.
The bitumen is upgraded at Scotford using both hydrotreating and hydroconversion processes to remove sulfur and break the heavy bitumen molecules into lighter products. Blendstocks acquired from outside sources are utilized in the production of its saleable products. The upgrader produces synthetic crude oil and vacuum gas oil. The vacuum gas oil is sold to an affiliate of the operator under a long term contract at market-related prices, and the other products are sold in the marketplace.
The Company’s integrated gas operations include production and marketing of products manufactured from natural gas, such as Liquefied natural gas(LNG) and methanol, in E.G. The Company has 60 % ownership in an LNG production facility in E.G., which sells LNG under a long-term contract at prices tied to Henry Hub natural gas prices. It owns 45 % interest in a methanol plant located in E.G. through its investment in Atlantic Methanol Production Company LLC (AMPCO). Methanol demand has a direct impact on AMPCO earnings. Its plant capacity of 1.1 mmt is about 2% of world demand.
Marathon Oil Corp
5555 San Felipe Street,
P O Box 3128
HOUSTON TX 77056-2723