Falling oil prices are weighing heavily on Marathon Oil as it builds its budget for next year, but the Houston-based oil company has no plans to pull back from the big U.S. shale plays even though its third-quarter profits suffered.
Like all oil companies, Marathon is working through the process of determining how it plans to spend its cash next year.
CEO Lee Tillman said the company, which won’t disclose its capital expenditure plans until December, has incorporated the recent oil price plunge into its calculations and remains confident that its balance sheet is healthy enough to weather the storm.
Despite oil’s 25 percent decline in recent months, U.S. shale drilling remains attractive, Tillman said, particularly in the sweet spot plays like the Bakken and Oklahoma, where Marathon recently added rigs to boost production.
“I very much believe as a company Marathon is well-positioned to invest intelligently through the commodity cycle,” Tillman said in a call with investors Tuesday.
Marathon in the third quarter pumped more oil from the ground than it did a year ago, thanks to surges in production in the Bakken and Eagle Ford Shale regions, but the company fetched a smaller profit for each barrel produced as oil prices tumbled.
Crude fell to $78.78 a barrel on Monday, the lowest price in two years. In the third quarter, Marathon’s sales price for U.S. crude and condensate fell 13 percent to $89.65 per barrel. The international sales price also declined.
The falling prices dragged down Marathon Oil’s third-quarter profit by 24 percent to $431 million, or 64 cents per share, during the three-month period ending Sept. 30.
Despite that, Tillman said Marathon remains committed to its key shale plays and has no plans to reduce its rig count. Last month it finalized the $2.1 billion sale of its Norway business and plans to pump that cash into expanding its footprint in U.S. shale plays, the company said.
The company is moving more aggressively in the Bakken, where third-quarter production surged 47 percent from the same time last year. In September, Marathon added an incremental rig to experiment with pushing wells closer together and to test out enhanced completion techniques, Tillman said. Early results have been promising.
“Even with the commodity price correction, those are very strong wells for us,” Tillman said in the call.
Marathon is also expanding its reach into Oklahoma, where the company snapped up 12,000 additional acres in the South Central Oklahoma Oil Province, or SCOOP play. Marathon plans to add two more rigs in Oklahoma before the end of the year.
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