Focus shifted to U.S. shale oil production
Marathon Oil has undergone a series of transformations since it was founded in Ohio 132 years ago, but perhaps some of the most dramatic transitions have been in the past eight years.
In 2011, Marathon Oil, which has a headquarters in Houston, spun off its refining division and began the long process of redefining itself as a U.S. shale-focused powerhouse. Since 2013, the company has shed operations in 10 countries, and expects to shed its U.K. operations soon, too. In less than a decade, Marathon Oil transformed itself from being a major integrated energy company with operations
spread across the globe to an independent exploration and production company with operations primarily focused on shale oil production in the U.S.
The company’s work to simplify its operations, along with its CEO Lee Tillman’s focus on prioritizing cash flow over “growth for growth’s sake” helped push Marathon Oil to the top 10 best performing Houston-based companies on this year’s Chron 100 list. The company went through a big turnaround in 2018. Thanks to capital efficiency and a 24 percent jump in oil production, Marathon saw its profits shoot up to $1 billion in 2018 compared to posting a $5.7 billion loss the year earlier. Its revenue from operations climbed 40 percent to hit $5.9 billion from $4.2 billion the previous year.
The 2015 oil bust pressured the industry to get more efficient and Marathon Oil was no exception. Over the past few years, the company has worked to slash operating costs, pushing down well operating costs by as much as 24 percent in the Bakken region year-over-year. Now the company can break even at a $45 per barrel oil price and drive oil production up.
Marathon plans to boost oil production this year by about 10 percent while slightly lowering its total capital budget to $2.6 billion, with the bulk of that spending in the Eagle Ford and Bakken shale regions. The company’s obsession with sticking to the budget means it doesn’t increase its capital spending even if oil prices spike. Instead it focuses on returning cash flow to shareholders, Tillman said.
Considering conventional oil drilling technologies took more than 150 years to mature, unconventional oil production technologies are in their infancy, and there is plenty of room to enhance efficiencies, Tillman said.
“When you consider the fact that unconventional (shale oil and gas production) are a little over a decade old, that’s about the same age as the iPhone,” Tillman said. “We’re very proud to be at the forefront of the U.S. energy renaissance that has taken the U.S. from scarcity to abundance.”