MRO - Earnings call transcript Q3 2017

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Operator

Welcome to the Marathon Oil Corporation 2017 Third Quarter Earnings Conference Call. My name is Hilda, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. to call like to now will turn over the Mr. I Dailey. Zach Mr. may Dailey, you begin.

Zach Dailey

morning can Marathon of welcome XXXX Hilda. Mitch are and Thanks, Good and President to joining this I'm CEO; Dailey, Lee Tillman, connection our remarks Dane Also Executive release, we earnings conference Zach Oil's Vice at and Operations; President and of our slides, Executive Relations. Vice on President Vice Investor and released with Little, prepared me morning be CFO. marathonoil.com. President Whitehead, Last website associated call. which night, quarter found third in also

Following request open the you brief re-prompt questions call we'd more from no can where two than Q&A, some Lee, ask and remarks permits. up time we'll you for as

for call risks in these our to website. may be release subject expressed actual I'll in quarterly today's on found could package a can cause or our the call statements forward-looking Please and disclosures our information turn discussion statements. in to discuss such of SEC that items. read reminder, differ any With financial we from to results contain the of Lee. implied earnings filings a materially the measures those uncertainties non-GAAP As and over Reconciliations that, by

Lee M. Tillman

Good and today. Thanks, us Zach. morning thanks joining for

the in there's our and and First, needed efficiencies. addressing we've cost we'll challenges, the a Houston share Series. victory no strong congratulations new all remarks, be then in the its Dodgers spend bulk my a consistently hometown portfolio, recent your historic improved few World reductions well outstanding All time performance, opening their Go productivity, described questions. I'll call. on win delivering base to year, delivered. a Astros what executed as across the 'Stros. fans of and can only of Astros with Hopefully,

the production guidance production quarter, at top-end high-end We XXXX strip outstanding living our company. end expect drove range, costs to that the toward production all exit pricing. our now growth an strength U.S. sequential low production the Eagle record increased while the This exceed of us the the the resource to was of current third this the continued our up per viability their achieving sets is range, for we saw we from QX, boe the The five respond complemented XXXX. is to the focus trend of oil efficiently Bakken rate to what flat par plays, our efforts. in and improvement transformed storm quarters of year cost the day, core the area. outside Hurricane XX% basin portfolio working our unit same while a from year's, Karnes quarter inventory in updated the XX% guidance resource level, our this wells year, which of Eagle means safely impacts last XXXX, so devastating on into on position. in our grew some in with was delivering the work We put and Harvey. our great XX-day integrate online XX% third we from highlights in completed plays within X,XXX by U.S. delivered our uplift beginning swiftly, production step-change year's team while by a At translated maintaining guidance discipline rate the stage is Ford of and across into Kudos ongoing County brought Myrmidon Hector above economic levels. cumulative production above QX budget as well well and execution averaging results our productivity despite tracking to XX-day during even performing program many quarter to three the Ford's Through to

to per a set Bakken X,XXX Basin with well success, the the and East IP X,XXX much first of record Williston QX, Hector extend in continue and Clarice test next oil this plan the were is day. XX% rates expectations. the rate Consistent at the X,XXX and STACK wells from barrels Middle for volatile XX-hour team two oil Our pad day. boe grew outperform XX Oklahoma with our highest farther to oil our wells Hector from to per

also in with encouraging Kingfisher completed well County early an Osage We results.

continue highest SCOOP we infill Delaware Northern results pilot a program the to with ramp on Oklahoma up X-Y integrate completion very leasehold, Our the and full-section STACK Wolfcamp focused sales, in basis Eddy objective on good we and an wells basin, to activity technology data, testing, remains of our returns. and designs two customized delineation continue with as optimize five the to County. newest In achieving in including across

EBITDAX frac within We have at strategy $XXX Production and continues in generation growth cash The world-class a rig. grew flows. fourth Equatorial profitable sequentially this capability also added transitioned a our and of generated over to dedicated delivering crew cash QX. asset to from overall support recently flow X% of million Guinea

the we neutral prices, current at capital. to dividend As working strip at expect XXXX mentioned including now outset, changes and in I flow be in cash

remains While about our to it's the XXXX early same. too budget capital talk philosophy specifics, allocation

to metric a while but a matter lease objectives means continuous compensation became with since to and that fully living per and the are a have returns-focused and with we I We delineation Committee, changes closely choices shift into growth expect WTI. should the capital structure. XX% feedback drive metrics CEO with will expect we investor expect have long-term and we've $XX our our made align Production outcome be oil our of highest data strategic informed others and enhance associated to further basin, metric in four will creation. protection, be margin to XXXX abundance program, will continue consistent the Along continue pilots, we across both risk-adjusted our flow infill at returns, performance resource you extensive U.S. the of around Compensation and to journey integrate These alignment as the moderate opportunities allocation lines, within listened an management years those to of price about mix investment between investment our to ago, share production portfolio. by value we'll plays. will these on high-return dialogue our incentives returns-based our and our support With an focus. targeted to with deliver each expansion, This to

all Bakken exceptional step-up in the outside in optimization. results, Ford within four-basin our Hector area, anticipated extension continued County, of will For Northern in areas the example, and the core activity Karnes into Eagle profitable particularly of compete Delaware

the our for more is CapEx more sends this clear signal ever of intense broader, it competition that been. All than has discretionary and diverse

a the effort dynamic four as expect our we macro well basins, across learnings respond and as our should to optimize capital continually environment. You trends remain as to leverage real-time allocation performance

been XXXX. receive limited reducing in on by achieve actions maximizing will position our static neither an just dividend. within a debt, oil second years we Oil couple profitable you sheet, the resource packages as pricing. our cycle. we of performance growth million quarter, profile acquire the fund cost by within hand All nor $XX deliver acreage group, flows about sheet. and should this objective reductions are can our the done managing at investment exploration on returns installment lowering recent on investment And strong gross million, of pursue well million, flat priority. for to interest And balance cost strong flows, small play program That our thanks done low portfolio opportunistically both budget cash we've balance $XXX as looking drive is continue have in and Underpinning core cash focusing transformation a $XX high-return our cash in $XXX we at the efficiencies, moderate debt reducing outlook our as anticipated around reminder, quarter expect the believe a that took Our in is expense The our operating work with continued organic of WTI. and we third basins, and to first to Marathon support strategy last cost case. to fully all OSM us annual a focus opportunities to is to With gross consistent maturity entry

We have execution scale at four our the in delivery plays. transformation position moved differentiated highest-margin, to portfolio lowest-cost across from U.S resource

we expansion growth will favorably drive outperform shift production We to and excellence weighting to our execution aligning as expand, better with who with adjusted the competition continue share every the financial end per concentration. to XXXX, hand volumes to us dedicated a by The conclude outstanding greater expect I'll I of to such our employees flow it you. our our a flexibility, story, coupled in driving difference cash And margins position beyond. the mix begin of to U.S. unconventionals, Q&A. debt investment Thank XXXX thanking every our asset of all to contractors the and want back made have and through quarter. to that, operator in margin

Operator

you. Thank

We session. will question-and-answer now begin the

We from Deutsche Bank. Ryan have a from question Todd

Ryan Todd

would price you potential the is But and can't about were list the capital know then, you spending flow. to medium I to flow the quarter. of that's prioritize cash philosophy you capital use – cash at is cash in XXXX. cash if with Good budget where mentioned of great shareholders in to over morning including allocation think with overriding a how in year, potential target would term? within be Maybe fit effectively into start if Okay, higher and operating target, we dividend, uses thanks. there the on could in And budgeted, guess I as line, the around the one the uses return excess than and the oil provide I next $XX? specifics

Lee M. Tillman

This Ryan. Okay. Yeah. is Good morning. Good Lee. morning,

forward while about our improved cash through event You're where see balance continued And capital outcome in continue returns, going respond well. beyond We're neutrality, investment-grade allocation then we've growth to to to basing going and we're protect as continue to of with within operating support dividends pricing. as to reduction. dividend basically we means continue cash low it's price support entry high-level balancing volatility exploration within our going flexibility our via liquidity support resource to then, shareholders, make our our see that our those the fund to opportunities and best a an and flow basins. return capital contiguous that free be flow well cash from look gross sheet flow. And making going in priorities, come to acquisitions, that going and and certainly that also team, sure the to our starting smaller to on the we In again, high-return production We right, we do investment. And absolutely cash as above got more an a to cost back some living position of want to sure capture Certainly, $XX currently flat protect with ample WTI better and that our risk-adjusted going we're to we're is resource and opportunities want some our a for to more to we're core of any bolt-on debt build for that market. our our to organic means.

would Ryan, we flow some where hand more we really stand, on that's discretionary cash next see if year. So,

Ryan Todd

in second a Great. you longer longer that you managing about guess, about quarter that, the down you'll year, cash post Should to maybe from leave mentioned next continue with of expect of million debt about you the get that we to think, think Can first as to pretty in pay scheduled balance. I a in guess OSM you talk installment you You term? or significant that in the follow-up And would advance how I it'll proceeds managing debt $XXX pay-down. term? see gross balance how cash maturities the

Lee M. Tillman

to hope directionally, to facilitate into what that, our always tuned. today, that's is the would We capital Yeah. we an Directionally, and that ways existing of our is That some not to that prepared that. get I and have. objective continue to capital But something reduce say stay the gross to we're our specifics structure We're again We're improve objective just of debt. that pursuing. scrutinizing structure to like. leverage elements might that look around

Ryan Todd

expect Is like – where there your a you'd we leverage to should targeted range where be? about

Lee M. Tillman

that. three kind of debt EBITDA, like well get the as cash get think to particularly very the certainly, out below mindful wanting X.X protect would Obviously, Ryan, on I kind of mark of years, that rating. to agencies. toward look below metrics, we investment-grade sure to with We're we we're and comfortably there we that next make two our of as

that that position capital in sector penalty and the rating the box is a took flexibility think terms that of bit cost in is the of investment-grade three, still obviously, sector provides. One the important But little the on. a it we of

Ryan Todd

Lee. Thanks, Great.

Lee M. Tillman

you, Thank Appreciate it. Ryan.

Operator

from We have & Baber Company. Simmons a question from Guy

Guy Baber

congrats Congrats everybody. as on Astros morning, Good the well. to quarter and the

Lee M. Tillman

it. Thanks, Appreciate Guy.

As a there's in you might folks today. few Houston imagine, tired

Guy Baber

I'm Right, of one them.

has So, has spending just the here, to outperformed expected. lower been lead this than year production while us capital off obviously,

the So, pretty efficiency improving to just appears capital meaningfully. be

appears specific I you're of point, vantage From our you ahead you have So, out plan here, pretty the where capital where are but efficiency of know performance the would now, if back you that analysis if coming see we year, where that broad-based, look on call compare really areas you maybe the did can it guys that a and expectations compared work. out? done to internal entering kind you just touch how you the is

understand if to you internal are specific to areas big really So, outperformers just relative plan. would there as trying better highlight

Lee M. Tillman

Yeah.

way the like think is cases. would Guy, first it's I of of it, all on combination I a these characterize all, factors

very First, base performance seen we in carried we've strong from from production XXXX. that the

seen year. So, those from strong program the from a capital carry-in support last barrels we've

been productivity the pulled higher anticipated well new our when has originally we Secondly, plan. than together

have ramp-up. teams a some went that finding saw an mitigate when we inflationary earlier the job of think allowed to of hyperinflation the through rig efficiencies much ways us during we initial kind year the of embed bit that I pressures outstanding done Thirdly, the little in of to have

fully there saw combination I both anticipate. I The some the continued importantly, in base essentially not period, Karnes performance kind plan, We only County keep completed of, Bakken, of even that efficiency, the the collectively, the Ford our And completion shift when new to in couldn't contributed and of the pressures intense Eagle area risk The cost Myrmidon designs. Hector, frankly obviously things. core some just areas in the very, in them, Oklahoma, well oil despite And carried of ability think year. had to So, those proud those call believe, the we're of I'll we we we've we I in, and I the half in second inflationary over the of specifically, those. in seen cite, performances outside think have flat which more to all the kind that quite capital but wells, breakout would things and very built a it's volatile we of of, outperformance extension the certainly, all there.

Guy Baber

on already those tenure creation. best the you bit That's the hoping very value helpful. what And have your the comments, was then, compensation all trying Lee, remind believe you are there revision and I maybe elaborate metrics And you a metrics perhaps then, and you're Marathon. organization in judge real us how what to your of achieve really potential on to this the evolved metrics, just could touched the course but over to at

Lee M. Tillman

Yeah.

a bit been an it of You're has right, evolution, Guy.

since consider fact, on that one. our think, that of great I cycle, metrics to something every that. each to we've changes matter been improvements really willingness and It's focused we Compensation We and make been Committee shown, day with actually amount in have and the make a

not compensation. we on our drive want do to not one metric. We to we get But is also variety in and So, we think metrics saying our a alignment any other do about current would today, overly to metrics have broken. reliant very of strong when to words, pay-for-performance. that use very we're any use you need of to don't a In our linkage run and structure I'm surprisingly, business, that strong variety happy say way structure I a our

flexibility And our We've in metrics, the keep our lot made metrics. the those changes of reflect so, weightings peer better around even made of changes a to in our we proxy we've company. group that

And share value most think search I our this dialogue part healthy forward as featuring those have and ways around that per of to a of be that so, continuing had we've think history is our creation aspects incentivize And long-term a one. of we of mindset. shown we one metrics for encourage to and structure. leaders internally as recent compensation I It's will both returns well, that

Guy Baber

you. good. Sounds Thank

Operator

from question Stanley. Calio a Morgan have from We Evan

Evan Calio

Hey. guys. Good morning,

Lee M. Tillman

Good morning, Evan.

Thomas Mitchell Little

Evan. morning, Good

Dane E. Whitehead

Good morning.

Evan Calio

Hey, know could here, CapEx us flow? for XXXX. are focus basins unconventional Lee. I and It strategic then are the you and competing walk the could have areas through acreage priorities capital XXXX all terms testing individual the you where priorities Delaware appears of dollars rank PayRock and your broad basins. in incremental as But within strategic in basins of holding

Lee M. Tillman

in fourth be integrating well is where in sharing it, the that program and Yeah. optimization, we're we they in using our really data, drive, four-basin data, to work Northern we really revolve the call nature will that strategic our of sure limited The the we're discretionary what call around Evan, Those, that through driven fully and that infill in want process course data data talked cadence And that XXXX, requirements. are I'll STACK, we still in the third our but finally, really with bucket. that, in that also optimization. and opinion, the of in pretty Delaware, to the future. leasehold only would the are continued have absolute The focus, is about want data to really STACK but areas at business best, our Well, that's technical building pilot those ongoing tone because that that capital return Much in in into not even we list. STACK first that's not say, the and decisions and productivity Delaware. within the then setting as quarter, now, a and top the still Those, we're my our, delineation the for element allocation by objectives very it, of consistent both all, of so for the as the the performance work forward-look. as of of in I Northern Northern that Delaware, strategic XXXX in of which go we're cost we that's quarter are really really ones only I'll starting the are course, on the make

capital where generate of on new lot a can the program, all the is important, if right, all of going a That's we very currently. be calls level that's on highest believe going it's integration that correct this to And doing more strongly. that next discretionary where you you're and opportunities. risk-adjusted to great competing essential make Within will. basins the of we really that to based be have, we'll to vitally into we what problem data is to basin-by-basin And and have four and revealed program, allocation. returns, be development get where year, we're And those that are so type clearly work

Evan Calio

In Maybe much appears disclosed early, Bakken, there your have results excellent, And your than inventory night. been last while deeper well a months ago. follow-up there. Hector the Great. was you six it

of a the or from growth future? run a flat run of – for generally deploy of to it significant a or does more growth driver there transform can run a cash it driver flow so, it flat And amount change i.e., it to you that So, significant capital region? in the or growth

Lee M. Tillman

Yeah.

changes think I everything. it

kind internal really our to I of of think proven. earlier criteria, It And does. yet year, it this our to inventory X be view the was Tier changes ability migrate that to Bakken. continue towards

Bakken to certainly the capital-efficient just this highly capital of as compete ability to have which means it's both in Bakken, continue Hector across exceptional up it's as success and more and from put continued in we down. going the wells strongly this the I has we to now in think had I with and that the the grow that these top-tier believe the de-risk prove demonstrating for do quarter, inventory we more And marched we area, year. Myrmidon, growth

Evan Calio

Great.

Lee M. Tillman

So, its change. role going to is

Evan Calio

the guys. Congratulation Great. and results on the Astros,

Lee M. Tillman

Thanks. Appreciate it.

Operator

Bank of question a Leggate Doug America. from have from We

Doug Leggate

Thanks. Good everybody. Lee. Good morning, morning,

Lee M. Tillman

morning, Doug. Good

Doug Leggate

A follow-up to Evan's question, Lee.

And proportion some look of area. update to you next kind these thinking for an walked get you fair of acreage with you've got that, past, from of then now Would your in would capital assuming year? that the best was the part a Hector of give options, tremendous portfolio. Southern follow-up, being I've away us that to way be the in your the Can kind maybe as a through other an relative Bakken about you in us think that seem to of those rates that believe to by what wells us here I is acreage de-risked of returns when addendum it probably oil you've got your allocation please. the at de-risked? are

Lee M. Tillman

kind of need South work initial East. control, would really I we – which still we shared What have well test to were. in the Doug, to this well, further but we Yeah. we still the and the that limited really still do stepped between with we the results, that where We to is us Far is of Hector of that have play, a this just pads. know the encouraged Also, some have not pad say, we from we're number to as although Eastern IPs did XX-hour good where kind across pads some

believe some inventory beginning So, we the left to migrate amount work that do Hector Tier to but toward still we're a material of there's do, X.

oil even the seen, considerably allocation, forward. your Myrmidon in through crowding with priority in efficiency and more be geologically that drilled, moved On because capital Myrmidon acres, they capital get without the a pads particularly of across to share question, the for full little for quantitative So, a But But I we've area. much of well XXX,XXX-ish order capital the inventory position advantaged the wells, more we've I these as particularly truly doubt, metrics we'll are of don't you. very you what an in move that we the bit the results does have look like a because better performance. around allocation control that percentage weighting, have acreage going that think Hector

feel we are allocation of those our good going to capital the that So, top priorities. really be near

Doug Leggate

Okay, you've I well as follow-up done tremendous is a another, job capital It's portfolio basically it's I appreciate a and quick acquisition unfortunately. – also – But relative but your allocation terms in guess, your question with Delaware, capital My one, upfront that. putting it the of for you've now with portfolio. employed. this PayRock the also but in means on mark so, paid

about when run management be So, think employed what to in and these metrics basis that revenue compensation, those competitive acquired for cash capital flow there. you to pace order leave get on from do it to I'll two now? you need on and earnings a assets competitive Thanks. return enough

Lee M. Tillman

Yeah.

executing of us I against to really attention First the for heavy-lifting we truly this here, not get to stage, It's have been where a a recognition recognition that's the to really transformation, portfolio. entire and is for portfolio a our just differentiated lot great team is the I what team turned on of effort think all, appreciate a us that full organic and behind me.

that. that we terms that all, that acquisition economics puts development data, acreage you case metric very first we value was an were of which a very in the that forward. And paid modify moving of we've both thing mindful acquisitions competitive a in you internally We're acquisition of Delaware, a new inevitably, us. given obviously we plans. very in seeing capture entry into get pace. we're which both in us that integrated those points, where full was propositions, assumed as same we with a our continue we of There of more spot felt from asset as that portfolio. the meaning acreage we to Northern of STACK strong But the greenfield deals In it seen – that price those existing value the acquisition those entered area, that full-field And for felt ensure a to

entry paid. we're very mindful So, that of costs those we

we several it kind things at think look difference; the talked of make acquisition. Doug, we return; reflect If boxes. we value, ticked we of quality, we acquisitions, of cases materiality, shareholder. the for compete; And about and an can when can those a means you with we have which finally, that we It both some a full-cycle upside back, drive will all those saved and feel starts about it of two

The to bit leasing support we is focused of other I is greenfield would much in continue and exploration a stealth and play resource that the background And cost mention runs entry thing on little that low a mode. just program of more kind that in opportunities.

hope opportunities. that have going of that wallet, can of going obviously our the low type be to always by it's either basins, we also where entry So, not to cost more we're we basins opportunities existing near those or outside generate

Doug Leggate

Appreciate Lee. you. the answers, Thank

Lee M. Tillman

Yeah.

Operator

have Paul We a from Research. question Sankey from Wolfe

Paul Sankey

Hi. Good morning, Lee, and...

Lee M. Tillman

Hey, Paul.

Paul Sankey

season up New York. Congratulations on the a here Astros. Happy for been miserable in you. It's

think high-level entire you some level, theme industry. through, you taking the hold Oil a endgame Marathon get could, if can growth to. returns been I for was And where go Lee, you've of the the the we over of about to us at detail is high question, So, if E&P given can to clearly talk a wondering,

Some in a performance and – bit fact, returns of are a you higher we dividend. operationally got Thanks. about this interesting it's your take of in yesterday, on CEO think in basis terms to sustained start talking this And a base can people from double-digit little improvement that thing? a you've target. you ROIC as talk Others had Where being by do about XXXX. a best-in-class

Lee M. Tillman

kind growth for generate five-year we do well. out focus, on our towards profitable the The Yeah. not but have always free and that No, have line also we is look endgame Paul. as of we sight within only that cash yield flow flow, cash and question, when benchmark of case, we generating a thanks we for can clear us been think returns-focused. But

cash to that I make be of. very flow neutral. about want striving metric metric be that enterprise do, to we're want driving D&C be our metric – very we're cash is direction. So, We the clear not Returns, mindful every we things to new our just in that. the a we is to is that sure in going that particularly correct that the that dollar spend moving program right every that direction, year returns

we're we space. performance a be in one growth. outperform watching cash expand share to that very going flow continue course, really cash margins what metric other to The metrics debt- we flow, tremendous potential highest as to feel E&P I that we correlated the to have adjusted think is is closely, And of the of on per there our

the capital So, returns dollar direction cash adjusted growth I coupling think was an metrics powerful strong as this that this combination. very enterprise we transformation of in also are kind we with on get at come the those cash execution. combination your watching moving of to very, per share and think the debt ensuring of going each closely that correct level, in incremental of that's shoulder to and flow side, And we're be a out that then

Paul Sankey

question some sort end commit an Yeah. – metric compare which aim positive, is can to a of I returns you as where that there's double-digit change can but the timeframe? directly leading of or you we is over you Can on guess some rate up. story obviously, that

Lee M. Tillman

Yeah.

the spend there's financial think along metrics, to Paul, price talking I these variability goes as be high Obviously, that. is know, with be depending and more at how your as better start to capital outlook that upon with we'll you that transparent them. what we about get going a

going there, number using you've making appropriate forward. wrapped that That's our the business. over is think, challenges about the commitment. to be as meaningful I talk time, But we're going So, there look metrics you that assumptions, these so sure some is out our to actually

around be when and a tell you that, we'll cash at traditional I flow share endgame about debt-adjusted much fulsome with things production like story growth CAGR, able coupled think more I to looking looks per what more think that like. start actually

Paul Sankey

have there's Bakken And the If fair? the And Understood. you. The order follow guess to Permian. most Thank mode the way little I'm would just are be hearing maybe bit disappointment is could to on down of change surprising of upside, the Eagle that don't maybe like in some I really where the neutral on you stuff. rate I in situation, base of I sounds potentially improving asset in and and I on it focus disposal a a And more you the it, that Ford in STACK. Is know, rapidly? up kind think specific impressive.

Lee M. Tillman

Yeah. upside. a to No, without to Bakken continue and thanks. doubt, the surprise Ford Eagle Certainly,

You just the have results to generated look at and basins. efficiency the those within well two that's capital being

the I going the Basin as we have that that view growth basin within high-return forward. for acres tremendous net Oklahoma in that company the XXX,XXX we still engine a think

of still there. we're just we're the very think delineation and much very pilot STACK, days. a I mode and in development And the leasehold still early

don't of a started. that standard to upstream even our a And there, from Northern standpoint. really in similar we've basins. efficiency the observed more And very results. expect so, we should it in some keen remain we that mean variability is getting I Delaware of development the bringing and variability further on extrapolate up But to of results wouldn't just of mature that we're development kind

consolidate at And I I think very completion I think curve learning we're – the look generate I'm the already more and coming But quarter. position that up how drilling an on going just as we're very to We're the very types getting confident further area that we're we're Delaware Northern ago. be efficiencies starting I – the continuing a results being rapidly continuing our that's in very the to I there. there. to question are see starting this just focused try When weeks going significant though to very some the a more XXXX. at-bats, sit rig Case this – field in of as of already a side, now, there. frac into out at just quarter down beginning as generated and well crew to going the we few added dedicated up When on a point, to it's picked was forward fourth there. certainly of in pleased fast capital demand that

Paul Sankey

a Thanks an It's assets different investment at points Yeah. Lee. you've in lot, interesting perspective got cycle. that the

Lee M. Tillman

Appreciate Thank you, it. Paul.

Operator

question Brian We have a Sachs. from from Goldman Singer

Brian Singer

Thank you. Good morning.

Lee M. Tillman

Good morning. Brian. Hey,

Brian Singer

Series years victory As ago. still lifetime of their Angels one a fan, celebrating I'm World XX

one tell can with this time. you I stay you for So, long will a

Lee M. Tillman

years Yeah. for Trust be one talking going Brian. probably about my is We're this guess. me, to XX

Brian Singer

absolutely. Absolutely,

And you you growth, measured for repurchase niche the about share aspects on on pay-down. or how the as more see share on relative focusing absolute then on wondered, that, really a a share debt being Marathon of think pick to basis? I adjusted falling metric or guys a and growth to count, I just per on debt So, where that that up little yourself the your metric, you to the comments differentiating, three potential bit wanted explore and wanted see for because there's

Lee M. Tillman

Yeah.

will of metric strong over mix you I its important accompanying the production an growth competitive will, think into that element to kind and to going we if change of The pieces, going growth time very have that that are when think be Brian, that. I break is that of production that the, that. and I apart be

only You drive unconventional. the are year, going number really higher. saw this of about associated our barrels That XX% to with is

that even going So, then that on based think efficiencies would protecting finally, the I all just to of continuing diligently natural, of really effect. kind the balance we are of making That's it's sheet think sheet. view there's margin not that mix mix sure our investment-grade a within effect. and work to that's I say, occur the generate expansion we counting that we balance can on And

our to the just through On effectively and to drive that's the opposed tool higher that. today we've mechanisms better side, other that case shares feel we the absolutely uses metric always of and more a in toolkit. that But as drive whole business got

Brian Singer

you area been productivity Thank you Bakken color. Can you Hector of Great. follow-up some to talk gains think the in about are both key gains And what talking the oil the my to that productivity and you've for as just goes then, others. for plays, where, scope see recovery in further four years? rates next you of the place of in and your over couple the

Thomas Mitchell Little

high Sure, Mitch. at is level. that at take This Yeah. a least I'll Brian.

operational efficiently some quickly Ford able we're to where central Eagle not is compelling the of been larger cementing, able extending and the operating to nature side, I as control just operate every or room, going our maximize the well but we're and the only portfolio by another. about base asset to also to more the is production, in the has our the operational through one offline to basin able efficiency day, for every gains to and through high-activity new or trial to think four-basin guided extent, production several routes that and that the optimization. resource artificial plays, often such to on higher what to leverage already periods that through able things we And We're machine-learning where barrels We're pipe, drill transferring lift optimize other techniques it's technologies learn years past uptime we drive we've kind use of basins. and to developed. upset the now versus pilot

now two a that employ is same wells. Northern the flow-back we and evident Eddy see and results. completion in of of the the for to Bakken Hector Wolfcamp workflow XXXX, dramatic, the high continued at efficiency well. extending not County, gains wells did, as down engineered trialed able Delaware with that us of be So, workflows the And we surprised been in catalysts integrated facility in very types now that should forward. and the and rate Myrmidon we getting we X-Y very the change time designs rate in to we're going terms impressive combined this seen has in of certainly there becoming of has and that into that our with most The been pushing change as our We've in in structures. one released tested

from So, and the different recovery mode. of a across lot optimization basins with dealing a in these still standpoint, we're reservoirs

change. returns really difficult number our business, teams which a focus, of value and to for it's positive. and is rate is moving where quantify our me a a towards driving the all you But focus So, for we're single this single a or certainly, from

Brian Singer

you. Thank Great.

Operator

We Pavel question James. have a from Molchanov from Raymond

Pavel S. Molchanov

diversified a guys. it of in the the most plays. now that's perhaps differentials spreads, Gulf macro areas? not. of about because of of would What's basis perspective Coast that you, We've seen, for deal Kind last some and the what's Thanks hurricane you the months, four how changing economics that of any related, I in along in elsewhere, in is great taking the ask think one question, the geographically take you the on and the a three, are particularly perhaps and is different producers the four of from volatility happening been with your some dips, U.S.

Lee M. Tillman

And and tool that us much to of of thinking we risk think element as broader while as to have key I our our very that capital think delivery some management, within if And – our underwrite an part that shareholders. of you've at living of management, means. element sense lot seen the our it. actions not about explored, the there. and commodity that protect sure hedging we differentials important a management use basis well in risk want around program. around commodity evident tool a defensive want That's Well, obviously, we topic looking we only in We're our as hedger there kit but specific just in our take risk are of making certain risk upside for that's time we a a program, I our spend

is the bit different markets, advantage model multiple one the mixes. have I have in in intrinsic of four-basin that hedge think we multiple a that do an sense we product do we that have

And an – bit so, just embedded we of of almost we do risk our portfolio, have a the diversity portfolio. because in that's have our management commodity element intrinsic of

economics been basically of the around the positive I the less or we've think in one WTI. seen, right has trading of the been more for which have the Bakken, observations that part around instance had there, strong we've story that more differentials

think supportive. I we've support also the with that been quite and the there the linkage Ford, to in primarily Eagle seen Brent, it's LLS

a selectively very risk much able to opportunities So, commodity from been we've advantage of standpoint. take those

Pavel S. Molchanov

then, Are part is And And become It's asked guide production about a that about to mix no ask you since there helpful. guess, certain you one. thoroughly see? Okay, again. of I would me a meaningful your one's actually to want which you there point at milestones begin Libya, Libyan let volumes?

Lee M. Tillman

Yeah.

XX% production, Libya from to cash in from little but tax separate cash statutory flow of it's rest yeah, for still gained fact just absolute or clarity, production sitting on Very think think you that free I kind to being relative the we're flow the Libya, there. I rate generated need is a of the portfolio.

front the – if But with our cash quarter, think flow number Libya. about $X.XX $X.XX you're the was I look associated don't you in me. and exact talking of I have at share for it I think of per

of there. So, Libya, flows. low sure put uncertainty said on still Libya want that, in perspective, of that out the that Having to make the somewhat our good security lot I majeure the margin, a with hold we're cash it's as And We've of correct uncertainty, late out we as XXXX. political, line. that two remains just in the impact of feel there we – barrels, came to years deal best operating really dealing in long we only situation below force limited asset been

that to is need necessarily not relatively make, mindful flows, So, I a continue environment, and I'm to line, this and push there think does don't But drive trend us. it's there's into because bottom that big a still any to but hopeful, going materiality very standpoint, risk even a we for way. year that just to that the and impact we're not just higher it this approach be from a to us cash on charged

Pavel S. Molchanov

Thank helpful. you, Okay, guys.

Operator

Scott from question RBC Hanold have We from a Markets. Capital

Scott Hanold

a Hey, of couple Thanks. Yeah. questions.

point cash your all couple you a your a as few to little surprised me things? XXXX made So, times of at plays. – we this of core some through bolt-on the resource if a free should guys help nice with looking have chunky potential be I is add-ons bit – this a across flow, maybe are that made at go just reading out into You look but you actively we positions? differently, you'd several opportunities

Lee M. Tillman

Yeah.

market, that areas. absolutely the to certainly core And like core watching I we're a area to particular, there high but we then going an would our to positions those. continue. the can our remains standpoint. going strengthen In to to look be think, smaller that synergy interest is We from Delaware existing just that find we're in consolidation of at we particularly bolt-ons like provide our extent fit-for-purpose operated Northern Scott, always still position, scale, our to

the opportunities So, to working those drive the those at from cost us that to day, well And in leasing to present some to those overall maybe a non-operated to pieces of kind that's themselves. accretive net to end do our make Northern And interest you sure in things expect at greenfield Delaware, to small Northern the want us we operated. to as convert of adding there will continue an opportunities everything should we're position opportunity up Delaware. incremental bolt-ons afford there

Scott Hanold

specifically, moved portfolio? frankly lot angle returns and opportunities basins the And my pretty attention you look, see color. have good you good. lot has That's I those that Okay. of if sort all should where in this in have today back – has step a the was getting And are been it – industry is to the there And of Eagle as from Bakken Permian. Ford and been of a left industry your into strategic upfront is maybe with like the and Bakken that seems the

Lee M. Tillman

looking be basins, to all, curve. not in someone say, but – have and that with of going inventory the that they looking kind and opportunities, we're we're sure All aren't of decade. acquire to existing would always We're want to our compete opportunities for I make We our core bringing developed to of that another buy it's decline will first things not filter portfolio. come to through of mindful pass of else's

bar is relatively looking and Bakken. places we've and so, high in in like of the generated either just to We certainly our the quality success those of because the a Eagle that locations. aren't there dilute position high-quality Ford And

Scott Hanold

Okay.

Lee M. Tillman

incredible up, scale Scott, look both the if right an take efficiency hard we that, at assets. said of come of a Having capital opportunity We're those at does it. certainly in amount driving would

we're kind are, be of to opportunities that going on it. smaller there then if pistol, So, fit our again,

Scott Hanold

in much framework, the the to do maybe XX if you piloting play rig I Great, to next in at you're us, general, you and all months, So, more STACK look slip starting do now. on great, in around you delineating in could if not or can general in, great. one Oklahoma in at how much XX remind XX think to when work area? just And and how counts that versus mistaken, right rigs look I I'm need in XX there developments just to

Lee M. Tillman

a as you, as the me just of think Oklahoma calibrate about, today, the be ahead, the quarter, eight for the would have about the about bit might we we way fourth We're for still Yeah. And Scott, at in more instance here for clarity. say, that probably maybe look order to on I rigs drilling – recall, – we requirements extending I XXXX of you and and really wrong little Mitch most XX% leasehold got in will the I STACK. talked of a correct about throughout number And might still in fourth XXXX quarter. leasehold bit if into little

still that's that, be testing. with to still component large going a of going we're capital So, pilot also and to well doing as our Along as element feature as program. delineation

element that and the you Another a said I both look focusing – the that pilots infill it program, great we've directed consider more that kind on XX% well. but of example as there's when is is Tan carefully. of Eve demographics is a described at I'm the large because little fourth again, of leasehold, if also the of quarter you pilot

half continuing So, about the forward the to pilot testing wells, you move our probably as is toward those look program, on well. really when ball at geared

well as kind leasehold see that protect to continue we're look delineate the in to STACK. we that's going as of So, to mix as

Scott Hanold

Thank Appreciate that. you.

Operator

We from have a Fargo. question Wells from Roger Read

Roger D. Read

morning. Thank Good you. Yeah.

Thomas Mitchell Little

Roger. Hey,

Lee M. Tillman

Hey, Roger. Good morning.

Roger D. Read

Hey.

per Just a growth. on the debt-adjusted share follow-up

components lot that. of So, obviously, to a

has to lower that, something know to can But cash months? repos. I flow your can pay which, watch of free any that grow about face After back, at look You faster. don't combination I allocation to is of is you XX back let's the next you it, shares. you need raise asked a growth, question and little debt, you you debt a here bit know step the the been number can share reduce can growth, as

So, the that's another about way metric? as that overall should to we ultimately improve calculation think

Lee M. Tillman

Yeah.

cost kind can been drive few that the a support offer getting flow the this million we that where $XX magnitude The maybe pull I'll at that corporate on to we think are demonstrated on cash thing to clear are benefits. capital our many important three latest comments, those perhaps cost bit other But some share a protecting back element that is that metric. there of an to do where a right, per – reduction think Dane they what focus when wants when is some reduction moving per we've this debt growth action, we cash you're structure. our And to nice to of rating and flow out. – very have or There's and structure We lot the pieces were strong have IG all a the with case about in did will jump continuous you corporate capital the you year, take we saw in adjusted IG currently debt us. in very that rating. agencies little I can right we that of structure. Directionally, able of drive your also direction two then of of in investment-grade and is that a within places that, actions, more not us

will continue we're opportunity well. impact the you combination if delever, that you'd as find know, to things of So, anything to allow going also have structure but to us don't I to be to that cost to us looking afford like our add. corporate Dane,

Dane E. Whitehead

add, million and just liquidity in second got $X.X billion got at the right I another divestiture the the in in we've We've would cash, end strong for QX. very of in we're quarter coming installment $XXX think now. I position OSM on

the at act. look have think structure, we we sense elements as today. are so, And flexibility in act to callable debt it actually par that to the There are makes for structure I at the when us capital

described to that capital really benefits keep on drive that and we'll to structure. trying focus Lee So, the

Roger D. Read

brings Okay. know But take your to helpful. going Yeah, you want on definitely days at a focus. you spread get cash then, acreage, you still the leasehold the at early are trying that's XX,XXX-foot we I it. would have, little or sort nature need guess I I'm of the to daily with a do and laterals. to to liquidity that Delaware? it here pursue and more contiguous of that a have, be looking a to in on happen to that make about the I look And geographic Northern Where Permian think, a the think to is acres, are acreage, ultimately single that you to transaction contiguous process? there that focused process Is

Lee M. Tillman

Yeah. No, daily only team. a that's question. not in Great but play it with process resource integrated also our really exploration our asset team, is

higher that you that conversion more op. from of to A described and in over interest, to access potential, greenfield getting small Midland X every XL looking as just some leasing swaps, We non-op a sits kind Roger, their our have purpose-built of needle team on, of move at day priority has No. to trades, continue each it, that working the leases

swaps good position. leasing trades, a a from and But they've a perspective of It's those game. continue and All say to wants work again to us But more well of consolidated continued one that that that. move of some got help are those get you'll that kind Particularly making kinds as of I singles kind trade. trades some synergy doubles drive to some you've done. ugly of hard-lifting swaps, of complex. the to No and those so, on. smaller see It's – in always a got acquisitions baby mix through progress. are things And going a think as toward we're land

strategy, is and all-of-the-above it the be look more proposition it's an again, going going but bit along a to an doubles it's like, So, to way. of singles and everyday

Roger D. Read

Okay. Thank That's great. you.

Operator

Jeffrey question a from Tuohy Campbell Brothers. We from have

Jeffrey L. Campbell

here. little Lee, speak this Osage the is you and of And morning, multi-parter Good test about in Resource? Could the team. a Oklahoma kind your

exposure? answer Did be the Will Osage other like. the development going can of your competitive Can you in Osage do have cost You whatever tests zones area exceed and you get in or this with potential any in? expectation we it the multi-zone the meet area? more

Lee M. Tillman

Yeah.

Thomas Mitchell Little

but... This is all Jeff. Absolutely, remember of try Yeah. I'll to those Mitch. questions,

Jeffrey L. Campbell

I can repeat them.

Thomas Mitchell Little

some back, I'm tests Osage me. with few talked a the quarters the in That's to vast I the off you'll past, extensive. have quite Osage industry which well, It's and window on I East. the are is We've, variability we're as our missed has, certainly extends on and think, other others the it But White a we've right. Yeah, if sure nature where even certainly seen the few doing further Certainly, some majority testing that some to remind covers early play. well. the one, Meramec encouraged done, there, starting that there the and underlying of in quite North, by oil performance we

true we we and still extensive. position. in recognize we're play prospectivity of process but across defining variability, So, do as also that high-grading it of see and some it's with and prospective the by We're quite our a the encouraged White, the that

that its well while talked we following that for that I in it as the the it's wasn't – this note we paid contributing think potential, important announcement the recognized and we about PayRock value to acquisition. to

So, part selectively as the delineation this we're and of looking integrate our is upside kind exploit that of program to effort. into

Woodford where of Meramec We have certainly test same Meramec but and be Osage. co-development a likely will an the Osage we'll and the looking the upcoming trial, and at pad, in

of bit completion actually we'd tuned, think required standpoint, there but little drives like this, cost come A on different will costs. it. a definitely style a more which we well here, little be below kind competitive. also average stay So, it's quite D&C to cost Meramec our From

Jeffrey L. Campbell

have and great you. that last so color, you Well, question I And thank just just want Okay. certainly memory, management. ask a to portfolio a was good on wondering... I'm

Lee M. Tillman

Sure.

Jeffrey L. Campbell

cash At you the saw there's favorable ago. in of peer unconventional are selling flow consider because any of And I the mentioned that revisiting know also too of but the or from we this long production. we a margin your sale some would stage them Equatorial game, generators, pretty you assets? Guinea free interesting some increased dynamics International here, uplift know not

Lee M. Tillman

Yeah. should core U.S. have grouping, outside those EG. value of I would about allocation And you today, that, be because portfolio is you basins those The it's Jeff, think non-core if generate looking capital certainly for four – to way that ask lie assets we plus would else's that assets other the about the for our within more do to as areas that think extent likely being simply would value don't and portfolio. to have we can and compete the so, someone shareholder, we the

like big some day-in the it's earlier, think question – of within how And in we fact, assets unique our today's a you of need if non-core assets. to commentary of playing we our just capital is the look of in did, some talking volumes saw and and we a But they're portfolio. they So, were to as are kind at I it, again, of of the, But We concentrated the this But to asking bit front a our sure value. of scrutinizing very our and on are that is what crossed portfolio portfolio heavy-lifting that and getting the can overall of on that aspect we make what other not, – role some EG, Guinea catch-up. maximize is material extent every and we start at the our the of where allocation. those kind model are to bit the business do some still part resource delivery. International release, additive the basins things do key we allocation about XX% lot want us behind just need still that our in less transactional beyond very would We capital Then, assets, little on we to pieces. Equatorial options. carefully looking activity say, have day-out, from management, little hurdle again, a playing similar

So, our continues expectation over that is time. portfolio clean-up

Jeffrey L. Campbell

appreciate a I That you. clear was it. very answer. Thank

Lee M. Tillman

it. Appreciate you, Thank Jeff.

Operator

for further turn Lee to over no remarks. Mr. have questions. will We call now Tillman final the I

Lee M. Tillman

appreciate much ends and Oil. questions a your Marathon you much have I I interest Well, in appreciate That your great very very day. call. today. Thank our

Operator

Ladies This participating. your and conference for you call. gentlemen, concludes thank

now disconnect. may You

Marathon Oil (MRO) 2 Nov 172017 Q3 Earnings call transcript