HOUSTON, Oct. 1, 2020 /PRNewswire/ -- Marathon Oil
Corporation (NYSE: MRO) today reported an update highlighting the
reinstatement of a base dividend, recent debt reduction
initiatives, and a transparent framework for future capital
allocation and uses of free cash flow intended to maximize
long-term shareholder value.
Highlights
- Reinstated quarterly base dividend at 3
cents per share
- Successfully tendered $500
million of 2022 notes, resulting in $100 million gross debt reduction
- Fourth quarter dividend and gross debt reduction more than
fully funded by third quarter free cash flow generation
- Capital allocation framework provides free cash flow visibility
and makes meaningful cash flow available for investor-friendly
purposes
-
- In a $40/bbl to $45/bbl WTI price environment, intend to allocate
at least 20% of cash flow from operations to balance sheet
enhancement and return of capital to shareholders
- In a $45/bbl WTI or better price
environment, intend to allocate 30% or more of cash flow from
operations to balance sheet enhancement and return of capital to
shareholders
- Resilience to lower commodity prices underpinned by free cash
flow breakeven below $35/bbl WTI in
2021 benchmark maintenance scenario; maintenance scenario could
deliver 2021 free cash flow of approximately $500 million at current commodity forward
curve
- Committed to prioritizing free cash flow and corporate returns
in all price environments
Dividend Reinstatement and Debt Reduction
Marathon Oil announced today that its board of directors has
declared a dividend of 3 cents per
share on Marathon Oil Corporation common stock. The dividend is
payable on Dec. 10, 2020 to
stockholders of record on Nov. 18,
2020.
Consistent with prior announcements, Marathon Oil also announced
it has completed a cash tender for an aggregate principal amount of
$500 million of its outstanding
$1 billion 2.8% Senior Notes due
November 2022. The tender proactively
addresses the Company's next significant debt maturity and was
funded from cash on hand. The preliminary cash balance at
Sept. 30, prior to funding the
tender, was approximately $1.1
billion, which includes the recently completed remarketing
of $400 million tax exempt bonds at a
weighted interest rate of 2.25%, as well as free cash flow
generated during third quarter 2020. The $500 million tender will result in a gross debt
reduction of $100 million relative to
the Company's second quarter ending debt balance.
Both the $100 million gross debt
reduction and fourth quarter dividend are more than fully funded by
third quarter free cash flow generation.
Marathon Oil continues to maintain a solid balance sheet, is
investment grade rated at all three primary rating agencies, and
recently had its outlook upgraded to stable by S&P.
"While 2020 has included its fair share of challenges, we
believe we have successfully repositioned our Company for success
in a lower, more volatile commodity price environment," said
Chairman, President, and CEO Lee
Tillman. "Through disciplined capital allocation, material
cost reductions and a relentless focus on capital efficiency, we
have materially enhanced our free cash flow generation potential
and are positioned to deliver differentiated capital efficiency and
peer leading free cash flow breakevens. Today's announcement is
evidence of our progress and our forward confidence, as we are
reinstating a base dividend and reducing our gross debt.
Maintaining a strong balance sheet and returning capital to
shareholders are core elements of our value proposition, and we
believe we are well positioned to do both in the current
environment."
Disciplined Capital Allocation Framework
Marathon Oil also provided an update on a transparent capital
allocation framework that prioritizes sustainable free cash flow
generation across a broad range of commodity prices.
"Marathon Oil has a track record of capital discipline, free
cash flow generation, and return of capital to shareholders that is
unique in our peer space," continued Tillman. "Over 2018 and 2019,
our average reinvestment ratio for development capital was below
80%, and we returned 23% of our total cash flow from operations
back to our shareholders. Looking ahead, we aim to deliver similar
shareholder-friendly outcomes, yet in a lower and more volatile
commodity price environment - and with an even greater focus on
free cash flow generation."
In a $40/bbl to $45/bbl WTI oil price environment, the Company
plans to target a total capital spending reinvestment ratio of
approximately 70% to 80% of cash flow from operations, ensuring 20%
to 30% of cash flow from operations will be made available for
investor-friendly purposes – prioritizing balance sheet enhancement
and return of capital to shareholders.
In an oil price environment above $45/bbl WTI, Marathon Oil plans to target a total
capital reinvestment ratio of approximately 70% or less of cash
flow from operations, ensuring 30% or more of cash flow will be
made available for investor-friendly purposes.
Marathon Oil's resilience to lower commodity prices is
underpinned by a free cash flow breakeven below $35/bbl WTI in its 2021 benchmark maintenance
scenario. This maintenance scenario would deliver total Company
2021 oil production in-line with the fourth quarter of 2020 for
approximately $1 billion in total
capital spending. At the current commodity price forward curve,
this benchmark scenario positions the Company for free cash flow of
approximately $500 million in
2021.
"The intent of our framework is to provide clear visibility to
compelling free cash flow generation," said Tillman. "We plan to
dedicate a material portion of our cash flow to investor-friendly
purposes, prioritizing further balance sheet improvement, while
continuing to build on our unique track record of returning capital
back to our shareholders. In the event of lower than expected
prices, our resilience is underpinned by our differentiated capital
efficiency and our sub $35/bbl
maintenance scenario breakeven. If commodity prices outperform, we
will continue to prioritize free cash flow. Production growth will
remain an output, but would be capped at 5% in higher price
environments, underscoring our commitment to capital discipline and
free cash flow generation."
Forward-Looking Statements
This
release contains forward-looking statements. All statements, other
than statements of historical fact, including, without limitation,
statements regarding the Company's future performance and business
strategy, future free cash flow, future return of capital to
shareholders, future capital spend, future free cash flow breakeven
and future oil production are forward-looking statements. Words
such as "anticipate," "believe," "could," "estimate," "expect,"
"forecast," "future," "guidance," "intend," "may," "outlook,"
"plan," "positioned," "project," "seek," "should," "target,"
"will," "would," or similar words may be used to identify
forward-looking statements; however, the absence of these words
does not mean that the statements are not forward-looking. While
the Company believes its assumptions concerning future events are
reasonable, a number of factors could cause actual results to
differ materially from those projected, including, but not limited
to: conditions in the oil and gas industry, including supply/demand
levels for crude oil and condensate, NGLs and natural gas and the
resulting impact on price; changes in expected reserve or
production levels; changes in political or economic conditions in
the U.S. and Equatorial Guinea,
including changes in foreign currency exchange rates, interest
rates, and inflation rates; actions taken by the members of the
Organization of the Petroleum Exporting Countries and Russia affecting the production and pricing of
crude oil; other global and domestic political, economic or
diplomatic developments; capital available for exploration and
development; risks related to the Company's hedging activities;
voluntary or involuntary curtailments, delays or cancellations of
certain drilling activities; well production timing; liability
resulting from litigation; drilling and operating risks; lack of,
or disruption in, access to storage capacity, pipelines or other
transportation methods; availability of drilling rigs, materials
and labor, including the costs associated therewith; difficulty in
obtaining necessary approvals and permits; non-performance by third
parties of contractual obligations; unforeseen hazards such as
weather conditions, a health pandemic (including COVID-19), acts of
war or terrorist acts and the government or military response
thereto; cyber-attacks; changes in safety, health, environmental,
tax and other regulations, requirements or initiatives, including
initiatives addressing the impact of global climate change, air
emissions, or water management; other geological, operating and
economic considerations; and the risk factors, forward-looking
statements and challenges and uncertainties described in the
Company's 2019 Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q for the quarters ended March 31,
2020 and June 30, 2020 and
other public filings and press releases, available at
https://ir.marathonoil.com/. Except as required by law, the Company
undertakes no obligation to revise or update any forward-looking
statements as a result of new information, future events or
otherwise.
Non-GAAP Measures
In analyzing and
planning for its business, Marathon Oil supplements its use of GAAP
financial measures with non-GAAP financial measures, including free
cash flow. Free cash flow is defined as net cash provided by
operating activities adjusted for working capital, capital
expenditures, and EG LNG return of capital. Management believes
this is useful to investors as a measure of the Company's ability
to fund its capital expenditure programs and dividend payments,
service debt, and other distributions to stockholders.
Media Relations Contact
Stephanie Gentry: 713-296-3307
Investor Relations Contacts:
Guy Baber: 713-296-1892
John Reid: 713-296-4380
View original content to download
multimedia:http://www.prnewswire.com/news-releases/marathon-oil-reinstates-base-dividend-and-reduces-debt-301144473.html
SOURCE Marathon Oil Corporation