Marathon Oil Corporation First Quarter 2023 Results

Return of Capital

Marathon Oil's percentage of CFO framework provides clear visibility to significant return of capital to equity investors, ensuring the shareholder gets the first call on cash flow generation and protecting shareholder distributions from capital inflation. In a $60/bbl WTI or higher price environment, the Company targets returning a minimum of 40% of CFO to equity investors. The Company remains on track to meet or exceed this minimum objective in 2023.

During first quarter, Marathon Oil returned 42% of adjusted CFO to equity investors, exceeding its minimum commitment. First quarter return of capital totaled $397 million, including $334 million of share repurchases and the $63 million base dividend.

Since significantly increasing return of capital to equity investors in fourth quarter 2021 under its current Return of Capital Framework, Marathon Oil has returned $4.3 billion to shareholders, including $3.9 billion of share repurchases that have reduced outstanding share count by 22%, contributing to significant growth in all per share metrics.

1Q23 Financials

CASH FLOW AND CAPEX: Net cash provided by operations was $865 million during first quarter or $942 million before changes in working capital. First quarter cash additions to property, plant and equipment totaled $532 million, while capital expenditures (accrued) totaled $601 million, consistent with the Company's previously provided guidance for approximately 60% of 2023 capital expenditures to be concentrated in the first half of the year.

BALANCE SHEET AND LIQUIDITY: Marathon Oil ended first quarter with $178 million in cash and cash equivalents. The Company redeemed $70 million of 8.5% Senior Notes during first quarter on the maturity date. At quarter end, Marathon Oil had $2.1 billion of available borrowing capacity on its revolving credit facility that matures in 2027. On April 3, 2023, the Company closed a $200 million remarketing of tax-exempt bonds at an interest rate of 4.05% that matures July 1, 2026.

ADJUSTMENTS TO NET INCOME: The adjustments to net income for first quarter increased net income by $3 million, primarily due to dry well expense. This was partly offset by a gain on asset sale and the income impact associated with unrealized gains on derivative instruments.

1Q23 Operations

UNITED STATES (U.S.): U.S. production averaged 341,000 net boed for first quarter 2023. Oil production averaged 176,000 net bopd. The Company brought a total of 61 gross Company-operated wells to sales during first quarter in comparison to guidance for approximately 62 to 67 gross Company-operated wells to sales. U.S. unit production costs averaged $5.82 per boe during first quarter.

Marathon Oil's first quarter Eagle Ford production averaged 144,000 net boed, including 75,000 net bopd of oil, with 36 gross Company-operated wells to sales. Bakken production averaged 95,000 net boed, including 63,000 net bopd, with 17 gross Company-operated wells to sales. Oklahoma, production averaged 54,000 net boed, including 12,000 net bopd. Permian production averaged 45,000 net boed, including 25,000 net bopd, with eight gross Company-operated wells to sales. The Company also brought five gross wells to sales during first quarter in Oklahoma under its joint venture program.

ENSIGN NATURAL RESOURCES: As previously announced, Marathon Oil closed on the acquisition of the Eagle Ford assets of Ensign Natural Resources on Dec. 27, 2022. Integration of the asset has progressed ahead of schedule, with transition activities now complete. Of the total 36 Eagle Ford wells to sales during first quarter, 14 were on the recently acquired Ensign acreage in the condensate window of Karnes and Live Oak Counties. These 14 wells have demonstrated top decile oil productivity in the Eagle Ford, as measured by average 30-day production rates.

INTERNATIONAL: E.G. production averaged 55,000 net boed for first quarter 2023, including 10,000 net bopd. Unit production costs averaged $4.54 per boe. Net income from equity method investees totaled $80 million. There were no cash distributions from equity method companies during first quarter. However, Marathon Oil expects to receive cash dividends in excess of $200 million during second quarter. In addition, the previously announced planned second quarter E.G. turnaround was successfully completed. The planned turnaround is expected to reduce second quarter E.G. production by approximately 12,000 boed.

EQUATORIAL GUINEA HOA: During first quarter, Marathon Oil signed an HOA with the Republic of E.G. and Noble Energy E.G. Ltd, a Chevron company, to progress the development of the E.G. Regional Gas Mega Hub (GMH). The HOA aligns all critical parties on necessary commercial principles to advance the next phases (II and III) of the GMH, which is expected to further leverage and extend the life of E.G.'s world-class gas monetization infrastructure, including the E.G. LNG facility, into the next decade.

More specifically, Phase II is anticipated to process Alba Unit (MRO 64% interest) gas, from Jan. 1, 2024, under new contractual terms following the expiration of the legacy Henry Hub-linked Alba sales and purchase agreement at the end of this year. Phase II is expected to materially increase Marathon Oil's exposure to global LNG pricing and drive significant improvement to E.G. earnings and cash flow. Phase III of the GMH is expected to facilitate gas processing from the Aseng Field at Punta Europa facilities. Beyond Phase III, a recently established bilateral agreement on cross-border oil and gas development between E.G. and Cameroon is expected to provide other opportunities to further expand the GMH through fast-track monetization of cross-border wet gas fields.

2023 Guidance

Marathon Oil's originally provided 2023 production guidance remains unchanged, as does the Company's 2023 capital spending guidance range of $1.9 to $2.0 billion, with approximately 60% of 2023 capital spending weighted to the first half of the year.

The Company's 2023 business plan benchmarks at the top of its high-quality E&P peer group, as measured by expected shareholder distribution yield; FCF yield and FCF efficiency; capital efficiency; pre and post-dividend FCF breakeven; and growth in production per-share.

A slide deck and Quarterly Investor Packet will be posted to the Company's website following this release. On Thursday, May 4, at 9 a.m. ET, the Company will conduct a question-and-answer webcast/call, which will include forward-looking information. The live webcast, replay and all related materials will be available at https://ir.marathonoil.com/.