Andrew Folse, Oil & Gas Analyst at GlobalData, a leading data and analytics company, offers his view on the current events:
Marathon Oils net loss of US$750m in Q2 2020 was well anticipated due to the drop in oil prices and the current economic crisis that impacted domestic demand. However, despite the average realized price for US crude oil and condensate falling to US$ 21.65 per barrel representing a 63% decrease from a year prior the company upholds an optimistic outlook and is expected to be able to improve cost efficiency by reducing well costs and maintaining well productivity.
Marathon Oils Bakken acreage is the companys most promising, with high productivity and low well cost. If Marathon Oil is able to drive well costs below US$450 per lateral foot, and maintain oil productivity above 30 days initial production (IP-30) of 1,500 barrel of oil per day (bopd), the company will very likely be able to average a breakeven oil prices well below US$30/bbl in Bakken.
As for its Eagle Ford acreage, if Marathon Oil is able to drive well costs below US$750 per lateral foot while maintaining oil productivity above IP-30 of 970bopd the company will be able to average a breakeven price below US$35/bbl.
With a competitive breakeven oil price, Marathon Oil is confident in taking on an unhedged risk going into 2021 to maximise on potential gains if commodity prices were to recover from the current level. However, this poses a huge threat to the company as the economic crisis is yet to be over and industry volatility persists. However, Marathon Oil is backed by a strong liquidity profile, with a US$522m cash balance in Q2 2020 and US$3bn in its undrawn credit facility. The company has US$5.5bn in long-term debt value with US$1bn maturing in the second half of 2022. 2020 Global Data Point.