Marathon Oil(MRO) - 2024 Q2 - Quarterly Report

Merger Agreement - Marathon Oil entered into a Merger Agreement with ConocoPhillips, where each outstanding share of Marathon Oil will be converted to 0.2550 shares of ConocoPhillips common stock[25]. - The transaction costs associated with the merger have reached $10 million, primarily consisting of third-party legal and banking fees[26]. - The merger is expected to close late in the fourth quarter of 2024, pending shareholder and regulatory approvals[25]. - The company is subject to restrictions under the Merger Agreement that limit the quarterly dividend increase to a maximum of $0.11 per share[35]. - The company is subject to restrictions under the Merger Agreement that limit its ability to incur additional debt[66]. - The company has suspended its stock repurchase activity due to restrictions from the Merger Agreement, with remaining authorization at approximately $1.8 billion as of June 30, 2024[188]. Financial Performance - For the three months ended June 30, 2024, Marathon Oil reported a net income of $349 million, compared to $287 million for the same period in 2023, representing a 22.9% increase[35]. - The diluted net income per share for the second quarter of 2024 was $0.62, up from $0.47 in the second quarter of 2023, reflecting a 31.9% increase[35]. - Revenues from contracts with customers for the three months ended June 30, 2024, totaled $1.551 billion, a 7.7% increase from $1.440 billion in the same period of 2023[39]. - Segment income for Q2 2024 was $349 million, up from $287 million in Q2 2023, reflecting a 21.6% increase[48]. - The company reported total revenues from contracts with customers for the first six months of 2024 were $3,204 million, a 5% increase from $3,051 million in the same period of 2023, with the U.S. segment contributing $2,973 million and the International segment $231 million[159]. Revenue and Sales Volumes - Crude oil and condensate revenues in the U.S. for the second quarter of 2024 were $1.316 billion, compared to $1.195 billion in the same quarter of 2023, marking a 10.1% increase[39]. - Revenues from contracts with customers for Q2 2024 totaled $1,666 million, an increase of 12.2% compared to $1,484 million in Q2 2023[46]. - The company experienced a 38% decrease in crude and oil condensate net sales volumes for the three months ended June 30, 2024, compared to the same period in 2023, with volumes of 5 mbbld[139]. - Natural gas sold as gas saw a 56% decrease in net sales volumes for the three months ended June 30, 2024, at 82 mmcfd, down from 186 mmcfd in 2023[139]. - The International segment reported revenues of $115 million for the three months ended June 30, 2024, significantly up from $44 million in the same period of 2023[148]. Capital Expenditures and Debt - Capital expenditures for the first half of 2024 were $1,268 million, compared to $1,224 million in the same period of 2023, indicating a 3.6% increase[51]. - As of June 30, 2024, the total long-term debt outstanding for the company was $5.0 billion[65]. - The company completed a public offering of $1.2 billion in unsecured senior notes on March 28, 2024, to repay existing borrowings[175]. - The company had approximately $2.3 billion in liquidity, consisting of $77 million in cash and cash equivalents and $2.2 billion available under its Revolving Credit Facility as of June 30, 2024[179]. - The company reported total financial liabilities of $5.201 billion as of June 30, 2024, compared to $5.111 billion as of December 31, 2023[85]. Operational Highlights - The company reported a net loss on commodity derivatives of $23 million for the first half of 2024, compared to a net gain of $18 million in the same period of 2023[51]. - The company incurred $10 million in transaction costs associated with the merger with ConocoPhillips[46]. - Marathon Oil's drilling activity in the Eagle Ford increased, with 40 wells drilled to total depth in Q2 2024 compared to 30 in Q2 2023[133]. - The company reported net sales volumes of LNG at 109 mmcfd for Q2 2024, with an average realized price of $8.52 per mcf, generating $84 million in revenue[136]. - The company reported total inventories of $161 million as of June 30, 2024, down from $186 million at the end of 2023, with crude oil, NGLs, and natural gas valued at $10 million[107]. Tax and Compliance - The effective income tax rate for Q2 2024 was 22%, consistent with the rate in Q2 2023[56]. - The company entered into a consent decree with the EPA, requiring a $65 million civil penalty and an estimated total cost of $177 million for compliance projects, with over 70% of costs already incurred[112]. - The company agreed to pay a civil penalty of $265,000 to the EPA as part of a consent agreement effective July 25, 2024, but does not expect this to materially affect its financial position[114]. - The company anticipates incurring a civil penalty of $65 million related to a consent decree with the EPA and Department of Justice in 2024[192]. Market Risks and Derivatives - The company employs financial derivatives to manage commodity price and interest rate risks, although current limitations may hinder these strategies[201]. - The company’s exposure to market risks includes commodity price risk and interest rate risk, which are managed through various strategies[201]. - A hypothetical 10% increase in crude oil prices would result in a fair value increase of $12 million, while a 10% decrease would lead to a fair value decrease of $15 million[203]. - The company had forward starting interest rate swap agreements totaling $295 million designated as cash flow hedges as of June 30, 2024[206]. - The company is subject to limitations on entering new derivative transactions under the Merger Agreement, impacting its risk management strategies[201].