MARATHON OIL CORP [MRO] Filings

10-Q 1 mro-20230930.htm 10-Q mro-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended	September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from _____ to _____

Commission file number 1-1513

Marathon Oil Corporation

(Exact name of registrant as specified in its charter)


Delaware						25-0996816
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

990 Town and Country Boulevard, Houston, Texas

77024-2217

(Address of principal executive offices)

(713) 629-6600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $1.00

MRO

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

There were 585,247,358 shares of Marathon Oil Corporation common stock outstanding as of October 31, 2023.

MARATHON OIL CORPORATION

Unless the context otherwise indicates, references to “Marathon Oil,” “we,” “our,” or “us” in this Form 10-Q are references to Marathon Oil Corporation, including its wholly owned and majority-owned subsidiaries, and its ownership interests in equity method investees (corporate entities, partnerships, limited liability companies and other ventures over which Marathon Oil exerts significant influence by virtue of its ownership interest).

For certain industry specific terms used in this Form 10-Q, please see “Definitions” in our 2022 Annual Report on Form 10-K.


	Table of Contents
		Page
Part I - FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Consolidated Statements of Income (Unaudited)	2
	Consolidated Statements of Comprehensive Income (Unaudited)	3
	Consolidated Balance Sheets (Unaudited)	4
	Consolidated Statements of Cash Flows (Unaudited)	5
	Consolidated Statements of Stockholders' Equity (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	7
	1. Basis of Presentation	7
	2. Accounting Standards	7
	3. Income and Dividends per Common Share	7

	4. Revenues	7
	5. Segment Information	9
	6. Income Taxes	14
	7. Credit Losses	14
	8. Inventories	15
	9. Property, Plant and Equipment	15

	10. Asset Retirement Obligations	15
	11. Leases	16
	12. Derivatives	17
	13. Fair Value Measurements	19
	14. Debt	21
	15. Stockholders' Equity	22
	16. Incentive Based Compensation	22
	17. Defined Benefit Postretirement Plans	23
	18. Reclassifications Out of Accumulated Other Comprehensive Income (Loss)	23
	19. Supplemental Cash Flow Information	24
	20. Equity Method Investments	24
	21. Commitments and Contingencies	25

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42


Part II - OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
	Signatures	45

Table of Contents

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

MARATHON OIL CORPORATION

Consolidated Statements of Income (Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions, except per share data)	2023		2022		2023		2022
Revenues and other income:
Revenues from contracts with customers	$	1,771	$	2,008	$	4,822	$	5,937
Net gain (loss) on commodity derivatives	1		41		19		(129)
Income from equity method investments	38		190		140		469
Net gain on disposal of assets	1		2		6		1
Other income	2		6		19		25
Total revenues and other income	1,813		2,247		5,006		6,303
Costs and expenses:
Production	192		193		607		509
Shipping, handling and other operating	164		199		487		575
Exploration	20		73		46		92
Depreciation, depletion and amortization	583		460		1,662		1,319
Impairments	—		2		—		4
Taxes other than income	113		137		251		381
General and administrative	72		79		225		220
Total costs and expenses	1,144		1,143		3,278		3,100
Income from operations	669		1,104		1,728		3,203
Net interest and other	(94)		(52)		(268)		(128)
Other net periodic benefit credits	5		5		11		14

Income before income taxes	580		1,057		1,471		3,089
Provision for income taxes	127		240		314		2
Net income	$	453	$	817	$	1,157	$	3,087
Net income per share:
Basic	$	0.75	$	1.22	$	1.88	$	4.40
Diluted	$	0.75	$	1.22	$	1.88	$	4.39
Weighted average common shares outstanding:
Basic	603		670		615		701
Diluted	604		672		616		703

The accompanying notes are an integral part of these consolidated financial statements.

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MARATHON OIL CORPORATION

Consolidated Statements of Comprehensive Income (Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2023		2022		2023		2022
Net income	$	453	$	817	$	1,157	$	3,087
Other comprehensive income (loss), net of tax



Change in actuarial gain (loss) and other for postretirement and postemployment plans	(4)		(3)		(17)		(6)

Change in derivative hedges unrecognized gain	—		7		1		23






Other	—		—		—		(1)
Other comprehensive income (loss)	(4)		4		(16)		16
Comprehensive income	$	449	$	821	$	1,141	$	3,103

The accompanying notes are an integral part of these consolidated financial statements.

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MARATHON OIL CORPORATION

Consolidated Balance Sheets (Unaudited)


	September 30,		December 31,
(In millions, except par value and share amounts)	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	174	$	334
Receivables, net	1,434		1,146
Inventories	174		125
Other current assets	66		66
Total current assets	1,848		1,671
Equity method investments	421		577
Property, plant and equipment, net of accumulated depreciation, depletion and amortization of $25,377 and $23,876	17,411		17,377


Other noncurrent assets	239		315
Total assets	$	19,919	$	19,940
Liabilities
Current liabilities:
Accounts payable	$	1,582	$	1,279
Commercial paper	450		—
Payroll and benefits payable	67		90
Accrued taxes	128		171
Other current liabilities	279		364
Long-term debt due within one year	400		402
Total current liabilities	2,906		2,306
Long-term debt	4,876		5,521
Deferred tax liabilities	386		167
Defined benefit postretirement plan obligations	94		100
Asset retirement obligations	308		295
Deferred credits and other liabilities	123		154
Total liabilities	8,693		8,543
Commitments and contingencies (Note 21)
Stockholders’ Equity
Preferred stock – no shares issued or outstanding (no par value, 26 million shares authorized)	—		—
Common stock:
Issued – 937 million shares (par value $1 per share, 1.925 billion shares authorized at September 30, 2023 and December 31, 2022)	937		937
Held in treasury, at cost – 347 million shares and 304 million shares	(8,598)		(7,512)
Additional paid-in capital	7,163		7,203
Retained earnings	11,634		10,663
Accumulated other comprehensive income	90		106
Total stockholders’ equity	11,226		11,397
Total liabilities and stockholders’ equity	$	19,919	$	19,940

The accompanying notes are an integral part of these consolidated financial statements.

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MARATHON OIL CORPORATION

Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended
	September 30,
(In millions)	2023		2022
Increase (decrease) in cash and cash equivalents
Operating activities:
Net income	$	1,157	$	3,087
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	1,662		1,319
Impairments	—		4
Exploratory dry well costs and unproved property impairments	41		85
Net gain on disposal of assets	(6)		(1)

Deferred income taxes	264		(137)
Unrealized loss on derivative instruments, net	8		4


Pension and other post retirement benefits, net	(27)		(28)
Stock-based compensation	32		28
Equity method investments, net	99		(130)
Changes in:
Current receivables	(298)		(221)
Inventories	(51)		(27)
Current accounts payable and accrued liabilities	166		300
Other current assets and liabilities	(17)		(57)
All other operating, net	(23)		75
Net cash provided by operating activities	3,007		4,301
Investing activities:
Additions to property, plant and equipment	(1,659)		(1,117)

Acquisitions, net of cash acquired	(15)		2
Disposal of assets, net of cash transferred to the buyer	(7)		8
Equity method investments - return of capital	57		12

Net cash used in investing activities	(1,624)		(1,095)
Financing activities:
Proceeds from revolving credit facility	1,018		—
Repayments of revolving credit facility	(1,468)		—
Proceeds from commercial paper borrowings, net	450		—
Borrowings	200		—
Debt repayments	(401)		(35)

Shares repurchased under buyback programs	(1,121)		(2,474)
Dividends paid	(186)		(162)
Purchases of shares for tax withholding obligations	(31)		(21)
All other financing, net	(4)		15
Net cash used in financing activities	(1,543)		(2,677)

Net increase (decrease) in cash and cash equivalents	(160)		529
Cash and cash equivalents at beginning of period	334		580
Cash and cash equivalents at end of period	$	174	$	1,109

The accompanying notes are an integral part of these consolidated financial statements.

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MARATHON OIL CORPORATION

Consolidated Statements of Stockholders’ Equity (Unaudited)


	Total Equity of Marathon Oil Stockholders
(In millions)	Preferred Stock		Common Stock		Treasury Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Equity
Nine Months Ended September 30, 2022
December 31, 2021 Balance	$	—	$	937	$	(4,825)	$	7,221	$	7,271	$	82	$	10,686
Shares repurchased under buyback programs	—		—		(592)		—		—		—		(592)
Stock-based compensation	—		—		55		(43)		—		—		12
Net income	—		—		—		—		1,304		—		1,304
Other comprehensive income	—		—		—		—		—		8		8
Dividends paid (per share amount of $0.07)	—		—		—		—		(52)		—		(52)
March 31, 2022 Balance	$	—	$	937	$	(5,362)	$	7,178	$	8,523	$	90	$	11,366
Shares repurchased under buyback programs	—		—		(760)		—		—		—		(760)
Stock-based compensation	—		—		4		8		—		—		12
Net income	—		—		—		—		966		—		966
Other comprehensive income	—		—		—		—		—		4		4
Dividends paid (per share amount of $0.08)	—		—		—		—		(56)		—		(56)
June 30, 2022 Balance	$	—	$	937	$	(6,118)	$	7,186	$	9,433	$	94	$	11,532
Shares repurchased under buyback programs	—		—		(1,122)		—		—		—		(1,122)
Stock-based compensation	—		—		—		10		—		—		10
Net income	—		—		—		—		817		—		817
Other comprehensive income	—		—		—		—		—		4		4
Dividends paid (per share amount of $0.08)	—		—		—		—		(54)		—		(54)
September 30, 2022 Balance	$	—	$	937	$	(7,240)	$	7,196	$	10,196	$	98	$	11,187

Nine Months Ended September 30, 2023
December 31, 2022 Balance	$	—	$	937	$	(7,512)	$	7,203	$	10,663	$	106	$	11,397
Shares repurchased under buyback programs	—		—		(334)		—		—		—		(334)
Excise tax on shares repurchased	—		—		(3)		—		—		—		(3)
Stock-based compensation	—		—		35		(54)		—		—		(19)
Net income	—		—		—		—		417		—		417
Other comprehensive loss	—		—		—		—		—		(7)		(7)
Dividends paid (per share amount of $0.10)	—		—		—		—		(63)		—		(63)
March 31, 2023 Balance	$	—	$	937	$	(7,814)	$	7,149	$	11,017	$	99	$	11,388
Shares repurchased under buyback programs	—		—		(372)		—		—		—		(372)
Excise tax on shares repurchased	—		—		(3)		—		—		—		(3)
Stock-based compensation	—		—		1		10		—		—		11
Net income	—		—		—		—		287		—		287
Other comprehensive loss	—		—		—		—		—		(5)		(5)
Dividends paid (per share amount of $0.10)	—		—		—		—		(62)		—		(62)
June 30, 2023 Balance	$	—	$	937	$	(8,188)	$	7,159	$	11,242	$	94	$	11,244
Shares repurchased under buyback programs	—		—		(415)		—		—		—		(415)
Excise tax on shares repurchased	—		—		(4)		—		—		—		(4)
Stock-based compensation	—		—		9		4		—		—		13
Net income	—		—		—		—		453		—		453
Other comprehensive loss	—		—		—		—		—		(4)		(4)
Dividends paid (per share amount of $0.10)	—		—		—		—		(61)		—		(61)
September 30, 2023 Balance	$	—	$	937	$	(8,598)	$	7,163	$	11,634	$	90	$	11,226

The accompanying notes are an integral part of these consolidated financial statements.

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MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

These consolidated financial statements are unaudited; however, in the opinion of management, these statements reflect all adjustments necessary for a fair statement of the results for the periods reported. All such adjustments are of a normal recurring nature unless disclosed otherwise. These consolidated financial statements, including notes, have been prepared in accordance with the applicable rules of the SEC and do not include all of the information and disclosures required by U.S. GAAP for complete financial statements.

These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2022 Annual Report on Form 10-K. The results of operations for the third quarter and first nine months of 2023 are not necessarily indicative of the results to be expected for the full year.

2. Accounting Standards

Accounting Standards Updates Adopted

No accounting standards were adopted in the third quarter of 2023 that had a material impact on our consolidated financial statements.

Accounting Standards Updates Not Yet Adopted

There were no issued but pending accounting standards expected to have a material impact on our consolidated financial statements.

3. Income and Dividends per Common Share

Basic income per share is based on the weighted average number of common shares outstanding. Diluted income per share assumes exercise of stock options and performance units in all periods, provided the effect is not antidilutive. The per share calculations below exclude 1 million of antidilutive stock options and performance units for the three and nine months ended September 30, 2023, and 1 million and 2 million of antidilutive stock options and performance units for the three and nine months ended September 30, 2022, respectively.


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2023		2022		2023		2022
Net income	$	453	$	817	$	1,157	$	3,087

Weighted average common shares outstanding	603		670		615		701
Effect of dilutive securities	1		2		1		2
Weighted average common shares, diluted	604		672		616		703
Net income per share:
Basic	$	0.75	$	1.22	$	1.88	$	4.40
Diluted	$	0.75	$	1.22	$	1.88	$	4.39

Dividends per share	$	0.10	$	0.08	$	0.30	$	0.23

4. Revenues

The majority of our revenues are derived from the sale of crude oil and condensate, NGLs and natural gas under spot and term agreements with our customers in the United States and Equatorial Guinea.

As of September 30, 2023 and December 31, 2022, receivables from contracts with customers, included in receivables, less reserves for credit losses, were $1.1 billion and $875 million, respectively.

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MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

The following tables present our revenues from contracts with customers disaggregated by product type and geographic areas for the three and nine months ended September 30:

United States


	Three Months Ended September 30, 2023
(In millions)	Eagle Ford		Bakken		Oklahoma		Permian		Other U.S.		Total
Crude oil and condensate	$	587	$	580	$	64	$	164	$	13	$	1,408
Natural gas liquids	80		47		30		20		—		177
Natural gas	48		20		31		12		1		112
Other	2		—		—		—		1		3
Revenues from contracts with customers	$	717	$	647	$	125	$	196	$	15	$	1,700


	Three Months Ended September 30, 2022
(In millions)	Eagle Ford		Bakken		Oklahoma		Permian		Other U.S.		Total
Crude oil and condensate	$	523	$	648	$	104	$	114	$	39	$	1,428
Natural gas liquids	49		82		63		16		6		216
Natural gas	56		67		105		22		11		261
Other	3		—		—		—		19		22
Revenues from contracts with customers	$	631	$	797	$	272	$	152	$	75	$	1,927


	Nine Months Ended September 30, 2023
(In millions)	Eagle Ford		Bakken		Oklahoma		Permian		Other U.S.		Total
Crude oil and condensate	$	1,606	$	1,467	$	205	$	475	$	35	$	3,788
Natural gas liquids	215		125		102		60		—		502
Natural gas	141		69		95		30		2		337
Other	5		—		—		—		11		16
Revenues from contracts with customers	$	1,967	$	1,661	$	402	$	565	$	48	$	4,643


	Nine Months Ended September 30, 2022
(In millions)	Eagle Ford		Bakken		Oklahoma		Permian		Other U.S.		Total
Crude oil and condensate	$	1,526	$	2,049	$	341	$	302	$	124	$	4,342
Natural gas liquids	148		263		191		46		23		671
Natural gas	145		156		256		55		28		640
Other	6		—		—		—		71		77
Revenues from contracts with customers	$	1,825	$	2,468	$	788	$	403	$	246	$	5,730

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MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

International (E.G.)


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2023		2022		2023		2022
Crude oil and condensate	$	64	$	75	$	160	$	186
Natural gas liquids	1		1		2		2
Natural gas	5		5		14		17
Other	1		—		3		2
Revenues from contracts with customers	$	71	$	81	$	179	$	207

5. Segment Information

We have two reportable operating segments. Both of these segments are organized and managed based upon geographic location and the nature of the products and services offered.

•United States (“U.S.”) – explores for, produces and markets crude oil and condensate, NGLs and natural gas in the United States; and

•International (“Int’l”) – explores for, produces and markets crude oil and condensate, NGLs and natural gas outside of the United States as well as produces and markets products manufactured from natural gas, such as LNG and methanol, in Equatorial Guinea (“E.G.”)

Segment income represents income that excludes certain items not allocated to our operating segments, net of income taxes. A portion of our corporate and operations general and administrative support costs are not allocated to the operating segments. These unallocated costs primarily consist of employment costs (including pension effects), professional services, facilities and other costs associated with corporate and operations support activities. Additionally, items which affect comparability such as: gains or losses on dispositions, impairments of proved and certain unproved properties, dry wells, changes in our valuation allowance, unrealized gains or losses on commodity and interest rate derivative instruments, effects of pension settlements and curtailments, expensed transaction costs for business combinations or other items (as determined by the chief operating decision maker (“CODM”)) are not allocated to operating segments.

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MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)


	Three Months Ended September 30, 2023
(In millions)	U.S.		Int’l		Not Allocated to Segments			Total
Revenues from contracts with customers	$	1,700	$	71	$	—		$	1,771
Net gain (loss) on commodity derivatives	7		—		(6)		(b)	1
Income from equity method investments	—		38		—			38
Net gain on disposal of assets	—		—		1			1
Other income	—		1		1			2
Less costs and expenses:
Production	173		19		—			192
Shipping, handling and other operating	162		2		—			164
Exploration	8		1		11		(c)	20
Depreciation, depletion and amortization	570		12		1			583

Taxes other than income	112		—		1			113
General and administrative	32		3		37			72
Net interest and other	—		—		94			94
Other net periodic benefit costs	—		—		(5)			(5)

Income tax provision (benefit)	145		11		(29)			127
Segment income (loss)	$	505	$	62	$	(114)		$	453
Total assets	$	18,503	$	1,072	$	344		$	19,919
Capital expenditures(a)	$	444	$	1	$	4		$	449

(a)Includes accruals and excludes acquisitions.

(b)Unrealized loss on commodity derivative instruments (See Note 12).

(c)Includes $11 million of unproved impairments related to Permian exploration leases.

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MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)


	Three Months Ended September 30, 2022
(In millions)	U.S.		Int’l		Not Allocated to Segments			Total
Revenues from contracts with customers	$	1,927	$	81	$	—		$	2,008
Net gain (loss) on commodity derivatives	(26)		—		67		(b)	41
Income from equity method investments	—		190		—			190
Net gain on disposal of assets	—		—		2			2
Other income	4		1		1			6
Less costs and expenses:
Production	173		20		—			193
Shipping, handling and other operating	171		5		23			199
Exploration	11		—		62		(c)	73
Depreciation, depletion and amortization	441		14		5			460
Impairments	—		—		2			2
Taxes other than income	136		—		1			137
General and administrative	37		4		38			79
Net interest and other	—		—		52			52
Other net periodic benefit costs	—		—		(5)			(5)

Income tax provision (benefit)	213		48		(21)			240
Segment income (loss)	$	723	$	181	$	(87)		$	817
Total assets	$	15,487	$	1,294	$	1,077		$	17,858
Capital expenditures(a)	$	406	$	1	$	6		$	413

(a)Includes accruals and excludes acquisitions.

(b)Unrealized gain on commodity derivative instruments (See Note 12).

(c)Includes dry well costs and unproved property impairments of $48 million for Louisiana Austin Chalk exploration leases and $14 million for Permian unproved property leases.

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MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)


	Nine Months Ended September 30, 2023
(In millions)	U.S.			Int’l		Not Allocated to Segments			Total
Revenues from contracts with customers	$	4,643		$	179	$	—		$	4,822
Net gain (loss) on commodity derivatives	27			—		(8)		(c)	19
Income from equity method investments	—			140		—			140
Net gain on disposal of assets	—			—		6			6
Other income	12			5		2			19
Less costs and expenses:
Production	542			65		—			607
Shipping, handling and other operating	482			5		—			487
Exploration	19			1		26		(d)	46
Depreciation, depletion and amortization	1,622			34		6			1,662

Taxes other than income	252		(b)	—		(1)			251
General and administrative	98			9		118			225
Net interest and other	—			—		268			268
Other net periodic benefit costs	—			—		(11)			(11)

Income tax provision (benefit)	372			29		(87)			314
Segment income (loss)	$	1,295		$	181	$	(319)		$	1,157
Total assets	$	18,503		$	1,072	$	344		$	19,919
Capital expenditures(a)	$	1,661		$	3	$	9