Marathon Oil Corporation

Good morning, and welcome to the Marathon Oil first quarter 2021 earnings conference call. My name is Brandon, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, during which you may dial star 1 if you have a question. Please note this conference is being recorded. I will now turn the call over to Guy Baber, Vice President of Investor Relations. You may begin, sir.

Thanks, Brandon, and thank you to everyone for joining us this morning on the call. Yesterday, after the close, we issued a press release, a slide presentation, and an investor packet that addressed our first quarter 2021 results. Those documents can be found on our website at MarathonOil.com. Joining me on today's call are Lee Tillman, our Chairman, President, and CEO, Dane Whitehead, Executive VP and CFO, Pat Wagner, Executive VP of Corporate Development and Strategy, and Mike Henderson, Executive VP of Operations. Today's call will contain forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. I'll refer everyone to the cautionary language included in the press release and presentation materials, as well as to the risk factors described in our SEC filings. Now with that, I'll turn the call over to Lee. who will provide his opening remarks. We'll also hear from Dane and Mike today before we go to our question and answer session. Lee?

Thank you, Guy, and good morning to everyone listening to our call today. I want to begin by once again thanking our employees and contractors for their dedication and hard work in putting together another quarter of outstanding execution. Not only have our teams continued to manage through the COVID-19 pandemic as critical essential infrastructure providers, They also successfully overcame the challenges of winter storm URI during first quarter, maintaining their focus on safety while still delivering on all of our core operational and financial objectives. Though 2020 was a challenging year for our industry, it also brought with it opportunity. And Marathon Oil chose to leverage the supply demand crisis to further optimize and enhance our business model. We high graded and focused our capital program. We lowered our cost structure. and we further improved our financial strength and flexibility. As a result, we have dramatically enhanced the resilience of our company, driving our free cash flow break-evens consistently below $35 per barrel WTI and building on a multi-year trend of sustainable free cash flow and getting that cash back in the hands of our investors. And we have dramatically enhanced our ability to sustainably deliver robust financial outcomes, financial outcomes that can compete with any sector in the S&P 500 and do so across a much broader and lower range of commodity prices. We recognize that given the inherent volatility of our commodity business that we must offer outsized free cash flow generation coupled with investor-friendly actions to make a compelling investment case. To that end, first quarter 21 results are a testament to the strength of our business model and how we have positioned our company for success. During first quarter, we generated over $440 million of free cash flow. Despite the challenges associated with Winter Storm URI, production volumes were in line with the midpoint of our full year 2021 guidance, and we are fully on track to meet the annual production, capex, and cost guidance we provided at the beginning of the year. and we are on track to exceed our free cash flow objectives. For $1 billion of capital spending, we now expect to generate $1.6 billion of free cash flow at $60 per barrel WTI, up from the prior guidance of around $1.5 billion. This corresponds to a free cash flow yield approaching 20% and a sub-40% reinvestment rate. all at an assumed oil price that is below the current forward curve. We remain committed to our $1 billion capital program. There will be no change to our capital budget even if oil prices continue to strengthen. We will simply generate more free cash flow and further solidify our standing as an industry leader when it comes to capital discipline, a hard-earned reputation we have established over multiple years. We have accelerated our balance sheet and return of capital objectives, the specifics of which Dane will cover in just a few minutes. Importantly, everything that we are doing is sustainable. Our peer leading capital efficiency, our outsized free cash flow generation, our competitive cost structure, our investment grade balance sheet, and our rising return of capital profile. The proof point for this sustainability is our five-year benchmark maintenance scenario that can deliver around $5 billion of free cash flow from 2021 to 2025 in a flat $50 per barrel WTI price environment, or closer to $7 billion of free cash flow at the current forward curve, along with a corporate free cash flow breakeven of less than $35 per barrel throughout the period. And the foundation for these differentiated financial outcomes is our multi-basin U.S. portfolio with well over a decade of high return inventory complemented by our integrated gas position in EG. Finally, we are leading the way in our approach to ESG excellence and are committed to continually enhancing all elements of our company's ESG performance. Safety remains our top priority. We are building on the record safety performance we delivered last year with a very strong start to 2021 as measured by total recordable incident rate. Best in class governance remains at the forefront of everything we do. We have appointed two new directors to the board this year and remain committed to ongoing refreshment, independence, and diversity. We also reduced and redesigned executive and board compensation for improved alignment with investors. as I highlighted early this year. And last but not least, we remain committed to reducing our greenhouse gas emissions intensity. We made tremendous strides during 2020, reducing our overall GHG intensity by approximately 25%. We are hard at work to achieve our GHG intensity reduction target of 30% in 2021, a metric hardwired into our compensation scorecard as well as our goal for a 50% reduction by 2025 relative to our 2019 baseline. And we have included $100 million of investment over the five years of the benchmark scenario to support this goal. With that brief summary of how we have positioned our company for success, I would like to turn it over to our CFO, Dane Whitehead, to share the notable acceleration of our balance sheet and return of capital objectives.