Marathon Oil Corporation

Good day and welcome to the Marathon Oil third quarter 2023 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star then one. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Guy Baber, Vice President of Investor Relations. Please go ahead.

Thanks, Danielle, and thanks also to everyone for joining us on the call this morning. Yesterday, after the close, we issued a press release, a slide presentation, and investor packet that address our third quarter 2023 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. As a reminder, 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 the risk factors described in our SEC filings. We'll also reference certain non-GAAP terms in today's discussion, which have been reconciled and defined in our earnings materials. So with that intro, I'll turn the call over to Lee and the rest of the team. We'll provide prepared remarks today. After the completion of those remarks, we'll move to a question and answer session. Lee?

Thank you, Guy, and good morning to everyone listening to our call today. First, I want to again start our call by expressing my thanks to our employees and contractors for another quarter of comprehensive execution against our framework for success. Well done on another great quarter while continuing to stay true to our core values as you responsibly deliver the oil and gas the world needs. There are a few key takeaways I want to leave you with this morning. First, the third quarter results we've continued to build on our track record of consistent operational execution that is translating to peer leading financial results. Our strong execution culminated in $718 million of adjusted free cash flow at a reinvestment rate of just 38%. Truly exceptional delivery. And I expect our free cash flow generation to further improve during fourth quarter from this already strong level. The first half weighted nature of our 2023 capital program contributed to a significant increase in our third quarter production, above the top end of our full year guidance, while capital spending declined. At the same time, we remain focused on managing our unit cash cost, which declined to the lower end of our annual guidance range, down more than 15% from the prior year quarter. We are well positioned to take advantage of any market-based deflation opportunities, but are ensuring that we are driving underlying efficiencies in all aspects of our business, both expense and capital. Second key takeaway this morning. Powered by this foundation of consistent execution, we continue to lead our peer group and the broader S&P 500 in returning capital to our shareholders through our transparent, cash flow-driven framework, that prioritizes our shareholders as the first call on cash flow. And importantly, we're delivering on our shareholder return objectives while continuing to enhance our investment-grade balance sheet. During third quarter, we return $476 million to shareholders, bringing total return of capital through the first three quarters to more than $1.3 billion, representing 41% of our top line cash flow from operations fully consistent with our framework. We're offering shareholders a double digit annualized distribution yield and peer leading per share growth. Our consistent and committed approach to share repurchases has driven a 26% reduction to our outstanding share count over the trailing eight quarters, far in excess of any peer company. We've also now reduced our gross debt by $450 million this year, including a $250 million October prepayment on our term loan. We are well on our way to our medium-term gross debt objective of about $4 billion that will further enhance our financial flexibility and lower our leverage metrics to less than one times EBITDA at a conservative oil price assumption. Looking ahead, we remain steadfastly committed to both our return of capital program and further gross debt reduction. It is not an either-or proposition. Consistent with that focus, our board recently approved a 10% increase to our base dividend and an increase in our outstanding share repurchase authorization to $2.5 billion. Importantly, this dividend raise is fully funded by the synergy with our repurchase program. That also ensures we hold the line on our post-dividend free cash flow break-even price, which is the lowest in the peer group. My third key takeaway this morning is that our unique EG integrated gas business is now set to realize a significant financial uplift in 2024, driven by a substantial increase in our global LNG price exposure. To this end, we recently signed a new TTF link LNG sales agreement for our equity Alba Gas. This contract marks the conclusion of the legacy Henry Hub contract, which expires at the end of this year. In 2024, this new contract is expected to contribute to a year-on-year EBITDA increase of approximately $300 million to $500 million, assuming TTF pricing of $15 to $20 per MMBTU. With all contractual agreements necessary to realize this uplift now formalized, our focus turns to further enhancing the longer term free cash flow generation capacity in EG. by optimizing our integrated gas operations, including the version of a portion of the methanol feed gas to higher margin LNG, and progressing the additional phases of the EG gas mega hub concept. Our final key takeaway is that we remain on track to deliver a 2023 business plan that benchmarks at the top of our high quality EMP peer group on the metrics that matter most. Free cash flow generation, reinvestment rate, capital efficiency, free cash flow break-even, and production growth per share. These differentiated outcomes are underpinned by a high-quality and high-return inventory that is demonstrating durable productivity year over year and offers a decade-plus of running risk. And as I look ahead to 2024, I expect more of the same. Our framework for success and our core priorities won't change. Our objective will again be to maximize our sustainable free cash flow generation, an objective we believe is best accomplished by a maintenance oil program of 190,000 barrels of oil per day. We'll again strive to deliver pure leading return of capital and per share growth. I fully expect another year of very strong oil productivity and operational execution across our high quality multi-basin portfolio. And we will benefit from the added tailwind of our growing exposure to the global LNG market and the associated financial uplift. With that, I'll turn it over to Dane who will provide a brief financial update.