Marathon’s Droshky Starts Producing – Analyst Blog

A leading integrated oil and gas company, Marathon Oil Corporation (MRO), announced the start-up of production at the Droshky development in deepwater Gulf of Mexico. The company, which owns 100% working interest in Droshky, started the production as per its budget plans.

 

A major subsea project, Droshky is situated at a water depth of approximately 3,000 feet in Green Canyon Block 244 and comprises four development wells. The final development expenditure of the project was about $900 million. The first stage of development is expected to produce 35 million of the estimated 60 million barrels of oil equivalent (boe) net resource.

 

The Droshky development, operating at its peak, is estimated to produce approximately 50,000 net boe per day, consisting of approximately 45,000 barrels per day of liquid hydrocarbons and 30 million cubic feet per day of natural gas. At the end of 2009, Droshky had booked proved reserves of almost 26 million boe.

 

We appreciate Marathon’s unrelenting efforts to complete major scheduled projects on time and at a competitive cost. We anticipate that the Droshky development will significantly contribute toward the company’s production capacity and enhance Marathon’s project portfolio.

 

We like Marathon’s large and geographically diverse reserve base, strong balance sheet and solid project pipeline. However, the volatile oil and gas prices and the company’s heavy downstream exposure will continue to weigh on Marathon’s revenues and profitability. Overall, we see the stock performing in line with the broader market and rate it as Neutral in the long term. This is supported by the short-term Zacks #3 Rank (Hold) rating.

 

Houston, Texas-based Marathon is engaged in exploration and production; oil sands mining; integrated gas; and refining, marketing and transportation operations. The company operates in three segments: Exploration and Production (“E&P”); Refining, Marketing, and Transportation (“RM&T”); and Integrated Gas. The major competitors of the company are Exxon Mobil Corp. (XOM) and Hess Corporation (HES).