Marathon Oil Reinstates Base Dividend and Reduces Debt

HOUSTON, TX (STL.News) Marathon Oil Corporation (NYSE: MRO) today reported an update highlighting the reinstatement of a base dividend, recent debt reduction initiatives, and a transparent framework for future capital allocation and uses of free cash flow intended to maximize long-term shareholder value.

Highlights

  • Reinstated quarterly base dividend at 3 cents per share
  • Successfully tendered $500 million of 2022 notes, resulting in $100 million gross debt reduction
  • Fourth quarter dividend and gross debt reduction more than fully funded by third quarter free cash flow generation
  • Capital allocation framework provides free cash flow visibility and makes meaningful cash flow available for investor-friendly purposes
  • In a $40/bbl to $45/bbl WTI price environment, intend to allocate at least 20% of cash flow from operations to balance sheet enhancement and return of capital to shareholders
  • In a $45/bbl WTI or better price environment, intend to allocate 30% or more of cash flow from operations to balance sheet enhancement and return of capital to shareholders
  • Resilience to lower commodity prices underpinned by free cash flow breakeven below $35/bbl WTI in 2021 benchmark maintenance scenario; maintenance scenario could deliver 2021 free cash flow of approximately $500 million at current commodity forward curve
  • Committed to prioritizing free cash flow and corporate returns in all price environments

Dividend Reinstatement and Debt Reduction

Marathon Oil announced today that its board of directors has declared a dividend of 3 cents per share on Marathon Oil Corporation common stock.  The dividend is payable on Dec. 10, 2020 to stockholders of record on Nov. 18, 2020.

Consistent with prior announcements, Marathon Oil also announced it has completed a cash tender for an aggregate principal amount of $500 million of its outstanding $1 billion 2.8% Senior Notes due November 2022.  The tender proactively addresses the Company’s next significant debt maturity and was funded from cash on hand.  The preliminary cash balance at Sept. 30, prior to funding the tender, was approximately $1.1 billion, which includes the recently completed remarketing of $400 million tax exempt bonds at a weighted interest rate of 2.25%, as well as free cash flow generated during third quarter 2020.  The $500 million tender will result in a gross debt reduction of $100 million relative to the Company’s second quarter ending debt balance.

Both the $100 million gross debt reduction and fourth quarter dividend are more than fully funded by third quarter free cash flow generation.

Marathon Oil continues to maintain a solid balance sheet, is investment grade rated at all three primary rating agencies, and recently had its outlook upgraded to stable by S&P.

“While 2020 has included its fair share of challenges, we believe we have successfully repositioned our Company for success in a lower, more volatile commodity price environment,” said Chairman, President, and CEO Lee Tillman.  “Through disciplined capital allocation, material cost reductions and a relentless focus on capital efficiency, we have materially enhanced our free cash flow generation potential and are positioned to deliver differentiated capital efficiency and peer leading free cash flow breakevens.  Today’s announcement is evidence of our progress and our forward confidence, as we are reinstating a base dividend and reducing our gross debt.  Maintaining a strong balance sheet and returning capital to shareholders are core elements of our value proposition, and we believe we are well positioned to do both in the current environment.”

NOTE: this is NOT the complete releases.

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