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Marathon Oil Corporation (MRO), Noble Energy, Inc. (NBL): Increasing Production From These Oil and Gas Producers Could Produce Returns for You

Marathon Oil Corporation (NYSE:MRO)The Energy Information Administration, in its most recent outlook, said that it expects global oil demand to grow by 0.9 million and 1.2 million barrels per day in 2013 and 2014 respectively. Considering the increase in demand for oil, the producers are constantly exploring new avenues to increase production. Moreover, due to uncertainty in the Middle-east, oil and gas production is shifting towards North America and several other countries. As such, here is the analysis of three North American companies that are consistently increasing their production.

Currently, Marathon Oil Corporation (NYSE:MRO) has 230,000 net acres in the core of Eagle Ford Shale. In an earlier estimate, the company expected 1,200 wells could be drilled in the region, but it has been increased to 3,000 wells. Under this new estimate, it is planning to extend its infrastructural activities with its existing 16 rigs and also plans to deploy more rigs. The company will spend $2 billion in this region, out of its total target capital spending of $6 billion for the current year. Further, it expects the production from this region to increase to 85,000 barrels of oil equivalent per day, or boepd, in 2013 from 65,000 boepd in 2012. This increased production will be a major contributor to the overall expected revenue of $121 billion in 2013, which will register growth of approximately 35% from 2012.

Marathon Oil Corporation (NYSE:MRO) has an on-going divestment plan of $1.5 billion- $3 billion. On June 25, it announced that its subsidiary, Marathon Oil Corporation (NYSE:MRO) International Oil Angola Block 31 Ltd., has entered into an agreement to sell a 10 percent stake in Block 31 offshore Angola to SSI Thirty-One Ltd for $1.5 billion. The majority of the proceeds from this divestment is expected to be utilized for share buybacks and strengthening the balance sheet. As of now, Marathon Oil Corporation (NYSE:MRO) is authorized to buy back 48.6 million shares. Therefore, analysts expect Marathon Oil Corporation (NYSE:MRO) to buy back at least 5.39 million shares in 2013 and to continue the share repurchase program in 2014 and 2015. The fact that Marathon Oil Corporation (NYSE:MRO) will continue to buy back its shares is evidenced in the generation of free cash flow of $774 million, $1.8 billion, and $2 billion in 2013, 2014, and 2015 respectively, up from -$1.2 billion in 2012.

change in Israel’s government export policy

The political tensions in the Middle East led Noble Energy, Inc. (NYSE:NBL), Delek Drilling Limited Partnership (TLV:DEDR.L), and Avner Oil Exploration Ltd. Partnership (TLV:AVNR.L) to enter into an agreement to sell a combined 30% stake in Leviathan gas field to Woodstock Holdings Inc (OTCMKTS:WSFL) last year.

As per the agreement, Noble Energy, Inc. (NYSE:NBL) will remain the key operator of the gas field and will hold a 30% working interest. However, due to a possible occurrence of cartelisation by these companies in the Israeli market, the regulator did not grant its approval to the transaction at the time. Recently, the Israeli government relaxed the norms of its export policy on natural gas and approved the export of 40% of Israel’s offshore natural gas production. This relaxation will facilitate the completion of the transaction by the end of this year and will generate a net cash inflow of $802 million for Noble Energy, Inc. (NYSE:NBL).

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