Shares of Marathon Oil Corporation (NYSE:MRO) surged on Thursday morning after the driller reported strong third-quarter results. By 11:00 a.m. EDT, the stock was up more than 13%.
Marathon Oil reported an adjusted loss of $0.97 million, or $0.11 per share during the third quarter. However, that was significantly less than the $0.20-per-share loss that analysts were anticipating. Driving the narrowing loss was stronger-than-expected production and a double-digit drop in costs.
Production averaged 402,000 barrels of oil equivalent per day during the third quarter, which was up 5% from last quarter and above the top end of Marathon's guidance range. Driving that strong production were the exceptional well results across all three of its resource plays as well as an improvement in production in Equatorial Guinea after the company brought a compression project online in July. Meanwhile, production costs dropped by more than 10% in North American and by nearly 20% internationally over just last quarter.
Thanks to its strong production during the quarter, Marathon Oil is boosting the lower end of its production guidance range. Meanwhile, the company announced plans to reaccelerate its drilling program by increasing its rig count by 50% during the fourth quarter. Those additional rigs put the company in the position to start delivering sequential production growth by the second half of next year. Furthermore, its supports Marathon's preliminary five-year plan to grow production by a 15% to 20% compound annual rate while remaining cash-flow-neutral at $55 oil.
That plan lines up with what shale-drilling rivals Devon Energy (NYSE:DVN) and Pioneer Natural Resources (NYSE:PXD) have previously announced. In Pioneer Natural Resources' case, it is in the process of increasing its rig count from 12 to 17 rigs by the end of the year. These additional rigs put Pioneer on a "trajectory to deliver compound annual production...growth through 2020 of approximately 15%...We also expect to spend within cash flow in 2018, assuming an oil price of approximately $55 per barrel." Meanwhile, Devon Energy is doubling its rig count during the fourth quarter to jump-start growth in 2017. It currently projects to deliver double-digit oil growth in 2017 at flat $55 oil, with plans to generate stronger growth in 2018 at $60 oil.
Marathon Oil's aim this year has been to become a more efficient producer, which it has accomplished by getting costs down while delivering better-than-anticipated production. Because of that, the company is ready to join a growing list of shale-focused peers and restart double-digit production growth in 2017.