Zach Dailey - Marathon Oil Corp. Lee M. Tillman - Marathon Oil Corp. Thomas Mitchell Little - Marathon Oil Corp..

Doug Leggate - Bank of America Merrill Lynch Evan Calio - Morgan Stanley & Co. LLC Ryan Todd - Deutsche Bank Securities, Inc. Guy Allen Baber - Simmons & Company International Edward George Westlake - Credit Suisse Securities (USA) LLC (Broker) Roger D. Read - Wells Fargo Securities LLC Brian Singer - Goldman Sachs & Co. Pavel S.

Molchanov - Raymond James & Associates, Inc. Arun Jayaram - JPMorgan Securities LLC.

Good morning and welcome to the Marathon Oil's Third Quarter 2016 Earnings Conference Call. My name is Brandon and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session. Please note this conference is being recorded. And I will now turn it over to Zach Dailey.

You may begin, sir..

Good morning, everyone. Thanks for joining us today. Welcome to Marathon Oil's third quarter earnings call. Following the opening remarks from President and CEO, Lee Tillman, we'll open the call up for Q&A.

Also joining us this morning are Mitch Little, Executive Vice President of Operations, and Pat Wagner, Interim CFO and Vice President of Corporate Development.

As a reminder, today's call may 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. Please read the disclosures in our earnings release and our SEC filings for a discussion of these items.

Reconciliations of any non-GAAP financial measures we discuss can be found in the quarterly information package on our website. With that, I'll turn the call over to Lee..

Thanks, Zach, and let me add my good morning to everyone. I'll make a few brief comments and open the call for questions.

Our key takeaways today are excellent well results and strong execution in the third quarter, while achieving cash flow neutrality, increasing rig activity in the fourth quarter within our original budget to prepare for sequential growth in the second half of 2017, and line of sight on 15% to 20% resource play CAGR at flat $55 WTI.

Our total company third quarter production was above the top-end of guidance and up sequentially. I'd like to recognize each of our asset teams for their contribution to this outcome. It's their hard work each and every day that delivers these outstanding results for our shareholders.

In the STACK and SCOOP, production was up over 50% from the prior quarter, as we benefited from new wells to sales and a couple of months of contribution from our recent STACK acquisition.

We continue to balance leasehold demands and acreage delineation in the STACK, and brought some outstanding Meramec oil and volatile oil wells to sales that are, on average, exceeding type curves on both our legacy and acquired acreage.

Our Bakken team delivered the best industry Three Forks well in the past three years on our East Myrmidon acreage, and extends the trend of basin-leading performance set last quarter in West Myrmidon. The Eagle Ford asset team continued to drive down completed well costs.

This quarter's wells averaged just under $4 million, further enhancing their outstanding returns. And our focus on the oil window at reduced stage spacing is improving the already strong economics in the play.

Internationally, we had an excellent quarter with Equatorial Guinea achieving their highest quarterly production since 2013, following the successful start-up of the Alba B3 compression platform in July. That contributed to a 10% sequential increase in international E&P's quarterly production volumes.

And OSM delivered record quarterly production and its lowest unit cost in the history of the mine.

On the portfolio side, we just sold some of our non-operated waterflood and CO2 assets in West Texas and New Mexico for proceeds of $235 million before closing adjustments, which brings our total for non-core asset sales to over $1.5 billion since August of last year.

You should expect portfolio management to continue as we drive to maximize capital allocation to our lowest cost, highest margin opportunities. With our ongoing non-core asset sales and recent STACK acquisition, our commitment to concentrating and simplifying our portfolio to the U.S. resource plays is clear.

Couple that with the $5.3 billion of liquidity, including $2 billion of cash we have on our balance sheet along with outstanding operational execution and a very competitive cost structure, we're poised to continue our execution momentum in 2017 and achieve profitable growth within cash flow at moderately higher prices.

While our planning process is still under way, our preliminary five-year view for resource play production supports a compound annual growth rate of 15% to 20% within cash flows at flat $55 WTI. With that, we can begin the Q&A..

Thank you. We will now begin the question-and-answer session. And from Bank of America we have Doug Leggate. Please go ahead..

Thanks. Good morning, everybody. Good morning, Lee..

Good morning, Doug..

So, Lee, back in September you raised the type curve on, I guess, your over-pressured Meramec wells, but you're substantially outperforming it seems on those latest results you announced last night. I guess I could say the same thing about the normally pressured areas.

So, I guess, can you layout for us what inning you think you're in, in terms of revising your resource backlog in the basin? And maybe the same question on the drilling backlog also in terms of number of locations?.

Yeah. Well, I think you're right that we had given a bit of an update on our Meramec volatile oil curve in our last disclosure. We continue to be very encouraged by result in both the black oil window as well as the volatile oil window.

And I would say right now it simply comes down to continuing to amass sufficient production history to have confidence with coming back out with a revision. But clearly, the bias in, and I would say across the STACK play is with an upward vector. So, I would just say stay tuned on that count..

Maybe just a quick clarification on that, Lee. The proppant loading is obviously substantially larger, but I don't think you gave any costs associated with that.

Would you see that as a go-forward model or are you still testing the limits at this point?.

Yeah. Hey, Doug. This is Mitch Little. We didn't provide a cost update on the volatile oil wells, but we're in the neighborhood between $8.5 million to $9 million on the wells we delivered in Q3. Still fairly early in the learning curve. We would expect to be able to continue to look for other efficiencies.

Certainly, as we go to pad drilling in some areas, we would capture efficiencies there. So, we're never done focusing on trying to drive costs down and returns up..

Thank you. My last one, if I can just squeeze it in real quick. You've given – you've gone back to giving guidance on the unconventional growth, I believe, for the next five years. I'm just curious if you could put an activity level around that and maybe some range of what the balance of the portfolio might look like in that timeline.

And I'll leave it there. Thanks..

Yeah. No, Doug, we did provide what I would kind of call some benchmark guidance linked to a flat $55 deck. We're, obviously, still in our planning process and won't really release formal budget guidance until kind of February, first quarter of next year.

But we thought it was critical to provide some visibility of the growth potential within the resource play portfolio, and that's what really drove it.

And again, although we didn't link it specifically to activity levels, I mean, you should expect that that represents a ramp-up across all three of our plays, and that's somewhat indicative of the action that were already taken in the fourth quarter of this year to begin the initial stages of that ramp-up to get to that sequential growth in the second half of 2017.

So, you already see us kind of taking rig count from eight to 12. And as you extrapolate that over time, we should expect in that growth case that we would continue to build on that ramp-up..

I appreciate the answers, Lee. Great quarter. Thanks..

Thank you, Doug..

From Morgan Stanley, we have Evan Calio. Please go ahead..

Hey. Good morning, guys. Lee, maybe if I just follow up on that, the growth guidance in your last response. I mean, I just – could you help me put the scenario, the resource growth scenario in perspective? I mean, what does that assume for the non-resource portfolio under the same parameters within the cash flow of $55? Is that a....

Yeah..

...controlled decline, or how much of that portfolio is funding the growth within cash flow of the resource portfolio?.

Yeah. Well, there's no doubt, Evan, that the conventional component of our portfolio, particularly in the areas like Equatorial Guinea and even OSM and the right commodity environment, those are providing significant free cash flow that allow us to redeploy that into the unconventional business.

But again, given that we're going to give much more granular guidance in the first quarter, what I would say though about 2017, and perhaps the way to think about it, Evan, is that we would anticipate on the order of 90% of our capital program being allocated to the resource plays as we look toward 2017.

So, you should expect that we'll be minimizing, to the extent possible, any plowback into the conventional assets..

Yeah. And my second question – and I'm trying to keep it outside of 2017 to front run the capital guidance. But can you talk about the capital allocation among the resource plays? I mean, I understand STACK has the first call on capital, but you guided two rigs here into the Eagle Ford.

I presume your strategy is to hold Eagle Ford flat, and I guess the same is strategy as it relates to the Bakken, at least East Myrmidon, where I know you have 200 locations. When would you further accelerate there relative to your other plays? If you could talk about that in the longer-term, I'd appreciate it..

Yeah. Certainly, capital allocation for us, it starts, first and foremost, with the objective of living within our cash flows, living within our means. That's the overarching objective.

But within that objective, and certainly this applies to 2017 and beyond, our first call on capital, as you rightly described, Evan, is going to be in Oklahoma and specifically achieving our strategic objectives in the STACK, which are first and foremost leasehold, after that really delineation.

And then really thirdly is preparation for full field development in the STACK. As we meet those objectives over the next year or two, from that point on, to the extent that we have free cash flow to – or cash flow to deploy, it's going to be done on the basis of the best risk-adjusted returns.

And what we see today, of course, is that Eagle Ford is still very strongly competing. It has some of the best economic returns in our portfolio. But with the recent results in the Bakken that we highlighted, including the East Myrmidon result this quarter, Bakken is now competing very strongly for capital allocation as well.

So, it's going to be a balance. It's going to be modulated based on our ability to deliver that within our means. But that's the way you should think about it. It's first and foremost our strategic objectives in Oklahoma, and then we're going to allocate based on the best risk-adjusted return..

Maybe just a quick follow-up. With the rigs added in the quarter and relative to (12:26) PayRock and otherwise, can you give us a resource CapEx run rate exiting 2017? I'll leave it at that. Exiting 2016, sorry..

Yeah. We would again – many of the rigs that we're adding, which are the four rigs that we talked about going from the eight to the 12, actually the fifth rig has already been added into Oklahoma, and I believe will spud its first well tomorrow. So, we've already added that rig.

The incremental rigs in the Eagle Ford and the Bakken will be added a little bit toward the backend of the quarter, but again it's preparing us for momentum into 2017. So we'll exit right at that 12 rig count number going into 2017. And then we'll evaluate that as we look at our price view at the time we release our budget.

We'll adjust that, as necessary, to modulate the ramp, again, to deliver within cash flows..

Great. Thanks..

From Deutsche Bank, we have Ryan Todd on line. Please go ahead..

Great. Thanks. Maybe a couple questions. I mean, first off, on your results in STACK, I mean, the great looking long laterals that we saw in the quarter with a couple wells.

I mean, how much acres do you think is conducive to long laterals at this point? And any guidance on what the mix might look like between long and short laterals in 2017?.

Yeah. Sure, Ryan. This is Mitch. I think we have talked about this a little bit before, but on the newly acquired acreage, we see about 50% being conducive to XLs. On our total position, that's closer to 30% where we stand today. We are actively working with other operators to consolidate positions.

We actually added about 11 units last quarter through those consolidation efforts. So, we would expect that to grow over time, but where we sit today is around 30%, a little bit over..

Great. And then maybe on portfolio management, you mentioned it in the prepared comments. I mean, you're down to very little outside of the U.S. resource space at this point. I mean, effectively just the oil sands – predominantly just the oil sands and Equatorial Guinea.

Any thoughts – I mean, I guess longer term on either one of those strategic to the portfolio, any thoughts on actively marketing positions? I mean, where do you see those over the next five years, I guess?.

Yeah. Well, I think that, first of all, just our non-core asset program in general, Ryan, we still believe that there are still some assets outside of the resource plays that we need to address. Those are, obviously, smaller in scale and will be deemed non-strategic to our go-forward plan.

The larger asset, Equatorial Guinea, we just completed a pretty strong investment cycle there. We've seen the performance of that asset, really the best performance since 2013. We want to continue to build on that.

We view that as core from the standpoint of providing significant free cash flow, both cash flow from the PSC as well as cash flow from the equity method investments that we have in country. And then, OSM, I think – and again, in today's environment, OSM is still delivering very strong cash flow that can be redeployed in the portfolio.

But from, I'll say, a strategic long-term fit, a non-operated position in the mine is something that we'll continue to evaluate as to its fit in our long-term portfolio..

Okay. Thank you..

From Simmons, we have Guy Baber on the line. Please go ahead..

Thanks very much. Good morning, everybody. Appreciated the medium-term overview of what you think the unconventional assets are capable of generating from a growth perspective. Now, understanding you can't give specific guidance, I just wanted to understand how you're thinking about the overall growth profile for the total company.

So, that 15% to 20% CAGR, looks like it could translate to a total company growth rate in the high-single digit, maybe even low-double-digit type range on a five-year CAGR including the oil sands.

Is that the type of growth rate, Lee, you envision for a company of Marathon's size, roughly 400,000 barrels a day? Is that how we should be thinking about the company?.

Yeah. Well, you're right, Guy. I mean, we haven't gotten into specifics yet on the rest of the portfolio. We're still actively in our budgeting cycle, but I think the numbers you've thrown are certainly in the general ZIP code.

And as a large-cap company, we think that that range is really where we need to be, to be competitive with the portfolio work that we have done. We think that's the right place for us to be for our shareholders.

And, again, that's all going to be governed with the proviso that we're going to deliver that growth within cash flows, while paying our dividend at an enterprise level. And to me, that's an important and relevant distinction..

Absolutely. And then, one more on portfolio management.

The type of growth you're discussing now on the unconventional plays, when it translates to total company growth and then you look at the well result improvements you're realizing, has that meaningfully raised the bar for you all in terms of any incremental meaningful acquisitions? And are you comfortable with the overall weighting that U.S.

unconventional carries in the portfolio right now or do you like even more exposure? Just trying to understand the appetite for incremental acquisitions and what that growth guidance might mean on that front..

Yeah, Guy, we are squarely focused today on execution against our organic portfolio and our three core U.S. basins, and are very comfortable with the inventory and resource potential to drive our mid-term and long-term growth objectives.

I think the STACK acquisition that we did in the summer is indicative of a type of opportunity that we will continue to test and evaluate. But in that case, in the case of the STACK acquisition, it really ticked all boxes for us. It was quality, scale. It offered value that could deliver full cycle returns, and it also offered a very attractive upside.

And really any opportunity, any resource capture opportunity would have to compete on that same basis and come into the portfolio immediately to compete for capital allocation. So, it's a relatively high bar to make that occur. And again, we're very happy with the organic inventory.

The teams are squarely focused on accelerating and delivering value from what we have today..

Thank you. And then last one for me. The macro oil backdrop, obviously, remains pretty fluid. OPEC has been unpredictable. You've talked about restoring operational momentum, increasing the rig count.

Were oil to continue to regress down into the – below the mid-40s, into the low-40s, how do you think about the flexibility of increasing the rig count? Is this temporary weakness something you're willing to look through in terms of oil prices? Just how do you think about accelerating activity levels just in the midst of still a pretty fluid oil backdrop here?.

Yeah. No doubt prices have gone through a little bit of softening here as of late. I think fundamentally, Guy, we think that supply and demand are starting to come more into balance. I think it's taking much longer than many anticipated. We've always viewed 2016 as a very transitional year.

I think as we look out to 2017, I would kind of characterize it as a recovery year, where we think that likely we'll see supply and demand come more into balance as we get later in the year. And quite frankly, our internal price forecast are shaped to reflect that, a bit lower in the front half and a bit higher in the back half of the year.

But to your point on flexibility, the beauty of the short cycle investments remains our ability to move and respond very quickly to the predominant price signals and price view that we have at that point in time. So, our view was that this was a step toward delivering on our sequential growth in the second half of 2017.

But as we see the macro environment turn a different way, we've got significant flexibility to adjust our capital program, as well as look at our cost structure in general. So, we're not concerned necessarily with this latest softening of pricing.

But we do need to be mindful of where the macro and our overarching objective of staying cash flow positive or neutral in 2017..

Thanks very much..

Yeah..

From Credit Suisse, we have Ed Westlake on line. Please go ahead..

Yes, good morning, Lee. Congratulations on the momentum across all the plays. Eagle Ford proppant loading increased substantially in 3Q. Maybe just a little bit of color about when you expect to see the change in completion start to show up. I mean, obviously, you've released some of the wells..

Yeah, I think – and I'll let Mitch chime in. But at a high level, we have been operating Eagle Ford at below maintenance capital. Where we stand in the third quarter, we view now as our activity being supportive of holding that level flat moving forward in time.

And, of course, part of that calculus is the fact that we are seeing improvements in the way that we're completing even the wells in the Eagle Ford, particularly in the oil window. And with that, maybe I'll let Mitch talk a little bit about what the teams are doing..

Yeah. Sure, Ed. I think what I would say is the third quarter was really the first quarter where we had gone – sort of made the holistic shift to this being our base design in the oil window. This 200-foot stage spacing, kind of 400,000 pounds per stage for a conventional job, we were trialing that earlier in the year to build confidence in it.

So, we've got some limited data now, a few dozen wells that are approaching a year or so of production. We've talked about before the increases that we have seen from tighter stage spacing at 200 feet versus 250 feet, showing initial uplift in the 15% to 20% range.

So, certainly that'll be our base design going forward, and we'll continue to share the results as they come in, like we did in the third quarter..

And then, I guess a follow-up on the oil sands. I mean, fantastic operational performance, as you say, cash flow and likely free cash flow. And obviously that then creates a value in that asset at some point, should someone else be interested in the asset, your stake.

Maybe just a little bit of an update in terms of where you can see sort of steady-state production, CapEx and OpEx, as the team continues to improve that asset..

Well, Ed, I would say that third quarter was an extraordinary quarter. I mean, we had production at an all-time record. I think the operator has done a great job of continuing to put pressure on operating cost. And the combination of all that delivered, again, a very exceptional unit operating cost there.

And because our realizations off the back of the upgrader are largely linked to WTI, with a small component to WCS, the asset does have a lot of cash flow potential. So, I have to give a lot of credit to the operator in generating quite a strong quarter.

Now, as we look forward, even in the fourth quarter we have planned turnaround that will ultimately impact, of course, volumes, which will have a feedback impact into the unit cost as well. So, I wouldn't extrapolate the third quarter as the base business model.

But what I would extrapolate is that our ability to generate higher reliability and lower cost in the mine, that trend is now becoming pretty well-established. And I think that's just going to make the asset more valuable, not only to our shareholders, but certainly in the event that strategically we elect to monetize at some point in the future..

Thank you..

From Wells Fargo, we have Roger Read on line. Please go ahead..

Yeah, good morning..

Morning, Roger..

Hey. Quick question, I guess, on the SCOOP/STACK and kind of looking at slide 11, talks about protecting the leasehold while doing the delineation.

Can you give us an idea maybe where you are in terms of the efficiency of drilling in the SCOOP/STACK today? And then how you think about that changing as more of the acreage becomes truly HBP and you can really focus on the efficiency side?.

Yeah. Sure, Roger. This is Mitch again. I guess what I would say or what I would share with you, it's a mixture of well types out there still and we are in the delineation phase.

But on average, across the STACK, our drilling efficiency is about a 40% increase in feet per day, if you looked as compared to a year ago and mixing the wells, kind of 10% to 20% lower completed well cost, and that's with higher intensity completions in most cases. So, we're still on the efficiency curve, if you will.

We haven't moved to fulfill development, the advantages of pad drilling, the advantages of continuity with drilling crews and applying the latest technology. So, we would still expect to be able to continue to see some learnings there and our teams are certainly driving on that, and with a real focus on flat times as well as drilling rates..

Okay. Thanks. And kind of a follow-up to some of the earlier questions about the guidance for second half of 2017, the growth in a $55 oil environment. What should we think of, Lee, as the – I don't know. It's pretty easy to understand, I guess, the positive. If you get crude above $55, it's easy to spend more money.

But is it a sub-$50 world we need to be concerned about in the first half of next year, is maybe pushing these plans into 2018 from 2017? Or – I don't know. I guess we're all just trying to understand kind of what are the guidelines for how we should think about setting things up for 2017 and beyond..

Yeah. Well, certainly, Roger, our intent is to provide a bit more granularity on that in the first quarter. But just looking at kind of where we stand today, obviously, we're shaping our price forecast across 2017 to, obviously, reflect a bit lower price in the beginning of the year and somewhat of strengthening toward the back end of the year.

And what we've talked about is that, we can maintain certainly that sequential growth case into the low 50s, and that's kind of ex any hedging success that we have as well.

And so, if you were to say – let's say, that we languished in the environment that we're in today, we would have to just assess that as we move into 2017 and we would adjust accordingly. If we see that being persistent, then you're right. Then we may choose to push that ramp out a bit in time.

But today, we want to make sure that we're on a trajectory that's going to deliver that ramp, recognizing that we have full optionality and flexibility to adjust early next year as price dictates. But again, our overarching objective is going to be cash flow neutrality..

Appreciate it. Thank you..

From Goldman Sachs, we have Brian Singer on line. Please go ahead..

Thank you. Good morning..

Good morning, Brian..

You touched on the oil sands operating cost. Can you talk about the operating cost trends elsewhere in the portfolio? It seemed like it came down for the international business outside of oil sands and parts of the domestic continue to come down as well.

Can you just talk to the sustainability of some of these costs – op costs reduction that we've seen and how that might change in a $55 world that you're talking about potentially for 2017?.

Sure, Brian. I'll touch on it, and then others can add to this. But as you point out, we shared an update on our operating cost, and I think on an absolute basis we're down 37% year-over-year in North America and 31% overall.

As you'd expect and as is common, that's a combination of some structural efficiencies that are sustainable and some commercial savings across the board. I think that's an impressive rate of change and we've seen it across the industry. Our work's never done in that area. We'll continue to push for further efficiencies.

Probably not fair to think about it as the same rate of change going into the next year, but we're going to continue to do that. And I think we've traditionally talked on the order of 50% commercial, 50% structural and efficiency gains across the total spend.

It's probably a little bit higher weighted to the structural and the operating side with things like the water handling system that we put in the Bakken, moving our water on pipe there. We're up to about 70% of our produced water on pipe now up there.

And certainly, some staff rationalizations, getting more efficient using technology across the operation. So, a little bit heavier weighted on the structural, I would say..

And I would just add, and the case just building on our discussion around OSM, assets like that that, for instance, have a very large energy component to them will have some flex depending upon where prices go as well.

So, there's a plus and a minus there from an asset like OSM's perspective, where, yeah, you may get a price response which is going to help you, of course, from a realization standpoint.

But from a cost standpoint, because a large component of your production costs are around energy, you're going to feel a little bit of the burn on the energy cost as well..

Got it. Thanks. And then, just a follow-up on the Bakken with some of the well productivity and efficiency that you're seeing from your slide 15, I think, it is. It certainly looks like some of these wells are trending above type curve.

Is your focus, as you start to increase activity in the Bakken, just more on the well performance and the well side? Or did you also see some – do you also see the potential for your inventory in the Bakken to improve as a result of the results that you're seeing?.

I certainly think that from an inventory standpoint, we have basically driven more inventory into what we would call kind of Tier 1 in competing for capital allocation by these changes in well productivity. I mean, kudos to the Bakken team.

I think they have used this down cycle to really put themselves in a much competitive stance in terms of capital allocation. But also just looking at their lease operating expense, Mitch mentioned the water handling system that was installed.

And when we look at other operators, we feel very confident that we are one of the low-cost operators, and that's just contributing to our margin in the Bakken. They had a limited amount of capital.

We haven't been drilling in the Bakken since really early in 2016, but we've completed the Clarks Creek pad and then, of course, the Maggie pad, which demonstrated these very strong results. And when we look at these just from a sheer return basis, they're competing head-to-head with some of the best in our portfolio.

And that team has, again, positioned themselves now to participate fully in the capital allocation discussion, and it's one of the key drivers of why we're putting a rig back to work there at the end of this year..

Yeah. And I'll just a little bit to that, Brian. Certainly, some of the learnings in the Myrmidon area that we've employed over the last two quarters are going to be transferable and will be trialed in other areas as well. The team is very focused, as we are across all basins, in upgrading all of our inventory. So, watch this space.

It's not one size fits all, certainly, but we do think there are some transferable learnings..

Thank you..

From Raymond James, we have Pavel Molchanov online. Please go ahead..

Hey, guys. Two different questions for you. First on the 15% to 20% long-term growth target for the resource plays.

What rig count does that assume implicitly and how might that be allocated between the Bakken, Eagle Ford, and Oklahoma?.

Yeah. Well, we haven't provided specific rig count numbers with that CAGR. Our intent, though, would certainly be to provide more definition specifically around 2017 in the first quarter when we do our capital budget release. But obviously, the growth engine for us going forward is going to be Oklahoma.

So, there's going to be a significant ramp-up in both capital allocation as well as rig activity in Oklahoma. The other assets, Bakken and Eagle Ford, just due to their potential to generate very high returns, will continue to compete.

And they give us the optionality to modulate between growth and cash flow generation in those particular assets, and we'll take full advantage of that..

Okay. And then, secondly, very different geography. You guys are one of the few international operators in Libya. We have heard just in the headlines that Libyan volumes have doubled since roughly August.

Are you seeing any of that substance on your own acreage or is that mostly other people's stuff?.

Sure, Pavel. This is Mitch. You're aware, I think, that our position is within the Waha Concessions. And while we're encouraged with the lifting of force majeure and the restart of production there, production through the month of October has kind of ranged between 30,000 and 50,000 gross barrels a day.

Liftings have commenced from the Ras Lanuf terminal, but they have not yet commenced from Es Sider. Through the various actions that have taken place in Libya over the last couple of years, there is certainly damage at the terminal that needs to be repaired and also out in the fields, particularly in some of the pipeline infrastructure.

So, we haven't seen a rapid increase above those levels. Repairs are going to be required. They're working diligently on the terminal. We would expect a lifting to occur from Es Sider in the not too distant future. But kind of been in the 30,000 to 50,000 barrel a day range through the month of October, through most of the month..

All right. That's very useful. Thank you, guys..

From JPMorgan, we have Arun Jayaram on the line. Please go ahead..

Yeah, good morning.

My first question is, if you could help us understand in terms of the 15% to 20% growth, is that going to look relatively linear as we think about growth moving forward or maybe the overall shape of that production profile?.

Yeah. Again, Arun, we haven't provided a lot of the character of the shape of the ramp-up. But, obviously, we'll be looking to accelerate pretty strongly in Oklahoma. And given its relative maturity to the other two plays, we should expect pretty significant growth rates within Oklahoma.

And then really in the Bakken and the Eagle Ford, it becomes a matter of choices around how rapidly do we want to develop those more mature areas. We can, again, modulate between the level of ramp-up and the level of free cash flow generation in both of those assets.

And so, we made some assumptions within that kind of, if you will, 2017 to 2021 view, because we wanted to provide that visibility. But it is really just a benchmark case. It's not necessarily a planning basis for us today. We're not predicting $55 flat for – through 2017 through 2021.

It's just a way for us, again, to provide that visibility and give a bit of a benchmark on the potential that we've got in those three core plays..

And, Lee, have you guys looked at – that is a boe number. How would the oil mix change over that time? Do you think you could grow it at a similar rate? Or your thoughts on just oil growth..

Yeah. We've obviously looked at it in terms of specific products as well. And without getting into too much specific, you should expect oil growth to be in that same range for the resource plays..

Great. Great. And just my follow-up is just, if you guys could maybe elaborate on some of the STACK wells that you reported this quarter. You had some very, very strong wells in eastern Blaine and Kingfisher. Some of the PayRock wells looked a bit mixed, but I was just wondering if you could maybe put some of the PayRock wells into context..

Sure, Arun. This is Mitch. I think what we would say for starters is, certainly encouraged with the aggregate performance being about 30% over the type curve. We're strongly in delineation mode and protecting our valuable leasehold.

So, not surprisingly, we're going to see a little bit of variability in results, but the wells are delivering expected oil rates. They're delivering oil cuts within the range that we expected based on the wells drilled prior to the acquisition. Seeing a little bit of variability in the GOR.

But certainly too early to draw any conclusions from the limited datasets that we have there and encouraged by the early results relative to the type curve..

Great. Thanks a lot..

We do have a follow-up from Evan Calio. Please go ahead..

Thank you. Great. Thanks for taking my second question here. It's a question for Mitch. I know you provided details on your first operated spacing test in the Meramec, this Yost spacing test. Can you discuss the selection of the six-well spacing perception? I know it's a standard spacing assumption in the PayRock acquisition, yet maybe conservative.

And how do you think these tests progress and with the completion design this year, if you would?.

Yeah. Sure, Evan. As you rightly point out, the six-well infill in Yost is consistent with kind of our base case assumption at the acquisition. You'll also be aware that we're participating in a number of outside operated infill programs.

One, in that kind of general areas is the Clover (42:27) infill, which is going to be testing a tighter spacing, a higher density. And so, the overall concept I guess I would say for the Yost is, let's go out and prove up our base case assumption, let's leverage learnings from that, along with our outside operated infills.

Take those learnings throughout 2017. We'll no doubt have a number of other infill tests and we'll test different concepts, both in terms of staggering vertically and well density within the section. And we'll take those learnings throughout 2017, and then move into more of a full field development mode after that..

That's helpful.

And the completion design for Yost?.

Sure. I think our base case, we're feeding (43:22) that infill in the fourth quarter here. So, the base case would be similar design to what we've been pumping. But as with all these areas, we're taking real-time learnings. We're using our multi-variant analysis model to integrate new well results, and we're doing 3D hydraulic fracture modeling.

So, base case would be similar to what we've been doing, kind of the 2,500 pounds per foot, 150 to 175 foot stage spacing, I believe, it is. But we'll continue to optimize that right up to the time the completion rig and frac crew move on location..

Great. Thanks, Mitch..

We have no further questions at this time..

Okay. Well, thank you very much. Thanks, everyone, for your questions today and certainly your interest in Marathon Oil.

Our investment case continues to strengthen, with visibility on competitive long-term growth within cash flows at moderate pricing, the depth and quality of inventory in three of the best oil basins, a very competitive cost structure, balance sheet strength, certainly continued concentration and simplification of the portfolio, and a pure leading leverage to oil.

We are squarely focused on those aspects of our business that we control, our execution, and our cost. And we're going to continue to drive to lower the breakeven of our enterprise, which will serve us well regardless of the forward commodity price environment. And with that, I'll just end by saying thank you very much for joining us today..

Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect..