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Marathon Oil Uncovers Another 600 Million BOE In 2015

Marathon Oil is cutting its spending levels going into 2016, including scaling back its conventional exploration program further.

Additional oil and gas reserves will still be uncovered through its unconventional drilling programs.

So far, the company has already added 600 million BOE to its 2P reserve base this year.

Future development of the SCOOP/STACK and Austin Chalk/Eagle Ford plays will further extend Marathon Oil's growth runway.

After accepting that crude will be lower for longer, Marathon Oil Corporation (NYSE:MRO) plans to cut its 2016 capex budget by at least $600 million versus its $3.3 billion budget for 2015. That would push its capex budget down to at least $2.7 billion, enabling the company to better protect its balance sheet.

During its September presentation at Barclays' (NYSE:BCS) energy conference, Marathon Oil's CEO Lee Tillman stated that he didn't want to stress Marathon Oil's balance sheet more than it already has been. Lee Tillman is putting Marathon Oil's financial position before growth, which is the right mindset going into 2016.

Further, bolstering Marathon Oil's financial standing, management sees the company's 2015 capex spending coming in lower than its $3.3 billion budget. Considering its budget is front-loaded, its spending reductions will be even more significant during the second half of this year.

Leaning On Unconventional Resource Gains
One way Marathon Oil is scaling back its spending is by shrinking its conventional exploration program's budget down to $100 million in 2016. That is a sharp reduction from the $500 million and $250 million Marathon Oil spent in 2014 and 2015, respectively. Marathon Oil doesn't plan on drilling any conventional exploration wells next year, and instead will focus solely on its appraisal programs, including those in the Gulf of Mexico and Gabon (West Africa).

However, this won't stop Marathon Oil from growing its resource base, as it continues to expand its unconventional growth runway. Since the end of 2014, Marathon Oil added 600 million BOE to its 2P (proven plus probable) reserve...