MPC Marathon Petroleum Corp. Common Stock

Marathon Oil Corporation (MRO) unveiled its capital, investment and exploration budget for 2012. The company intends to expend around $4.822 billion on its capital program, of which nearly 65% will be targeted toward the development of liquid assets.

Of the total budget, Marathon plans to put in approximately $900 million for the core exploration and production (E&P) assets including its operations in the Gulf of Mexico, Norway, U.S. conventional oil and gas plays, Equatorial Guinea, the United Kingdom and Libya. 

Management has assigned almost $3.0 billion for E&P growth projects, with $2.7 billion focused on four key North America liquids-rich resource plays – the Eagle Ford shale in south Texas, North Dakota's Bakken shale, the Anadarko Woodford shale in Oklahoma, and the emerging Niobrara shale formation within the DJ Basin of southeast Wyoming and northern Colorado.

With two-third of the budget invested in growth projects, the company aims to boost production in the Eagle Ford shale and strengthen its presence in the Bakken and Anadarko Woodford shale plays.

For Oil Sands Mining segment, Marathon allocated $275 million that include funds for the initiation of debottlenecking projects, a carbon sequestration project and other ventures. The corporate expenses are expected to be about $160 million.

Marathon aims to burn up about a quarter of its 2012 budget on building a strong asset base across North America, Africa and Europe that will enhance its global portfolio and pave the way for future investment opportunities. The company believes that continued focus on the liquids-rich U.S. resource plays will enable it to achieve the projected 5% to 7% compound average production growth from 2010 to 2016.

Houston, Texas-based Marathon is a leading integrated oil and gas firm with extensive upstream operations. The company’s business is organized into three segments: Exploration and Production (accounted for more than 80% of Marathon’s total income), Oil Sands Mining, and Integrated Gas. In July 2011, Marathon completed the spin-off of its refining/sales business into a separate, independent and publicly traded company Marathon Petroleum Corporation (MPC).

We expect the company to perform at par with the broader industry and maintain a long-term Neutral recommendation. Marathon has a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months.

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