Marathon slashes another $600 million from its 2020 capex, leaving $1.3 billion

Houston — Marathon Oil has joined the ranks of several upstream operators that have slashed their 2020 capital budgets a second time in the last month because of plummeting global oil demand and persistently low crude prices.

The company, which started this year with capex of $2.4 billion, on Wednesday shaved off another $600 million in addition to a reduction of $500 million in early March.

The result is a capital budget that is nearly 50% of its original amount, or around $1.3 billion, the company said in a statement.

The additional cuts represent suspending further drilling in the Northern Delaware Basin, in southeast New Mexico.

"Only a limited number of wells to sales are expected through the balance of the year," the company said.

Marathon will continue to optimize development plans in the Bakken Shale of North Dakota and the Eagle Ford Shale of South Texas.

The company also said it plans "frac holidays" in those two plays during Q2 when hydraulic fracking does not occur, before transitioning to a reduced, more continuous well drilling and completion schedule for the rest of the year.

Last month, Marathon suspended resource play exploration and Oklahoma activity.

The combined moves are designed to protect the balance sheet, Marathon CEO Lee Tillman said.

"We're maintaining our returns-first mindset with a focus on preserving value through the cycle," Tillman said.

Marathon said it would provide further updates during its first-quarter earnings conference call in May.

Although the company did not mention 2021 capex, Credit Suisse analyst Bill Featherston projected it would be roughly $1 billion.

"We now expect Marathon to be free cash flow neutral after dividends next year at $40/b WTI.," Featherston said, meaning its cash income will match its expenses at that price.

But that price is still well below the Wednesday midday trading price of just under $24/b.