Sample Case Study Paper (SWOT Analysis) of Marathon Oil Corporations

Marathon Oil Corporation (henceforth Marathon) is an integrated international energy company engaging in the exploration of gas, refining, production, transportation, and marketing (Datamonitor, 2011). Marathon operates in the US, Indonesia, Libya, Equatorial Guinea, Iraqi, Norway, Gabon, and UK. Headquartered in Houston, Texas, Marathon employs more than 29,670 people (Datamonitor, 2011). Marathon engages in crude oil refinery, marketing and transportation of products. The company operations are based on oil and gas value chain, an enigma that provides Marathon with competitive edge. In the United States, Marathon Oil Corporation is considered as a fourth largest oil company. Nonetheless, the intense competition intends to erode the Marathon’s share market.

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In 2011, Marathon growth trend resulted from global strong projects through acquisitions, production-sharing contacts (PSCs), and joint ventures through their representative subsidiaries. Some of these are Eagle Ford Shale play acquisition in Texas, Iraqi Kurdistan Region, Poland and others (Barnes, 2008). During the annual period ending December 2011, production sales and exploration averaged 219 barrels per day while the natural gas equated 363 barrels of oil equivalent per day (mboed). In FY2010 ending December, marathon recorded $72,204,000 as revenue which was 34.7% increase over FY2009. In FY2010, the company’s operating profit was $10,660 million and a net profit of $2,568,000 (Datamonitor, 2011). This paper will look at how the Marathon Oil Corporation operates and how it globally manages the overseas locations. The paper will takes special interest in United Kingdom and Kurdistan Region of Iraq as Marathon overseas locations.

Corporate Governance

For the benefit of the shareholders, affairs and dealings are controlled and managed under the route of board of directors. Under the Delaware law, the board of directors is obligated to fulfill their fiduciary and due care duties. The board formulates and oversees important decisions expect for the scenario were shareholder’s action is required (Marathon Oil Corporation, 2012). The board also holds the responsibility of electing Company’s Chief Executive (CEO) and other senior managers. The board endeavor to maintain six to eleven members as stipulated by the company by-laws. The company believes that the most important asset that any business can possess is reputation for integrity (Marathon Oil Corporation, 2012). Marathon Oil supports corporate responsibility because it provides more integrity and credibility for investors.

SWOT Analysis

Strengths

Presence across the Entire Oil and Gas Value Chain

Marathon operates in the full value chain, from the exploration, production, storage, and pipeline to the marketing and distribution. The company’s various segments normally refine, transports crude oil and subsidiary products (Datamonitor, 2010). Marathon owns a system of pipeline that transports crude oil and refined products primarily between refineries and terminals. There are three major segments such as exploration and production segment exploring, producing, and market liquid natural gas hydrocarbons in a global scale. The second segment, the integrated gas segment is obligated to sell and transport products manufactured form natural gas such as LNG and methanol (Datamonitor, 2010). While oil sands mining is a segment that extracts, mines, and transports bitumen harvested from the sand deposits in Canada and then upgrading the bitumen to produce synthetic crude oil and its by-products. The value chain presence grants Marathon a competitive advantage that is leveraged in the end (Brown, Gutterman, Brown, & Gutterman, 2003).

Strong Refining Operations

Marathon Oil Corporation is ranked as the fifth largest refiner of petroleum products in U.S. This demonstrates the company’s ability to capture strong refining operations. Garyville refinery is Marathon’s most productive and profitable refinery in the United States. The previous expansion projects ensured that the refinery was one of U.S. refineries (Datamonitor, 2010). Garyville can import crude oil from any part of the world and then redistributing then in a global scale. Readily available and cost-effective pipeline provide marathon with easy access to feedstock and optional product transport to the highest markets (Flaherty, 1996). Garyville strategic location helps the company to increase production from the feed from Gulf of Mexico at lower costs than other refineries. This strong refining option helps to leverage Marathon’s revenue growth.

Focus On Retail Marketing

Through Speedway LLC its wholly owned subsidiary, Marathon sells gasoline and other merchandised under this brand. At this outlets diesel is sold and the retail outlets at Speedway provide a wide variety of merchandised that ranges from food, beverages to non-food items. In the U.S. alone Speedways has 1,358 retail outlets (Datamonitor, 2010). Marathon’s focal to retail marketing has improved company’s sales resulting to better performance.

Weaknesses

Partnership Arrangements

Marathon normally conducts certain business operations like oil and gas exploration and production, and pipeline transportation by entering into arrangements (Marathon Oil Corporation , 2012). Marathon does this to share associated risks with partners in these operations. On the contrary, these collaborations decrease the company’s ability to manage risks and cost especially where the Marathon is not the operator. This indeed limit the company control on performance on the said operations (Datamonitor, 2010). This in the end influences the operational performance and financial position.

Opportunities

Eagle Ford Shale Assets Acquisition

This acquisition enhanced the U.S. unconventional focused position providing low-risk, profitable, and scalable growth. Apart from instituting highest oil value, Marathon condensate on Eagle Ford shale core area on assets that will lead to the delivery reserve additions and immediate program (Marathon Oil Corporation, 2012). Additionally, this granted Marathon with active company-operated drilling program, which are significantly important potential resource that leads to a solid economic returns and higher profitability.

Increasing Demand for Natural Gas Worldwide

As an important energy sources in the future, natural gas demand is increasing. Natural gas abundance at a global scale has coupled environmental soundness with its clean and multiple applications (Marathon Oil Corporation, 2012). For the said reason, natural gas consumption is expected to go up. The demand growth of natural gas will lead to increased revenues for Marathon and its related services.

Threats

Intense Competition

Marathon is eminent to face intense competition in all sectors of oil and gas industry. There is stiff competition in exploration and development of new reserves. Marathon competes with major independent and integrated oil and gas companies and some of the competitors have greater financial and other resources even more than Marathon’s. Some of the major of competitors are Chevron Corporation, Exxon Mobile Corporation, Total, BP, Royal Dutch Shell and many more (Datamonitor, 2010). Marathon competes with other companies in the acquisition to produce and market synthetic and conventional crude oil refinery. The company also competes with other companies in the convenient industry through Speedway’s retail outlet. The intense competition tends to erode the company’s market share.

Risks that Comes With Global Operations

Marathon operates in a global scale and a number of risks are associated with these operations in the international markets. Some of these risks are foreign policies that relates to liquid hydrocarbon and natural gas, bitumen or refined products taxation and pricing, acts of terror, political and economic instability, fluctuating currency values, currency control, and hard currency shortages (Flaherty, 1996). Moreover, Marathon recent entry in Iraqi has triggered occurrence of future terrorist attacks that led to increased liquid hydrocarbons, natural gas, and subsidiary products that led to the reduced company’s profitability and cash flows.

Operations

Technology: Exploration and Production

In reservoir characterization, completions, drilling, and enhanced recovery (EOR), the company leverages its technical capabilities. Marathon also applies heavy oil or situ-recovery when capturing additional resources on existing assets that collates gas reservoirs and unconventional oil (Marathon Oil Corporation, 2012). Marathon work hand in hand with the numerous partners in the industry when developing and applying improved techniques for improvement especially on its unconventional resources.

The company places special focus upon technologies with the aim of improving the overall effectiveness of radio frequency identification (RFID) tags from hydraulic fractures. Marathon is developing technologies that would efficiently improve the opportunities of Canadian oil sands. Some of these technologies are bitumen extractions technologies, upgrading heavy oils into pipelineable syncrude and refinery conversion of refinery residues to distillates (Datamonitor, 2010). On the emerging technologies, Marathon focuses on carbon intensity, carbon capture and segmentation, and energy efficiency. Marathon is partaking academic and industry emerging technologies in Canada, MITs and Gulf Coast Carbon Center.

Supplier Relations

When it comes to suppliers who provide necessary materials and equipment, marathon seeks for the right relationship and the right value concerning the right product. An excellent global procurement division controls and manages supplier relations. The procurement provides both contracting support and onsite procurement (De Toni, 2011). On an international scale, supply relations are reserved by a typical successful supplier partnership based on financial viability, ethical standards, innovations, value-added capabilities, and proper understanding of Marathon’s operations. In response to supplier diversity, Marathon has a proactive business initiative that foresees providing underserved suppliers equal business enterprise opportunities (Report, US Oil & Gas, 2012). This supports strong supplier relations, which is intangible asset of the future.

Health, Environment, Safety, and Security

Marathon observes and maintains high standards of health, security performance, and safety that are foundations of continual cultural improvements. Marathon has made it a customary to indentify, evaluate and monitor environmental, social, and political situations concerning business performance and activities (Young & Nie, 1996). Marathon has also established policies that are associated with to the integral commitments on operational safety and environmental performance. Marathon maintains operating procedure relating to working locations. The evaluate hazards and risks that are probable to cause serious injury or fatality for its employees and contractors.

Marathon tends to balance reductions on environmental impact at the same time expanding operations to meet the growing demands. Marathon participates in programs that advocate for reduction of Greenhouse Gas and increase energy efficiency such as Energy Star programs (Marathon Oil Corporation, 2012). Marathon maintains a zero spill record. Marathon achieves this by training, providing preventive procedure, mechanical safeguards, and routine equipment inspection. The company has mobilized to mitigate and respond to impacts of the companies waste and residual materials, and emissions.

Diversity

Workforce

Marathon provides equal opportunities for everyone. The company focuses on building a diverse workforce by recruiting, hiring, and promoting candidates who are highly qualified (De Toni, 2011). This ensures equal training and development opportunities that create balance in work and life.

Corporate culture

Marathon offers its work force a variety of programs and activities that relates to diversity and inclusion. Cultural awareness programs, diversity teams, training and education opportunities are some of these elements (Young & Nie, 1996).

External partnerships

On the national and international outreach efforts, Marathon has developed good relations leading to partnerships with the community, suppliers, the higher educators, and civic organizations (Marathon Oil Corporation, 2012). The company focuses on establishing a diverse supplier base – a reflective of how it operates. Marathon has other philanthropic partnerships that promote inclusions and diversity.

Global operations

In the global exploration and production, Marathon Oil’s focuses its activities on profitable production to already existing assets while at the same time developing new core area potency in the global scale. Marathon Operations are in the frontline of providing and supplying liquid hydrocarbons and natural gas to the world growing energy economy (Barnes, 2008). These production operations are focused in Africa, Asia, and Europe. The company also has interest of ownership in in-situ method of extraction in Canada’s leased oil sands. In the global market Marathon adds value by developing opportunities availed by natural-gas demand (Flaherty, 1996). This complements the company’s exploration and operations that normally opens a wide-array of strategic investment opportunities deliberated for adding value growth in these countries. Marathon recognizes that it is a privilege to operate in these countries. The paper discusses Marathon operations oversees taking special interest on Asia Kurdistan Region of Iraq and United Kingdom in Europe.

Asia -Kurdistan Region of Iraq

Kurdistan Region of Iraq is Marathon’s new impact exploration area. The company acquired four exploration blocks in 2010 giving Marathon access to more than 365,000 total net acres (Klump, 2010). This is the last onshore regions that is has significant resource possible to offer short-term and long-term potency for oil production. Marathon manages such oversees operations by signing production sharing contacts for operatorship and 80 percent working interest in the two northeast blocks of Erbil-Harir and Safen. Marathon is currently carrying 20% interest by Kurdistan Regional Government (Klump, 2010). Additionally, marathon has already signed a 20% and 25% working interest in Atrush Block and Sarsang Block respectively. In 2009, Marathon’s spokesperson, Lee Warren states that the company was its earliest stage of a good high-potential exploration opportunity (Business Monitor, 2012). Marathon Oil jointly explores the two blocks in the Iraq Kurdistan region. Iraq posses the second largest reservoirs of oil following Saudi Arabia and this were to go up to 2.4 million barrels output in a single day. Marathon jointly worked with Total in the mission of exploring of Iraq’s excellent hydrocarbon province. Marathon subsidiary Marathon Oil KDV B.V closed farmout agreements with Total S.A subsidiaries (Business Monitor, 2012). Marathon signed production-sharing contacts (PSCs) for operatorship with Total. With the joint venture, Marathon and Total extensively drilled to explore the potency of these two blocks. The agreement came with the relations between Baghdad and other autonomous regions over festering disputes such as territorial claims and over oil contact (De Toni, 2011). With these oversees alliances, Marathon shares the benefits of the project benefits while sharing of risks.

United Kingdom

For more than 20 years now, Marathon has been producing oil and natural gas in United Kingdom. Using its strategic joint-venture ‘technique’, Marathon current Brae Complex that are company-operated. Marathon operations in U.K. are based in Aberdeen, Scotland. In 2010, U.K. net sales represented 15% of Marathon international liquid sales and 10% international gas sales (Marathon Oil Corporation, 2012).

Brae Complex

Using its subsidiary Brae Complex, Marathons operates and owns a 42% in the Brae fields in the North, South, West and Central. Marathon also has a 39% working interest in Brae east filed and 27.8 working interest in Braemar field (Marathon Oil Corporation , 2012). By the end of December 2011, Brae platforms averaged 10 mbpd on the net liquid hydrocarbon. Using its proficient international relation team, Marathon has established relations and partnerships with BP and Marathon uses Bp-operated Forties pipeline system to export Brae field fluids to Cruden Bay in Scotland (Marathon Oil Corporation, 2012). Brae platform and connecting pipeline strategic locations significantly continues to support third party processing and transportation segment.

Corporate Social Responsibility

 

The company manages the business in such a way that it promote environmental, social, and economically benefit the stakeholders. Marathons efforts enhance wellbeing while at the same time protects environmental benefits. The company’s foundation is living our values that are Marathons, long-standing health and safety commitments (Marathon Oil Corporation, 2012). The international corporate social responsibility (CSR) Policy ensures that Marathon stays focused on the key concepts that align the efforts of social responsibility with the company’s needs, operations, and the business goals.

Emergency Preparedness

To protect its employees, contractors, community, and the environment Marathon has realized the importance of emergency preparedness. The company and its stakeholders can incur heavy cost if emergency incidents are poorly designed, managed, and resolved. In reaction to emergency response plans, Marathon maintains a three-tiered response structure and membership in several worldwide Oil Spill Response Organizations or OSROs to support its internal capabilities (Marathon Oil Corporation , 2012). In 1990, Marathon established its Corporate Emergency Response Team (CERT). This team is comprised of highly trained employees who are favorably conversant with Incident Command System. CERT foresees Marathon’s total corporate resources and resource management available for communication and responding to major emergencies in the corporate location (Marathon Oil Corporation, 2012). CERT trains, resource, and develop in-house response management skills in times of hurricanes, earthquakes, security breaches, and oil spills.

Social-Economic

Marathon maintains a positive influence in the community. The company fosters constructive relationships, addresses sustainable development issues, build alliances, and contribute to the community appropriately. Marathon has established sustainable mechanisms that empower the community and the nations at large to develop human capital (Marathon Oil Corporation, 2012). This prepares the local communities to resolve future development and issues in a more sustainable and responsible manner. Marathon engages in long-term programs that would improve the lives of the community. The company undertakes proactive dialogue and effective relationships with parties or groups that have stake in Marathon’s operations and projects (Marathon Oil Corporation, 2012). Marathon takes this as a core business activity. On human rights, the company respects, human, legal, and cultural rights.

Over the last half decade, Marathon has gradually expanded its volume investments through acquisitions, production-sharing contacts (PSCs), and joint ventures through their representative subsidiaries in respective countries (Datamonitor, 2010). For instance, for financial FY2011, Marathon budgeted capital expenditures of $4,837 million and exploration budget of $5,267 million. The production budget is allocated to projects offering potential growth (Datamonitor, 2010). Marathon planned to drill 70 to 75 of well operated in Bakken and other 25 to 50 outside-operated wells. In the same financial year (2011), Marathon had planned a budget of $294 million for oil sands mining segment (Datamonitor, 2010). In addition to this, the company included $1,238 million for refinery, marketing, and transportation segments.

Reference

Barnes, D. (2008). Operations Management: An International Perspective. Connecticut: Cenage Learning EMEA.

Brown, R. L., Gutterman, A. S., Brown, R. L., & Gutterman, A. S. (2003). A Short Course in International Business Plans: Charting a Strategy for Success in Global Commerce. New York: World Trade Press.

Business Monitor. (2012). Iraq:Oil and Gas Report. EBSCO Discovery Service .

Datamonitor. (2011). Marathon Oil Corporation. EBSCO Discovery Service.

Datamonitor. (2010). Marathon Oil Corporation. EBSCO Discovery Services.

De Toni, A. F. (2011). International Operations Management: Lessons in Global Business. Farnham: Gower Publishing, Ltd.

Flaherty, M. T. (1996). Global operations management. New York:NY: McGraw-Hill Companies .

Klump, E. (2010, October 20). Marathon Signs Exploration Contracts, Marking Entry Into Iraqi Kurdistan. Retrieved September 5, 2012, from http://www.bloomberg.com/news/2010-10-20/marathon-signs-exploration-contracts-marking-entry-into-iraqi-kurdistan.html

Marathon Oil Corporation . (2012). Global operations. Retrieved September 5, 2012, from Kurdistan Regions of Iraq: http://www.marathonoil.com/Global_Operations/Kurdistan_Region_of_Iraq/Operations/

Marathon Oil Corporation. (2012). Governance . Retrieved September 5, 2012, from http://www.marathonoil.com/Social_Responsibility/Governance/

Marathon Oil Corporation. (2012). Socio-Economic. Retrieved September 5, 2012, from Social Responsibility: http://www.marathonoil.com/Social_Responsibility/SocioEconomic/

Marathon Oil Corporation. (2012). Technology. Retrieved September 5, 2012, from http://www.marathonoil.com/Technology/

Marathon Oil Corporation. (2012). United Kingdom. Retrieved September 5, 2012, from http://www.marathonoil.com/Global_Operations/United_Kingdom/Operations/

Report, US Oil & Gas. (2012). US Energy Market Overview. EBSCO Discovery Service.

Young, S. T., & Nie, W. (1996). Managing Global Operations: Cultural and Technical Success Factors. Connecticut: Greenwood Publishing Group.

 

 

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