As it tangles with depressed commodity prices, Marathon Oil Corp. is cutting spending in the Eagle Ford and Bakken shales but raising the amount of capital allocated to Oklahoma resource plays as it has noticed the success of other operators in the Sooner State.

Capital allocated to Marathon's three key U.S. resource plays for this year overall  has been cut to $2.2 billion, from $2.4 billion. There was no change to full-year production guidance of 370,000-390,000 net boe/d, which excludes Libya.

The Eagle Ford will get $1.3 billion as Marathon cuts its rig count in the play to seven by the end of the second quarter. For this year, Marathon expects to drill 196-206 gross operated Eagle Ford Wells. In the Bakken. spending is being cut to $645 million as Marathon goes to a one-rig program by the end of the second quarter. Gross operated wells to be drilled this year number 26-36.

However, in the Oklahoma resource basins spending has been raised to $253 million " a result of an increase in high-value outside-operated activity," Marathon said. The company will maintain two operated rigs and plans to participate in about 50 outside-operated well spuds in 2015, nearly double the previously announced program. The number of gross operated wells to be drilled this year is unchanged.

"...Oklahoma does compete for capital very favorably," CEO Lee Tillman told an analyst during the company's earnings conference call Thursday. "If you go back to our single well economics and you look at those even head-to-head with the Eagle Ford, those wells are on par. So strictly from an economic standpoint, absolutely competitive.

"...[W]e saw a unique opportunity in really leverage our money there to continue to expand our knowledge and insight around the Oklahoma resource basin. So we felt that was a unique opportunity. It's largely being driven by Oklahoma continuing to attract more capital from other operators' portfolios, and we want to participate in that."

Gastar Exploration Inc. just announced a divestiture in Oklahoma, but proceeds could be used to develop other acreage, the company said, as it has shifted its focus from Appalachia to Oklahoma's Hunton Limestone (see Shale Daily, May 8). Earlier this year, Continental Resources Inc. and Newfield Exploration Co., two companies devoted to drilling in the South Central Oklahoma Oil Province (SCOOP), said separately that they planned to intensify their focus on the legacy play in 2015, while scaling back capital expenditure dollars and rigs in other unconventional areas (see Shale Daily, May 7; Feb. 25).

Marathon's unconventional Oklahoma production averaged 25,000 net boe/d during first quarter, an increase of 67% over the year-ago quarter and up 25% compared to the previous quarter. About 48% of first quarter net production was liquids, and 52% was natural gas. All five gross operated wells brought to sales during the quarter were in the SCOOP, with three of the wells in the southern SCOOP with 30-day initial production (IP) rates averaging 1,500 gross boe/d, Marathon said. The Company has three operated wells in the Meramec Shale that achieved 30-day IP rates of up to 1,182 gross boe/d (81% liquids, 56% oil).

The company said it plans to participate in about 50 outside-operated wells this year in the SCOOP Woodford, SCOOP Springer and STACK areas. In the first quarter, Marathon participated in five high-density, outside-operated spacing pilots in the SCOOP area -- three in the Woodford (80-128 acre spacing) and two in the emerging Springer Shale (105-128 acre spacing) overlying the Woodford. The Woodford pilots include one high-density 10-well pilot composed of five wells in the upper Woodford and five wells in the middle Woodford.

"The capital we've reallocated to Oklahoma is primarily focused on increasing our non-operated gross well exposure," Tillman said. "This increase in capital demonstrates our belief that Oklahoma represents an exciting growth opportunity for Marathon Oil that competes very favorably with our existing portfolio."

First quarter production in the Eagle Ford averaged 147,000 net boe/d, a 53% increase over the year-ago quarter and 12% over the previous quarter. About 63% of first quarter net production was crude oil/condensate, 18% was natural gas liquids (NGL), and 19% was natural gas.

In the Bakken, Marathon averaged 57,000 net boe/d of production during first quarter, an increase of 33% over the year-ago quarter and 4% over the previous quarter. Bakken production averaged 89% crude oil, 5% NGLs and 6% natural gas.

"The Bakken enhanced completion design pilot program has concluded with promising early results reflected in a revised standard well completion design going forward," Marathon said. "Data from the first 23 wells suggest greater than 30% improvement in cumulative production after 90 days when compared to direct offset performance. All 24 of the wells brought to sales in the first quarter incorporated an enhanced completion design, optimizing proppant loading, frack fluid volumes and stage density. Early performance of the first high-density pilot (six wells per horizon) is encouraging with 30-day IP rates of 662-1,209 gross boe/d, similar to area direct offsets at wider spacing and in line with expectations."

Marathon's North America exploration and production segment reported a loss of $161 million in the first quarter compared to income of $242 million in the year-ago quarter. The decrease was primarily due to lower liquid hydrocarbon prices and higher depreciation, depletion and amortization, partially offset by higher net sales volumes from U.S. resource plays, the company said. Production costs per boe of $7.94 decreased 17% from the previous quarter and were down 28% from the year-ago period. The company reported a first quarter adjusted net loss of $253 million, (minus 37 cents/share), which excludes special items, compared with adjusted income of $438 million (63 cents/share) in the year-ago quarter.

The first quarter reported net loss was $276 million (minus 41 cents/share), compared with net income of $398 million (57 cents/share) in the year-ago quarter.