By Eric Fox - August 4, 2012 | Tickers: BBG, XEC, DNR, MRO | 0 Comments

Eric is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

Marathon Oil (NYSE: MRO) is cutting back on its oil and gas development program in the onshore United States as the company reacts to lower cash flow from falling commodity prices while drilling and completion costs continue to stay at stubbornly high levels.

Eagle Ford Shale

Marathon Oil's largest onshore operation in the United States is in South Texas, where the company is developing the Eagle Ford Shale. The company is operating 20 rigs here and plans to drop two rigs as a result of lower prices for crude oil and natural gas liquids. Marathon Oil still believes that it can still maintain its original development program of 230 to 240 wells as the company has become more efficient in its drilling operations here.

Marathon Oil even announced that it would drill 11 additional Eagle Ford Shale wells on properties recently acquired from Paloma Partners II LLC. The company is buying 17,131 net acres for approximately $750 million.

Woodford Shale

The largest reduction in activity for Marathon Oil will be in its operations in the Mid Continent, where the company is developing the Woodford Shale in the Anadarko Basin. The company plans to operate two rigs here, down from the previous level of six rigs. Despite the cut, Marathon Oil is maintaining its 2012 exit rate production guidance of 10,000 BOE per day from here and believes that a two rig program will be able to convert the companys leases from term to held by production.

Cimarex Energy (NYSE: XEC) has a much larger operation in the Woodford Shale and is active mostly in the Cana portion of the play due to the high level of natural gas liquids present in the production stream. The company spent approximately 44% of its capital budget in the Woodford Shale and drilled 25 net wells in the Cana play in the first half of 2012.

Cimarex Energy is dealing with lower commodity prices by shifting development toward plays that produce mostly crude oil. The company is targeting the Bone Spring in Texas and New Mexico where oil ranges from 79% to 87% of total production.

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Marathon Oil Dials Back in the Onshore United States