Lee M. Tillman
Chairman, President & Chief Executive Officer at Marathon Oil
Thank you, Pat. I will close with a quick summary of how we have positioned our company for success and a preview of what to expect from us in 2022. Spoiler alert, there will be no surprises in 2022 and no compromise with respect to our capital return framework. If we focus on the financial benchmarks that matter, we are delivering top-tier capital efficiency, free cash flow yield and balance sheet strength. Our 2021 capital rate of sub-35% and capital intensity as measured by capex per barrel of production are both the lowest in our independent E&P peer group, a strong validation of our leading capital and operating efficiency. We are also one of the few E&Ps expecting to deliver a 2021 reinvestment rate at or below the S&P 500 average. We're also delivering top quartile free cash flow yield this year among our peer group and well above the S&P 500 average. And we are doing all of this with an investment-grade balance sheet at sub-onetime net debt to EBITDA, a 2021 leverage profile also well below both our peer group and the S&P 500 average. In short, we are successfully delivering outsized financial performance versus our peer group and the broader market with the commodity price support we are experiencing this year.
Yet perhaps more importantly, we are well positioned to deliver competitive free cash flow and financial performance versus the broader market at much lower prices than we see today, all the way down to the $40 per barrel WTI range. This is the power of our sustainable cost structure reductions, our capital and operating efficiency improvements and our commitment to capital discipline, all contributing to a sub-$35 per barrel breakeven. Looking ahead to 2022, our differentiated capital allocation framework that prioritizes the shareholder at the first call on cash flow generation will not change. Our commitment to capital discipline will not waver with maintenance oil production, the case to beat, as we finalize our 2022 budget. We believe the right business model for a mature industry prioritizes sustainable free cash flow, a low reinvestment rate and meaningful returns to equity investors, not growth capital. Recall that we introduced a unique 5-year maintenance scenario earlier this year that featured $1 billion to $1.1 billion of annual spending, $1 billion of annual free cash flow at $50 WTI and a 50% reinvestment rate. Given we are no longer living in a $50 per barrel environment and that prices are currently north of $80 per barrel, it is both prudent and reasonable to consider some level of limited inflation up to about 10% that would yield modest pressure on the maintenance scenario capital range.
Yet importantly, this modest level of inflation pales in comparison to the uplift to our financial performance in the current environment, with a 2022 maintenance scenario free cash flow potentially on the order of $3 billion at recent strip pricing or nominally 3 times the $50 benchmark outcome. And under such a maintenance scenario, we are positioned to lead the peers once again with a 2022 free cash flow yield above 20%, far in excess of the S&P 500 free cash flow yield of approximately 4%. Our minimum 40% of cash flow target translates to about $1.6 billion of equity holder returns next year. But that is a minimum, and we see significant headroom to drive that number higher. At the expected 4Q run rate of 50% of CFO, 2022 equity holder returns would increase to approximately $2 billion, while still improving our cash balance and net debt position. Even at a more conservative $60 per barrel oil price environment, our minimum 40% of cash flow targets still translates to about $1.1 billion of equity holder returns in 2022. And applying 2022 consensus estimates to the return frameworks disclosed by our peers, only confirms our leading return of capital profile, with a double-digit cash distribution yield to our equity investors in 2022.
The confidence in this outsized delivery is further supported by recent Board action to increase our share repurchase authorization to $2.5 billion to ensure we have sufficient runway to continue delivering on our return of capital commitment next year. To close, our company was among the first to recognize the need to move to a business model that prioritizes returns, sustainable free cash flow, balance sheet improvement and return of capital. We have also led the way in better aligning executive compensation to this new model and with investor expectations. We are successfully executing on our model today, delivering both financial outcomes and ESG excellence that are competitive not just with our direct E&P peers but also the broader market. With that, we can open up the line for Q&A.