Lee Tillman
Chairman, President and Chief Executive Officer at Marathon Oil
Thank you Guy, and good morning to everyone listening to our call today. I want to begin by once again thanking our employees and contractors for their continued dedication and hard work in putting together another quarter of outstanding execution. It is their hard work that makes all the accomplishments we will discuss today possible. The combination of our high quality, multi-basin portfolio, our differentiated execution and our commitment to capital discipline are driving truly exceptional results for our company. During second quarter, we generated $420 million of free cash flow, bringing free cash flow generation through the first half of the year to over $860 million. For our $1 billion full year 2021 capital budget, assuming $65 WTI and $3 Henry Hub, we now expect to generate $1.9 billion of free cash flow this year. This corresponds to a free cash flow yield north of 20% at a reinvestment rate of just 35% and a corporate free cash flow breakeven well below $35 per barrel WTI, a powerful combination of results that we believe differentiates us against any company in our sector, as well as the broader market.
We are successfully delivering on all of our financial, operational and ESG related objectives. We remain fully committed to capital discipline and our $1 billion capital program. As I've said many times, our budget is our budget, and we won't raise our spending levels with stronger commodity prices but will simply generate more free cash flow. Supported by such strong performance, we have just raised our quarterly base dividend by 25%. This is the second quarter in a row that we have increased our base dividend. We are also accelerating our balance sheet objectives, pulling forward achievement of our gross debt target which will drive a shift in our return of capital focus toward equity holders. Further, we are enhancing our return of capital framework, now targeting at least 40% of our annual cash flow from operations to equity holders in a $60 per barrel WTI or higher price environment, while still retiring future debt at maturity. This is one of the most significant return of capital commitments to shareholders in our sector.
Perhaps most importantly, everything that we are doing is sustainable. The proof point for the sustainability is our five-year benchmark maintenance scenario. We previously highlighted that this scenario can deliver around $5 billion of free cash flow from 2021 to 2025 in a flat $50 WTI price environment with corporate free cash flow breakeven below $35 per barrel throughout the period. Updating our scenario for a flat $60 per barrel WTI price deck highlights the power of our balanced but oil-weighted portfolio and the significant leverage we have to even modest commodity price support. At $60 flat WTI and an average reinvestment rate of 40%, we can deliver around $8 billion of cumulative free cash flow through 2025, or more than 90% of our company's current market capitalization. Integrating our updated capital allocation framework with this maintenance capital scenario provides clear visibility to a leading return of capital profile, over $1 billion of capital returned to equity holders per year in a $60 per barrel environment, and this consistent financial deliver is underpinned by well over a decade of high return inventory across four of the most competitive U.S. resource plays, complemented by our free cash flow generative EG-integrated gas business.
Finally, the ongoing pursuit of ESG excellence remains foundational to our strategy. Safety remains our top priority. Our first half 2021 safety performance as measured by total recordable incident rate stands at 0.29 and follows on from two consecutive years of record-setting company safety performance. We have taken a leadership role in governance, particularly when it comes to reshaping executive compensation. We have reduced compensation for executives and the board while also optimizing our framework for better alignment with shareholders and the financial metrics that matter. This includes the elimination of all production and growth targets as well as the introduction of a cumulative free cash flow target in our long term incentive program. Last but not least, we remain hard at work to reduce our GHG emissions. We continue to make progress towards achieving our GHG intensity reduction target of 30% in 2021, a metric hardwired into our compensation scorecard, as well as our goal for a 50% reduction by 2025, both of these relative to our 2019 baseline.
With that brief overview, I would like to turn it over to Mike Henderson, our Executive Vice President of Operations, who will provide an update on our 2021 performance.