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Marathon Oil's (MRO) Q3 Loss in Line, Revenues Top Estimates
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Marathon Oil Corporation (MRO - Free Report) reported third-quarter 2020 adjusted net loss per share of 28 cents, matching the Zacks Consensus Estimate. This performance can be attributed to weak oil and gas price realizations, and lower output, partially offset by a fall in year-over-year U.S. production costs. However, a year ago, the company earned 14 cents per share.
Meanwhile, Marathon Oil’s revenues of $754 million outpaced the Zacks Consensus Estimate of $752 million but fell from the year-ago top-line of $1.35 billion.
Segmental Performance
This Texas-based energy explorer’s total net production (from U.S. and International units) in the quarter under review came in at 370,000 barrels of oil equivalent per day (BOE/d) compared with 426,000 BOE/d in the year-ago period.
U.S. E&P: This upstream unit suffered a loss of $135 million against a profit of $180 million in the year-ago period due to reduced oil and gas price realizations, and soft output.
Marathon Oil’s average realized liquids prices (crude oil and condensate) of $37.78 per barrel were below the year-earlier level of $55.09. However, natural gas liquids’ average price realizations increased 3.8% to $11.80 a barrel. Meanwhile, average realized natural gas prices dropped 7.3% year over year to $1.78 per thousand cubic feet.
On a brighter note, production costs summed $4.32 per BOE, representing a 13% year-over-year decline, attributable to strong cost-control measures.
However, net production of 297,000 BOE/d decreased from 339,000 BOE/d in third-quarter 2019. The total U.S. output comprised 53.5% oil or 159,000 barrels per day (bpd), down 21% year over year.
The declined year-over-year production, especially from Eagle Ford, Bakken and Oklahoma hampered the company’s quarterly performance. Notably, Eagle Ford and Bakken output came in at 91,000 BOE/d and 98,000 BOE/d, respectively, reflecting a 14.9% and 10.1% fall each from the respective year-ago levels while the Oklahoma output was 73,000 BOE/d compared with 84,000 BOE/d in the year-ago quarter.
International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported a profit of $8 million compared with $96 million earned in the comparable quarter last year due to ramped-down production activity and dwindled commodity price realizations.
Marathon Oil reported production available for sale of 73,000 BOE/d, down from 87,000 Boe/d in third-quarter 2019. Lower output from Equatorial Guinea caused this downside.
The company’s average realized liquids prices (crude oil and condensate) of $30.28 per barrel reflect a 34.2% decline from the year-earlier quarter. Natural gas and natural gas liquids’ average price realizations came in at 24 cents per thousand cubic feet and $1 a barrel each, in line with the respective year-over-year numbers.
Marathon Oil Corporation Price, Consensus and EPS Surprise
Total costs in the quarter were $996 million, lower than $1.11 billion in the prior-year period.
The company reported an operating cash flow of $345 million in the third quarter, down from $737 million a year ago.
Further, Marathon Oil generated free cash flow of $180 million in the third quarter through a robust performance across all elements of business.
As of Sep 30, it had cash and cash equivalents worth $1.1 billion and a long-term debt of 5.41 billion. Debt-to-capitalization of the company was 33.2%.
Guidance
Marathon Oil slashes its current-year unit output operating expense view for both U.S. and International segments by over 5% and 8%, respectively. Further, it raises its 2020 U.S. oil-equivalent production guidance by 5,000 net BOE/d at the midpoint.
Meanwhile, Marathon Oil reiterates its current-year oil output projection at 190,000 net barrels per day while maintaining its full-year capex view of $1.2 billion, led by strong execution and improved capital efficiency.
Marathon Oil's ability to withstand soft commodity prices is supported by its assertion of a free cash flow breakeven even at a WTI price below $35 per barrel in 2021. Further, the company expects to restrict next year’s capital spending within $1 billion and targets an average production level similar to that of the fourth-quarter 2020.
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Marathon Oil's (MRO) Q3 Loss in Line, Revenues Top Estimates
Marathon Oil Corporation (MRO - Free Report) reported third-quarter 2020 adjusted net loss per share of 28 cents, matching the Zacks Consensus Estimate. This performance can be attributed to weak oil and gas price realizations, and lower output, partially offset by a fall in year-over-year U.S. production costs. However, a year ago, the company earned 14 cents per share.
Meanwhile, Marathon Oil’s revenues of $754 million outpaced the Zacks Consensus Estimate of $752 million but fell from the year-ago top-line of $1.35 billion.
Segmental Performance
This Texas-based energy explorer’s total net production (from U.S. and International units) in the quarter under review came in at 370,000 barrels of oil equivalent per day (BOE/d) compared with 426,000 BOE/d in the year-ago period.
U.S. E&P: This upstream unit suffered a loss of $135 million against a profit of $180 million in the year-ago period due to reduced oil and gas price realizations, and soft output.
Marathon Oil’s average realized liquids prices (crude oil and condensate) of $37.78 per barrel were below the year-earlier level of $55.09. However, natural gas liquids’ average price realizations increased 3.8% to $11.80 a barrel. Meanwhile, average realized natural gas prices dropped 7.3% year over year to $1.78 per thousand cubic feet.
On a brighter note, production costs summed $4.32 per BOE, representing a 13% year-over-year decline, attributable to strong cost-control measures.
However, net production of 297,000 BOE/d decreased from 339,000 BOE/d in third-quarter 2019. The total U.S. output comprised 53.5% oil or 159,000 barrels per day (bpd), down 21% year over year.
The declined year-over-year production, especially from Eagle Ford, Bakken and Oklahoma hampered the company’s quarterly performance. Notably, Eagle Ford and Bakken output came in at 91,000 BOE/d and 98,000 BOE/d, respectively, reflecting a 14.9% and 10.1% fall each from the respective year-ago levels while the Oklahoma output was 73,000 BOE/d compared with 84,000 BOE/d in the year-ago quarter.
International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported a profit of $8 million compared with $96 million earned in the comparable quarter last year due to ramped-down production activity and dwindled commodity price realizations.
Marathon Oil reported production available for sale of 73,000 BOE/d, down from 87,000 Boe/d in third-quarter 2019. Lower output from Equatorial Guinea caused this downside.
The company’s average realized liquids prices (crude oil and condensate) of $30.28 per barrel reflect a 34.2% decline from the year-earlier quarter. Natural gas and natural gas liquids’ average price realizations came in at 24 cents per thousand cubic feet and $1 a barrel each, in line with the respective year-over-year numbers.
Marathon Oil Corporation Price, Consensus and EPS Surprise
Marathon Oil Corporation price-consensus-eps-surprise-chart | Marathon Oil Corporation Quote
Financials
Total costs in the quarter were $996 million, lower than $1.11 billion in the prior-year period.
The company reported an operating cash flow of $345 million in the third quarter, down from $737 million a year ago.
Further, Marathon Oil generated free cash flow of $180 million in the third quarter through a robust performance across all elements of business.
As of Sep 30, it had cash and cash equivalents worth $1.1 billion and a long-term debt of 5.41 billion. Debt-to-capitalization of the company was 33.2%.
Guidance
Marathon Oil slashes its current-year unit output operating expense view for both U.S. and International segments by over 5% and 8%, respectively. Further, it raises its 2020 U.S. oil-equivalent production guidance by 5,000 net BOE/d at the midpoint.
Meanwhile, Marathon Oil reiterates its current-year oil output projection at 190,000 net barrels per day while maintaining its full-year capex view of $1.2 billion, led by strong execution and improved capital efficiency.
Marathon Oil's ability to withstand soft commodity prices is supported by its assertion of a free cash flow breakeven even at a WTI price below $35 per barrel in 2021. Further, the company expects to restrict next year’s capital spending within $1 billion and targets an average production level similar to that of the fourth-quarter 2020.
Zacks Rank & Key Picks
Marathon Oil currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are Oasis Petroleum Inc , Antero Resources Corporation (AR - Free Report) and Earthstone Energy, Inc. , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
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