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Why Is Marathon Oil (MRO) Up 5.4% Since Last Earnings Report?
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It has been about a month since the last earnings report for Marathon Oil (MRO - Free Report) . Shares have added about 5.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Marathon Oil due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Marathon Oil Corporation reported fourth-quarter 2021 adjusted net income per share of 77 cents, comprehensively beating the Zacks Consensus Estimate of 55 cents. In the year-ago period, the company had incurred a loss of 12 cents. Marathon Oil’s bottom line was favorably impacted by stronger liquid realizations and better-than-expected domestic production. Precisely, volumes in the United States came in at 304,000 barrels of oil equivalent per day (BOE/d), beating the Zacks Consensus Estimate of 294 BOE/d.
Marathon Oil reported revenues of $1.8 billion that jumped from the year-ago sales of $830 million and also came above the consensus mark by 14.5%.
In good news for investors, the company is using the excess cash from a supportive environment to reward them with dividends and buybacks. As part of that, MRO has executed $1 billion of share repurchases since October (with $1.7 billion remaining under the current authorization) and recently announced a dividend hike for the fourth time in as many quarters.
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 353,000 BOE/d compared with 352,000 BOE/d in the year-ago period.
U.S. E&P: This U.S. upstream unit reported income of $553 million against a loss of $33 million in the year-ago period due to stronger price realizations.
Marathon Oil’s average realized liquids prices (crude oil and condensate) of $77.03 per barrel were significantly above the year-earlier level of $39.71. Natural gas liquids average price realizations soared 114.7% to $34.99 a barrel. Additionally, average realized natural gas prices were up 126.8% year over year to $5.24 per thousand cubic feet.
Meanwhile, production costs were $4.90 per BOE, representing a 6.1% year-over-year rise.
Net production of 304,000 BOE/d increased from 280,000 BOE/d in fourth-quarter 2020. The total U.S. output comprised 57% oil or 172,000 barrels per day (bpd), up 8.2% year over year.
The higher year-over-year production, especially from Eagle Ford and Bakken buoyed the company’s quarterly performance. The Eagle Ford region recorded production of 93,000 BOE/d, up 13.4% from the level in fourth-quarter 2020, while output from Bakken was 124,000 BOE/d compared with 110,000 BOE/d in the year-ago quarter. On a somewhat disappointing note, Oklahoma output came in at 56,000 BOE/d, reflecting a 3.4% fall from the year-ago level.
International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $106 million, compared with $29 million in the year-ago period due to improvement in liquids prices.
Marathon Oil reported production available for sale of 49,000 BOE/d, down from 72,000 Boe/d in fourth-quarter 2020.
Marathon Oil’s average realized liquids prices (crude oil and condensate) of $71.29 per barrel reflected a 103.2% jump 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, respectively – same as the corresponding period of 2020.
Financial Position
Total costs in the quarter were $1.1 billion, $19 million lower than the prior-year period. Marathon Oil reported an operating cash flow of $1.1 billion for the fourth quarter, up significantly from $428 million a year ago. As of Dec 31, it had cash and cash equivalents worth $580 million and long-term debt of 4 billion. The debt-to-capitalization ratio of the company was 27.1. Marathon Oil spent $251 million in capital and exploratory expenditures during the quarter and raked in $898 million of free cash flow.
2022 Guidance
Marathon Oil has set the capital budget at $1.2 billion for this year, up modestly (16%) from $1 billion it spent in 2021 as it continues to target shareholder returns over production growth. The company is targeting production in the range of 340,000 BOE/d to 350,000 BOE/d – essentially unchanged from the last year. Further, Marathon Oil expects oil volumes in the band of 168,000-176,000 barrels per day. Assuming $60 WTI, Marathon Oil expects to return a minimum of 40% of its cash flow from operations.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 6.64% due to these changes.
VGM Scores
Currently, Marathon Oil has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Marathon Oil has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Marathon Oil (MRO) Up 5.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Marathon Oil (MRO - Free Report) . Shares have added about 5.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Marathon Oil due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Marathon Oil Reports Better-Than-Expected Q4 Earnings
Marathon Oil Corporation reported fourth-quarter 2021 adjusted net income per share of 77 cents, comprehensively beating the Zacks Consensus Estimate of 55 cents. In the year-ago period, the company had incurred a loss of 12 cents. Marathon Oil’s bottom line was favorably impacted by stronger liquid realizations and better-than-expected domestic production. Precisely, volumes in the United States came in at 304,000 barrels of oil equivalent per day (BOE/d), beating the Zacks Consensus Estimate of 294 BOE/d.
Marathon Oil reported revenues of $1.8 billion that jumped from the year-ago sales of $830 million and also came above the consensus mark by 14.5%.
In good news for investors, the company is using the excess cash from a supportive environment to reward them with dividends and buybacks. As part of that, MRO has executed $1 billion of share repurchases since October (with $1.7 billion remaining under the current authorization) and recently announced a dividend hike for the fourth time in as many quarters.
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 353,000 BOE/d compared with 352,000 BOE/d in the year-ago period.
U.S. E&P: This U.S. upstream unit reported income of $553 million against a loss of $33 million in the year-ago period due to stronger price realizations.
Marathon Oil’s average realized liquids prices (crude oil and condensate) of $77.03 per barrel were significantly above the year-earlier level of $39.71. Natural gas liquids average price realizations soared 114.7% to $34.99 a barrel. Additionally, average realized natural gas prices were up 126.8% year over year to $5.24 per thousand cubic feet.
Meanwhile, production costs were $4.90 per BOE, representing a 6.1% year-over-year rise.
Net production of 304,000 BOE/d increased from 280,000 BOE/d in fourth-quarter 2020. The total U.S. output comprised 57% oil or 172,000 barrels per day (bpd), up 8.2% year over year.
The higher year-over-year production, especially from Eagle Ford and Bakken buoyed the company’s quarterly performance. The Eagle Ford region recorded production of 93,000 BOE/d, up 13.4% from the level in fourth-quarter 2020, while output from Bakken was 124,000 BOE/d compared with 110,000 BOE/d in the year-ago quarter. On a somewhat disappointing note, Oklahoma output came in at 56,000 BOE/d, reflecting a 3.4% fall from the year-ago level.
International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $106 million, compared with $29 million in the year-ago period due to improvement in liquids prices.
Marathon Oil reported production available for sale of 49,000 BOE/d, down from 72,000 Boe/d in fourth-quarter 2020.
Marathon Oil’s average realized liquids prices (crude oil and condensate) of $71.29 per barrel reflected a 103.2% jump 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, respectively – same as the corresponding period of 2020.
Financial Position
Total costs in the quarter were $1.1 billion, $19 million lower than the prior-year period. Marathon Oil reported an operating cash flow of $1.1 billion for the fourth quarter, up significantly from $428 million a year ago. As of Dec 31, it had cash and cash equivalents worth $580 million and long-term debt of 4 billion. The debt-to-capitalization ratio of the company was 27.1. Marathon Oil spent $251 million in capital and exploratory expenditures during the quarter and raked in $898 million of free cash flow.
2022 Guidance
Marathon Oil has set the capital budget at $1.2 billion for this year, up modestly (16%) from $1 billion it spent in 2021 as it continues to target shareholder returns over production growth. The company is targeting production in the range of 340,000 BOE/d to 350,000 BOE/d – essentially unchanged from the last year. Further, Marathon Oil expects oil volumes in the band of 168,000-176,000 barrels per day. Assuming $60 WTI, Marathon Oil expects to return a minimum of 40% of its cash flow from operations.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 6.64% due to these changes.
VGM Scores
Currently, Marathon Oil has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Marathon Oil has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.