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Marathon (MRO) Q2 Earnings Miss Despite Oil Price Improvement
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Marathon Oil Corporation (MRO - Free Report) reported second-quarter 2024 adjusted net income per share of 63 cents, missing the Zacks Consensus Estimate of 67 cents. The underperformance reflects higher costs and tepid production numbers.
However, the company’s bottom line rose from the year-ago adjusted profit of 48 cents due to higher commodity price realizations.
The company reported revenues of $1.7 billion, which came $15 million above the consensus mark and rose 12.8% from the year-ago sales.
Investors should know that on May 29, U.S. upstream behemoth ConocoPhillips (COP - Free Report) announced a definitive agreement to acquire Marathon Oil in an all-stock transaction valued at $22.5 billion. Completion of the transaction is expected by the fourth quarter of 2024.
Marathon Oil Corporation Price, Consensus and EPS Surprise
This Texas-based energy explorer’s total net production (from U.S. and International units) in the quarter under review came in at 393,000 barrels of oil equivalent per day (BOE/d) compared with 399,000 BOE/d in the year-ago period.
U.S. E&P: This U.S. upstream unit reported an income of $379 million, up from $365 million in the year-ago period due to an uptick in oil and gas realizations, partly offset by higher costs. We modeled the segment income at $434 million.
Marathon Oil’s average realized liquids price (crude oil and condensate) of $79.12 per barrel was 9.1% higher than the year-earlier level of $72.49 but narrowly missed our projection of $80.48. Meanwhile, natural gas liquids’ average price realizations increased 13.1% to $21.18 a barrel. Finally, average realized natural gas prices plunged 24.9% year over year to $1.42 per thousand cubic feet and underperformed our estimate of $1.44.
As far as production costs are concerned, they averaged $6.21 per BOE, or a 5.6% year-over-year increase.
Net production of 351,000 BOE/d was down 1.4% from second-quarter 2023. Total U.S. output, which came over our projection of 345,000 BOE/d, comprised approximately 52% oil, or 183,000 barrels per day (bpd).
The Eagle Ford region recorded an average production of 153,000 BOE/d, while output from Bakken was 107,000 BOE/d. The Oklahoma output came in at 42,000 BOE/d. In the Permian Basin, MRO produced 47,000 BOE/d.
International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $79 million compared with $30 million in the year-ago period and our projection of $45.8 million. The significantly improved results could be primarily attributed to higher natural gas sales prices.
Marathon reported production available for sale of 42,000 BOE/d, essentially in line with our projection as well as the second-quarter 2023 level of 43,000 Boe/d.
Marathon’s average realized liquids prices (crude oil and condensate) of $57.31 per barrel reflected a 6.8% improvement from the year-earlier quarter. Natural gas and natural gas liquids’ average price realizations came in at $4.96 per thousand cubic feet and $1 a barrel, respectively, compared to 24 cents and $1 in the corresponding period of 2023.
Financial Position
Total costs in the second quarter were $1.2 billion, up 11.8% from the prior-year period and exceeded our expectation by 6.6%. Marathon Oil reported an adjusted operating cash flow of $1 billion, down 8.3% from a year ago.
As of Jun 30, 2024, Marathon Oil had cash and cash equivalents worth $77 million and long-term debt of $4.6 billion. The debt-to-capitalization ratio of the company was 29.
Marathon Oil spent $665 million in capital and exploratory expenditures during the quarter and raked in $364 million in adjusted free cash flow. The company also executed $231 million in share repurchases during the period.
2024 Guidance
Marathon continues to budget its capital spending between $1.9 billion and $2.1 billion this year. Meanwhile, MRO continues to prioritize shareholder returns over production growth. The company is targeting production between 380,000 BOE/d and 400,000 BOE/d. Further, Marathon expects oil volumes in the band of 185,000-195,000 barrels per day.
Some Key E&P Earnings
While we have discussed Diamondback Energy’s second-quarter results in detail, let’s see how some other upstream companies have fared this earnings season.
ConocoPhillips, one of the world’s largest independent oil and gas producers, reported second-quarter 2024 adjusted earnings per share of $1.98, missing the Zacks Consensus Estimate of $2.06. The bottom line, however, improved from the prior-year quarter’s $1.84 per share. ConocoPhillips’ higher costs and expenses led to a weaker-than-expected bottom line. The negatives were partially offset by strong oil equivalent production volumes, which increased 7.8% year over year.
As of Jun 30, 2024, ConocoPhillips had $4.3 billion in cash and cash equivalents. COP’s total long-term debt was $17 billion, while it had a short-term debt of $1.3 billion. Capital expenditure and investments totaled $3 billion. Net cash provided by operating activities was $4.9 billion.
Natural gas producer EQT Corporation (EQT - Free Report) reported an adjusted loss from continuing operations of 8 cents per share in second-quarter 2024, narrower than the Zacks Consensus Estimate of a loss of 20 cents. The bottom line also improved from the year-ago quarter’s reported loss of 17 cents. EQT’s better-than-expected profits were driven by higher sales volumes, which increased to 508 billion cubic feet equivalent (Bcfe) from the year-ago quarter’s 471 Bcfe.
EQT’s adjusted operating cash flow was $405 million in the quarter, up from $340.8 million a year ago. Free cash flow in the quarter was a negative $171.1 million compared with a negative $129.3 million in the second quarter of 2023. Total capital expenditure for the company amounted to $576 million, increasing from $470 million a year ago. As of Jun 30, 2024, EQT had $29.9 million in cash and cash equivalents. Net debt was $4.9 billion.
APA Corporation (APA - Free Report) , another U.S. energy operator, reported second-quarter 2024 adjusted earnings of $1.17 per share, beating the Zacks Consensus Estimate of 95 cents and improving from the year-ago adjusted figure of 85 cents. The outperformance primarily reflects higher-than-expected production owing to the contribution from the Callon Petroleum acquisition that was closed on Apr 1.
During the quarter under review, APA generated $877 million of cash from operating activities while it incurred $839 million in upstream capital expenditures. The company reported an adjusted operating cash flow of $1.1 billion. It also registered a free cash flow of $103 million compared to $94 million a year ago.
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Marathon (MRO) Q2 Earnings Miss Despite Oil Price Improvement
Marathon Oil Corporation (MRO - Free Report) reported second-quarter 2024 adjusted net income per share of 63 cents, missing the Zacks Consensus Estimate of 67 cents. The underperformance reflects higher costs and tepid production numbers.
However, the company’s bottom line rose from the year-ago adjusted profit of 48 cents due to higher commodity price realizations.
The company reported revenues of $1.7 billion, which came $15 million above the consensus mark and rose 12.8% from the year-ago sales.
Investors should know that on May 29, U.S. upstream behemoth ConocoPhillips (COP - Free Report) announced a definitive agreement to acquire Marathon Oil in an all-stock transaction valued at $22.5 billion. Completion of the transaction is expected by the fourth quarter of 2024.
Marathon Oil Corporation Price, Consensus and EPS Surprise
Marathon Oil Corporation price-consensus-eps-surprise-chart | Marathon Oil Corporation Quote
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 393,000 barrels of oil equivalent per day (BOE/d) compared with 399,000 BOE/d in the year-ago period.
U.S. E&P: This U.S. upstream unit reported an income of $379 million, up from $365 million in the year-ago period due to an uptick in oil and gas realizations, partly offset by higher costs. We modeled the segment income at $434 million.
Marathon Oil’s average realized liquids price (crude oil and condensate) of $79.12 per barrel was 9.1% higher than the year-earlier level of $72.49 but narrowly missed our projection of $80.48. Meanwhile, natural gas liquids’ average price realizations increased 13.1% to $21.18 a barrel. Finally, average realized natural gas prices plunged 24.9% year over year to $1.42 per thousand cubic feet and underperformed our estimate of $1.44.
As far as production costs are concerned, they averaged $6.21 per BOE, or a 5.6% year-over-year increase.
Net production of 351,000 BOE/d was down 1.4% from second-quarter 2023. Total U.S. output, which came over our projection of 345,000 BOE/d, comprised approximately 52% oil, or 183,000 barrels per day (bpd).
The Eagle Ford region recorded an average production of 153,000 BOE/d, while output from Bakken was 107,000 BOE/d. The Oklahoma output came in at 42,000 BOE/d. In the Permian Basin, MRO produced 47,000 BOE/d.
International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $79 million compared with $30 million in the year-ago period and our projection of $45.8 million. The significantly improved results could be primarily attributed to higher natural gas sales prices.
Marathon reported production available for sale of 42,000 BOE/d, essentially in line with our projection as well as the second-quarter 2023 level of 43,000 Boe/d.
Marathon’s average realized liquids prices (crude oil and condensate) of $57.31 per barrel reflected a 6.8% improvement from the year-earlier quarter. Natural gas and natural gas liquids’ average price realizations came in at $4.96 per thousand cubic feet and $1 a barrel, respectively, compared to 24 cents and $1 in the corresponding period of 2023.
Financial Position
Total costs in the second quarter were $1.2 billion, up 11.8% from the prior-year period and exceeded our expectation by 6.6%. Marathon Oil reported an adjusted operating cash flow of $1 billion, down 8.3% from a year ago.
As of Jun 30, 2024, Marathon Oil had cash and cash equivalents worth $77 million and long-term debt of $4.6 billion. The debt-to-capitalization ratio of the company was 29.
Marathon Oil spent $665 million in capital and exploratory expenditures during the quarter and raked in $364 million in adjusted free cash flow. The company also executed $231 million in share repurchases during the period.
2024 Guidance
Marathon continues to budget its capital spending between $1.9 billion and $2.1 billion this year. Meanwhile, MRO continues to prioritize shareholder returns over production growth. The company is targeting production between 380,000 BOE/d and 400,000 BOE/d. Further, Marathon expects oil volumes in the band of 185,000-195,000 barrels per day.
Some Key E&P Earnings
While we have discussed Diamondback Energy’s second-quarter results in detail, let’s see how some other upstream companies have fared this earnings season.
ConocoPhillips, one of the world’s largest independent oil and gas producers, reported second-quarter 2024 adjusted earnings per share of $1.98, missing the Zacks Consensus Estimate of $2.06. The bottom line, however, improved from the prior-year quarter’s $1.84 per share. ConocoPhillips’ higher costs and expenses led to a weaker-than-expected bottom line. The negatives were partially offset by strong oil equivalent production volumes, which increased 7.8% year over year.
As of Jun 30, 2024, ConocoPhillips had $4.3 billion in cash and cash equivalents. COP’s total long-term debt was $17 billion, while it had a short-term debt of $1.3 billion. Capital expenditure and investments totaled $3 billion. Net cash provided by operating activities was $4.9 billion.
Natural gas producer EQT Corporation (EQT - Free Report) reported an adjusted loss from continuing operations of 8 cents per share in second-quarter 2024, narrower than the Zacks Consensus Estimate of a loss of 20 cents. The bottom line also improved from the year-ago quarter’s reported loss of 17 cents. EQT’s better-than-expected profits were driven by higher sales volumes, which increased to 508 billion cubic feet equivalent (Bcfe) from the year-ago quarter’s 471 Bcfe.
EQT’s adjusted operating cash flow was $405 million in the quarter, up from $340.8 million a year ago. Free cash flow in the quarter was a negative $171.1 million compared with a negative $129.3 million in the second quarter of 2023. Total capital expenditure for the company amounted to $576 million, increasing from $470 million a year ago. As of Jun 30, 2024, EQT had $29.9 million in cash and cash equivalents. Net debt was $4.9 billion.
APA Corporation (APA - Free Report) , another U.S. energy operator, reported second-quarter 2024 adjusted earnings of $1.17 per share, beating the Zacks Consensus Estimate of 95 cents and improving from the year-ago adjusted figure of 85 cents. The outperformance primarily reflects higher-than-expected production owing to the contribution from the Callon Petroleum acquisition that was closed on Apr 1.
During the quarter under review, APA generated $877 million of cash from operating activities while it incurred $839 million in upstream capital expenditures. The company reported an adjusted operating cash flow of $1.1 billion. It also registered a free cash flow of $103 million compared to $94 million a year ago.