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Marathon Q3 Earnings Beat Estimates Even as Oil Prices Drop
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Marathon Oil Corporation (MRO - Free Report) reported third-quarter 2024 adjusted net income per share of 64 cents, beating the Zacks Consensus Estimate of 61 cents. The outperformance reflects better than expected domestic production numbers.
However, the company’s bottom line fell from the year-ago adjusted profit of 77 cents due to lower commodity price realizations in its primary ‘U.S. E&P’ segment and higher costs.
The company reported revenues of $1.8 billion, which came $82 million above the consensus mark but dropped 1.2% from the year-ago sales.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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 416,000 barrels of oil equivalent per day (BOE/d) compared with 422,000 BOE/d in the year-ago period and our projection of 403,000 BOE/d.
U.S. E&P: This U.S. upstream unit reported an income of $362 million, down from $505 million in the year-ago period due to a decline in oil and gas realizations, plus higher costs. We modeled the segment income at $419 million.
Marathon Oil’s average realized liquids price (crude oil and condensate) of $73.92 per barrel was 8.6% lower than the year-earlier level of $80.90 but narrowly beat our projection of $73.78. Meanwhile, natural gas liquids’ average price realizations decreased 4.5% to $20.40 a barrel. Finally, average realized natural gas prices plunged 36.4% year over year to $1.45 per thousand cubic feet and underperformed our estimate of $1.67.
As far as production costs are concerned, they averaged $5.97 per BOE, or a 17.8% year-over-year increase.
Net production of 379,000 BOE/d was up 2.7% from third-quarter 2023. Total U.S. output, which came over our projection of 353,000 BOE/d, comprised approximately 52% oil, or 198,000 barrels per day (bpd).
The Eagle Ford region recorded an average production of 166,000 BOE/d, while output from Bakken was 116,000 BOE/d. The Oklahoma output came in at 40,000 BOE/d. In the Permian Basin, MRO produced 56,000 BOE/d.
International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $95 million compared with $62 million in the year-ago period and our projection of $85.8 million. The significantly improved results could be primarily attributed to higher natural gas sales prices.
Marathon reported production available for sale of 37,000 BOE/d, below our projection of 50,000 BOE/d as well as the third-quarter 2023 level of 53,000 Boe/d.
Marathon’s average realized liquids prices (crude oil and condensate) of $61.68 per barrel reflected a 4.1% deterioration from the year-earlier quarter. Natural gas and natural gas liquids’ average price realizations came in at $5.75 per thousand cubic feet and $1 a barrel, respectively, compared to 25 cents and $1 in the corresponding period of 2023.
Financial Position
Total costs in the third quarter were $1.3 billion, up 9.4% from the prior-year period and exceeded our expectation of $1.2 billion. Marathon Oil reported an adjusted operating cash flow of $1 billion, down 8.9% from a year ago.
As of Sept. 30, 2024, Marathon Oil had cash and cash equivalents worth $134 million and long-term debt of $4.6 billion. The debt-to-capitalization ratio of the Zacks Rank #3 (Hold) company was 29.4.
Marathon Oil spent $458 million in capital and exploratory expenditures during the quarter and raked in $589 million in adjusted free cash flow.
2024 Guidance
Marathon continues to budget its capital spending between $1.9 billion and $2.1 billion this year. Meanwhile, the company is targeting production of 393,000 BOE/d. Further, Marathon expects oil volumes of 192,000 barrels per day.
Some Key E&P Earnings
While we have discussed Marathon Oil’s third-quarter results in detail, let’s see how some other upstream companies have fared this earnings season.
U.S. energy operator Diamondback Energy (FANG - Free Report) reported third-quarter 2024 adjusted earnings per share of $3.38, which missed the Zacks Consensus Estimate of $3.80 and decreased from the year-ago adjusted figure of $5.49. The underperformance primarily reflects a fall in overall realization. However, revenues of $2.6 billion rose 13% from the year-ago quarter’s sales and outperformed the Zacks Consensus Estimate by 6.6% on strong production.
Diamondback capital expenditure was $688 million. Of this, $633 million was spent on drilling and completion, $52 million on infrastructure, environment and $3 million on midstream. The company booked $1 billion in free cash flow in the third quarter. As of Sept. 30, the Permian-focused operator had approximately $373 million in cash and cash equivalents and $11.9 billion in long-term debt, representing a debt-to-capitalization of 25%.
APA Corporation (APA - Free Report) – another U.S.-based upstream explorer reported third-quarter 2024 adjusted earnings of $1 per share, missing the Zacks Consensus Estimate of $1.03 and deteriorating from the year-ago adjusted figure of $1.33. The underperformance primarily reflects lower commodity prices and higher costs.
Revenues of $2.5 billion were up 10% from the year-ago quarter’s sales and came ahead of the Zacks Consensus Estimate by 11.7% on the back of contribution from the Callon Petroleum acquisition and higher-than-expected production. Meanwhile, APA continues to reward shareholders with dividends and buybacks. APA bought back 102,305 shares at $29.32 apiece during the third quarter. The company also shelled out $92 million in dividend payments.
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Marathon Q3 Earnings Beat Estimates Even as Oil Prices Drop
Marathon Oil Corporation (MRO - Free Report) reported third-quarter 2024 adjusted net income per share of 64 cents, beating the Zacks Consensus Estimate of 61 cents. The outperformance reflects better than expected domestic production numbers.
However, the company’s bottom line fell from the year-ago adjusted profit of 77 cents due to lower commodity price realizations in its primary ‘U.S. E&P’ segment and higher costs.
The company reported revenues of $1.8 billion, which came $82 million above the consensus mark but dropped 1.2% from the year-ago sales.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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 416,000 barrels of oil equivalent per day (BOE/d) compared with 422,000 BOE/d in the year-ago period and our projection of 403,000 BOE/d.
U.S. E&P: This U.S. upstream unit reported an income of $362 million, down from $505 million in the year-ago period due to a decline in oil and gas realizations, plus higher costs. We modeled the segment income at $419 million.
Marathon Oil’s average realized liquids price (crude oil and condensate) of $73.92 per barrel was 8.6% lower than the year-earlier level of $80.90 but narrowly beat our projection of $73.78. Meanwhile, natural gas liquids’ average price realizations decreased 4.5% to $20.40 a barrel. Finally, average realized natural gas prices plunged 36.4% year over year to $1.45 per thousand cubic feet and underperformed our estimate of $1.67.
As far as production costs are concerned, they averaged $5.97 per BOE, or a 17.8% year-over-year increase.
Net production of 379,000 BOE/d was up 2.7% from third-quarter 2023. Total U.S. output, which came over our projection of 353,000 BOE/d, comprised approximately 52% oil, or 198,000 barrels per day (bpd).
The Eagle Ford region recorded an average production of 166,000 BOE/d, while output from Bakken was 116,000 BOE/d. The Oklahoma output came in at 40,000 BOE/d. In the Permian Basin, MRO produced 56,000 BOE/d.
International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $95 million compared with $62 million in the year-ago period and our projection of $85.8 million. The significantly improved results could be primarily attributed to higher natural gas sales prices.
Marathon reported production available for sale of 37,000 BOE/d, below our projection of 50,000 BOE/d as well as the third-quarter 2023 level of 53,000 Boe/d.
Marathon’s average realized liquids prices (crude oil and condensate) of $61.68 per barrel reflected a 4.1% deterioration from the year-earlier quarter. Natural gas and natural gas liquids’ average price realizations came in at $5.75 per thousand cubic feet and $1 a barrel, respectively, compared to 25 cents and $1 in the corresponding period of 2023.
Financial Position
Total costs in the third quarter were $1.3 billion, up 9.4% from the prior-year period and exceeded our expectation of $1.2 billion. Marathon Oil reported an adjusted operating cash flow of $1 billion, down 8.9% from a year ago.
As of Sept. 30, 2024, Marathon Oil had cash and cash equivalents worth $134 million and long-term debt of $4.6 billion. The debt-to-capitalization ratio of the Zacks Rank #3 (Hold) company was 29.4.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Marathon Oil spent $458 million in capital and exploratory expenditures during the quarter and raked in $589 million in adjusted free cash flow.
2024 Guidance
Marathon continues to budget its capital spending between $1.9 billion and $2.1 billion this year. Meanwhile, the company is targeting production of 393,000 BOE/d. Further, Marathon expects oil volumes of 192,000 barrels per day.
Some Key E&P Earnings
While we have discussed Marathon Oil’s third-quarter results in detail, let’s see how some other upstream companies have fared this earnings season.
U.S. energy operator Diamondback Energy (FANG - Free Report) reported third-quarter 2024 adjusted earnings per share of $3.38, which missed the Zacks Consensus Estimate of $3.80 and decreased from the year-ago adjusted figure of $5.49. The underperformance primarily reflects a fall in overall realization. However, revenues of $2.6 billion rose 13% from the year-ago quarter’s sales and outperformed the Zacks Consensus Estimate by 6.6% on strong production.
Diamondback capital expenditure was $688 million. Of this, $633 million was spent on drilling and completion, $52 million on infrastructure, environment and $3 million on midstream. The company booked $1 billion in free cash flow in the third quarter. As of Sept. 30, the Permian-focused operator had approximately $373 million in cash and cash equivalents and $11.9 billion in long-term debt, representing a debt-to-capitalization of 25%.
APA Corporation (APA - Free Report) – another U.S.-based upstream explorer reported third-quarter 2024 adjusted earnings of $1 per share, missing the Zacks Consensus Estimate of $1.03 and deteriorating from the year-ago adjusted figure of $1.33. The underperformance primarily reflects lower commodity prices and higher costs.
Revenues of $2.5 billion were up 10% from the year-ago quarter’s sales and came ahead of the Zacks Consensus Estimate by 11.7% on the back of contribution from the Callon Petroleum acquisition and higher-than-expected production. Meanwhile, APA continues to reward shareholders with dividends and buybacks. APA bought back 102,305 shares at $29.32 apiece during the third quarter. The company also shelled out $92 million in dividend payments.