Oil and natural gas exploration and production firm
Marathon Oil Corporation
) reported in-line second quarter 2012 profits, as robust volumes
from the company's key resource plays was offset by a drop in crude
oil and natural gas prices.
MARATHON PETROL (MPC): Free Stock Analysis
MARATHON OIL CP (MRO): Free Stock Analysis
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Houston, Texas-based Marathon - which last year spun off its
refining/sales business into a separate, independent and publicly
Marathon Petroleum Corporation
) - announced earnings (excluding special items) of 59 cents per
share, matching the Zacks Consensus Estimate
However, the company's per share adjusted profits came sharply
lower than the second quarter 2011 level of 96 cents amid lower
Revenues at $3,784.0 million were down 2.1% year over year but were
above the Zacks Consensus Estimate of $3,263.0 million.
Exploration and Production:
Income from the upstream segment totaled $417.0 million during the
quarter, down from $601.0 million in the previous-year period.
The company reported production (available for sale) of 362,000
oil-equivalent barrels per day (BOE/d). While being at the high end
of guidance, volumes also reflected a 6.5% increase from the
340,000 BOE/d achieved in the second quarter of 2011. This
primarily reflects improved output in the Eagle Ford, Bakken and
Anadarko Woodford shale plays.
Marathon's worldwide realized crude oil price of $97.81 per barrel
was 6.8% below the year-earlier quarter level, while natural gas
realizations decreased by 15.9% year over year to $2.70 per
thousand cubic feet (Mcf).
Oil Sands Mining:
Synthetic crude oil sales volumes in the oil sands business
improved 7.3% year over year to 44,000 barrels per day. However,
this was more than offset by lower price realizations. As a result,
Marathon's Oil Sands Mining segment recorded a profit of $51.0
million as against income of $69.0 million in the corresponding
quarter of last year.
Income from the segment shot down 69.8% year over year, from $43.0
million to $13.0 million, hamstrung by lower liquefied natural gas
volumes and weak gas prices.
During the quarter, Marathon spent $1,245.0 million on capital
programs (95% on E&P).
Recommendation & Rating
Marathon is a leading energy firm with a large and
geographically-diverse reserve base and solid project pipeline.
Additionally, the company possesses a healthy balance sheet, which
helps it to capitalize on investment opportunities. We also like
the strong growth potential of Marathon's high-margin liquids-rich
unconventional plays, which diversify its portfolio and are
expected to further drive its overall volumes.
While being incrementally more positive on the company, we believe
Marathon will take some time to fully absorb the outcome of the
spin-off. Consequently, we would rather wait for a better entry
point before accumulating shares.
As such, we see the stock performing in line with the broader
market and maintain our long-term Neutral recommendation, supported
by a Zacks #3 Rank (short-term Hold rating).