Oil and natural gas exploration and production firm
Marathon Oil Corporation
) reported weak fourth quarter profits, as exploration costs
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Houston, Texas-based Marathon, which spun off its refining/sales
business into a separate, independent and publicly traded company
Marathon Petroleum Corporation
) in 2011 - announced earnings (excluding special items) of 55
cents per share, below the Zacks Consensus Estimate of 68 cents
and the fourth quarter 2011 level of 78 cents.
Revenues at $4,236.0 million were up 11.2% year over year and
were also above the Zacks Consensus Estimate of $3,772.0 million
amid robust volumes from key resource plays.
Exploration and Production:
Income from the upstream segment totaled $501.0 million during
the quarter, down from $558.0 million in the previous-year
period. This was mainly on account of heightened exploration
costs, which skyrocketed 70.0% to $238.0 million.
The company reported production (available for sale) of 420,000
oil-equivalent barrels per day (BOE/d), reflecting a 12.0%
increase from the 375,000 BOE/d achieved in the fourth quarter of
2011. This primarily reflects improved output in Marathon's U.S.
Marathon's worldwide realized crude oil price of $97.86 per
barrel was slightly below the year-earlier quarter level of
$98.46 per barrel, while natural gas realizations increased by
8.7% year over year to $3.26 per thousand cubic feet (Mcf).
Oil Sands Mining:
Synthetic crude oil sales volumes in the oil sands business
improved 9.1% year over year to 48,000 barrels per day. However,
this was more than offset by lower throughput due to unplanned
downtime at the Scotford upgrader. As a result, Marathon's Oil
Sands Mining segment recorded a profit of $19.0 million as
against an income of $63.0 million in the corresponding quarter
of last year.
Income from the segment shot up 75.0% year over year, from $20.0
million to $35.0 million, buoyed by stronger gas prices.
As of the end of 2012, Marathon had approximately 2.0 billion
oil-equivalent barrels in proved reserves (77% liquids and 72%
developed). For the three-year period ended Dec 31, 2012, the
company added net proved reserves of 808 million oil-equivalent
barrels, excluding dispositions.
During the quarter, Marathon spent $1,482.0 million on capital
programs (95% on E&P).
Marathon expects first quarter output to be in the range of
415,000-430,000 BOE/d, while full year volumes are likely to be
between 395,000 and 420,000 BOE/d.
Stocks to Consider
Marathon currently carries a Zacks Rank #3 (Hold), implying that
it is expected to perform in line with the broader U.S. equity
market over the next one to three months.
Meanwhile, one can look at other domestic energy explorers like
Breitburn Energy Partners L.P.
Cabot Oil & Gas Corporation
) as attractive investments. Both these companies - sporting a
Zacks Rank #1 (Strong Buy) - offer value and are worth
accumulating at current levels.