Oil and natural gas exploration and production firm
Marathon Oil Corporation
) reported marginally weaker-than-expected third quarter 2012
profits, as crude oil and natural gas prices dropped.
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 64 cents per
share, a penny below the Zacks Consensus Estimate.
However, the company's per share adjusted profits came above the
third-quarter 2011 level of 59 cents amid robust volumes from key
Revenues at $4,161.0 million were up 9.5% year over year and were
also above the Zacks Consensus Estimate of $3,496.0 million.
Exploration and Production:
Income from the upstream segment totaled $486.0 million during
the quarter, up from $330.0 million in the previous-year period.
The company reported production (available for sale) of 392,000
oil-equivalent barrels per day (BOE/d). While exceeding the
company guidance of 365,000-380,000 BOE/d, volumes also reflected
a 14.3% increase from the 343,000 BOE/d achieved in the third
quarter of 2011. This primarily reflects improved output in
Marathon's U.S. resource plays.
Marathon's worldwide realized crude oil price of $97.40 per
barrel was 1.8% below the year-earlier quarter level, while
natural gas realizations decreased by 1.4% year over year to
$2.77 per thousand cubic feet (Mcf).
Oil Sands Mining:
Synthetic crude oil sales volumes in the oil sands business
improved 6.0% year over year to 53,000 barrels per day. However,
this was more than offset by higher operating costs. As a result,
Marathon's Oil Sands Mining segment recorded a profit of $65.0
million as against an income of $92.0 million in the
corresponding quarter of last year.
Income from the segment shot down 29.1% year over year, from
$55.0 million to $39.0 million, hamstrung by weak gas prices.
During the quarter, Marathon spent $1,339.0 million on capital
programs (95% on E&P).
Marathon expects fourth quarter output to be in the range of
400,000-415,000 BOE/d. Buoyed by the strong third quarter
volumes, management hiked its 2012 production guidance to the
375,000-385,000 BOE/d range from the previous band of
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).