Prompted by the uncertainty caused by Winter Storm Uri, Marathon Oil Corporation MRO recently released a preliminary update on its first-quarter 2021 production and financial operations.
The company’s first-quarter 2021 production of oil and natural gas averaged at 345,000 barrels of oil equivalent per day (Boe/d) with oil output of 172,000 barrels per day. The average realized unhedged crude oil price in the period was $55 per barrel while that of natural gas liquids was $24. The same for natural gas was $6.30 per thousand cubic feet.
Also, the company’s first-quarter general and administrative expenditure outlook is projected at $90 million comprising severance expense of $11 million and corporate aircraft lease termination expense of $13 million, all attributed to cost-cutting actions in the March quarter of 2021.
Marathon Oil's cash flow from operations is expected to be in the $610-$630 million range with negative working capital adjustments of $10-$20 million. In the meantime, cash additions to land, plant and facilities are anticipated to total about $200 million. Further, a $71-million realized derivative loss is estimated in the quarter to be reported.
In the first quarter, Marathon Oil entered a transaction to fully redeem the $500-million aggregate outstanding principal amount of its 2.8% senior notes due 2022. Notably, the company will redeem the aforementioned senior notes on Apr 29, 2021.
The transaction will result in a $500-million reduction in gross debt and a $14-million cut in annual cash interest expenses. Importantly, the transaction aligns with the company’s pledge to lower gross debt by $500 million in 2021 to strengthen its balance sheet.
Moreover, the transaction is in line with Marathon Oil’s objective to continue improving its investment-grade balance sheet through gross-debt reduction and a sustainable free cash-flow generation.
The company is scheduled to release first-quarter 2021 results on Wednesday May 5, after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s loss is 6 cents per share and for revenues is $1.04 billion.
2021 Guidance
Marathon Oil set a $1-billion capital budget for this year, indicating a decline from $1.2 billion it spent in 2020. The company is targeting production in the range of 330,000-350,000 BOE/d, implying an 11% downfall from the 2020 production at the midpoint. Further, Marathon Oil expects oil volumes in the band of 169,000-175,000 barrels per day (91% at the midpoint).
Company Summary
Incorporated in 2001, Houston, Texas-based Marathon Oil is a leading oil and natural gas exploration and production (E&P) company with operations in the United States and Africa. As of 2020 end, Marathon Oil had approximately 972 million oil-equivalent barrels in net proved reserves (52% crude oil/condensate and 69% proved developed) while 86% of the same was located in the United States.
Zacks Rank & Key Picks
Marathon Oil currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are Matador Resources Company MTDR, Diamondback Energy, Inc. FANG and Denbury Inc. DEN, each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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