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Marathon Oil (MRO) Posts Narrower-Than-Expected Loss for Q2

Marathon Oil Corporation MRO reported second-quarter 2020 adjusted net loss per share of 60 cents, narrower than the Zacks Consensus Estimate of a loss of 62 cents, attributable to lower year-over-year U.S. production costs. Though a year ago, the company earned 23 cents per share. This time, its bottom line was unfavorably impacted by the commodity price crash triggered by the coronavirus-induced demand slump amid a supply glut.

Meanwhile, Marathon Oil reported revenues of $272 million that missed the Zacks Consensus Estimate of $531 million and also fell from the year-ago figure of $1.43 billion.

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 390,000 barrels of oil equivalent per day (BOE/d) compared with 435,000 BOE/d in the year-ago period.

U.S. E&P: This upstream unit suffered a loss of $365 million against a profit of $215 million in the year-ago period due to weak commodity price realizations and lower output.

Marathon Oil’s average realized liquids prices (crude oil and condensate) of $21.65 per barrel were below the year-earlier level of $59.18. Moreover, natural gas liquids’ average price realizations tumbled 51.4% to $7.09 a barrel. Additionally, average realized natural gas prices dropped 23.8% year over year to $1.44 per thousand cubic feet.

On a brighter note, production costs summed $4.09 per BOE, representing a16.35% year-over-year decline, marking the lowest since Marathon Oil became a standalone E&P entity.

However, net production of 307,000 BOE/d decreased from 332,000 BOE/d in second-quarter 2019. The total U.S. output comprised 59.3% oil or 182,000 barrels per day (bpd), down 5.2% year over year.

The declined year-over-year production, especially from Eagle Ford, Bakken and Oklahoma hampered the company’s quarterly performance. Notably, Eagle Ford and Bakken output came in at 108,000 BOE/d and 103,000 BOE/d, respectively, reflecting a marginal fall from the year-ago level while the output from Oklahoma was 60,000 BOE/d compared with 82,000 BOE/d in the year-ago quarter.

International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, plunged in the red with a loss of $6 million against earnings of $96 million in the comparable quarter last year due to ramped-down production activity and weak commodity price realizations.

Marathon Oil reported production available for sale of 83,000 BOE/d, down from 103,000 Boe/d in second-quarter 2019. Moderate output from Equatorial Guinea along with the company’s exit from U.K. business caused this downside.

Marathon Oil’s average realized liquids prices (crude oil and condensate) of $13.79 per barrel reflect a 76.3% decline from the year-earlier quarter. Natural gas and natural gas liquids’ average price realizations came in at 24 cents per thousand cubic feet and $1 a barrel, respectively, accounting for a 31.4% and 40.1% year-over-year fall each.

Marathon Oil Corporation Price, Consensus and EPS Surprise

Marathon Oil Corporation Price, Consensus and EPS Surprise

Marathon Oil Corporation price-consensus-eps-surprise-chart | Marathon Oil Corporation Quote

Financials

Total costs in the quarter were $975 million, lower than $1.18 billion in the prior-year period.

The company reported an operating cash flow of $9 million in the second quarter, down from $797 million a year ago.

As of Jun 30, it had cash and cash equivalents worth $522 million and a long-term debt of 5.5 billion. Debt-to-capitalization of the company was 33%.

Guidance

Marathon Oil raises its current-year oil output guidance to 190,000 net barrels per day while curbing its full-year capex view to $1.2 billion from the prior projection of $1.3 billion, resulting from strong execution and an improved capital efficiency.

Zacks Rank & Key Picks

Marathon Oil has a Zacks Rank #3 (Hold), currently. Some better-ranked players in the energy space are Halliburton Company HAL, Core Laboratories NV CLB and Pembina Pipeline Corp PBA, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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