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Marathon Oil (MRO) Incurs Narrower-Than-Expected Loss in Q4

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Marathon Oil Corporation (MRO - Free Report) reported fourth-quarter 2020 adjusted net loss per share of 12 cents, narrower than the Zacks Consensus Estimate of a loss of 20 cents. The company’s bottom line was favorably impacted by a tight leash on costs and better-than-expected contribution from both segments. Precisely, the U.S. E&P and the International E&P reported a loss of $33 million and a profit of $29 million, beating the respective Zacks Consensus Estimates of a loss of $119 million and earnings of $8.4 million.

However, the fourth-quarter adjusted loss compared unfavorably with the year-earlier quarter's earnings of 7 cents due to lower liquids prices and production.

Marathon Oil reported revenues of $830 million that missed the Zacks Consensus Estimate of $844 million and fell 31.7% year over.

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

 

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 352,000 barrels of oil equivalent per day (BOE/d) compared with 413,000 BOE/d in the year-ago period.

U.S. E&P: This U.S. upstream unit reported a loss of $33 million as against a profit of $148 million in the year-ago period due to weak oil price realizations and falling output.

Marathon Oil’s average realized liquids prices (crude oil and condensate) of $39.71 per barrel were below the year-earlier level of $54.83. However, natural gas liquids average price realizations improved 5.4% to $16.30 a barrel. Additionally, average realized natural gas prices were up 10% year over year to $2.31 per thousand cubic feet.

Meanwhile, production costs were $4.62 per BOE, representing a 9.9% year-over-year decline.

Net production of 280,000 BOE/d decreased from 328,000 BOE/d in fourth-quarter 2019. The total U.S. output comprised 57% oil or 159,000 barrels per day (bpd), down 18.9% year over year.

The lower year-over-year production, especially from Eagle Ford and Oklahoma dragged down the company’s quarterly performance. Notably, Oklahoma output came in at 58,000 BOE/d, reflecting a 29.3% fall from the year-ago level. The Eagle Ford region recorded production of 82,000 BOE/d, down 21.9% from the level in fourth-quarter 2019. On a somewhat positive note, output from Bakken was 110,000 BOE/d compared with 108,000 BOE/d in the year-ago quarter.

International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $29 million, down $4 million from the year-ago period due to lower production and liquids prices.

Marathon Oil reported production available for sale of 72,000 BOE/d, down from 85,000 Boe/d in fourth-quarter 2019.

Marathon Oil’s average realized liquids prices (crude oil and condensate) of $35.08 per barrel reflected a 27.3% 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 – same as the corresponding period of 2019.

Financials

Total costs in the quarter were $1.1 billion, $62 million lower than the prior-year period. Marathon Oil, which recently resumed a stepped-down quarterly dividend of 3 cents per share, reported an operating cash flow of $418 million in the fourth quarter, down from $700 million a year ago.

As of Dec 31, it had cash and cash equivalents worth $742 million and long-term debt of 5.4 billion. Debt-to-capitalization ratio of the company was 33.8.

2021 Guidance

Marathon Oil has set $1 billion of capital budget for this year, down from $1.2 billion it spent in 2020. The company is targeting production in the range of 330,000 BOE/d to 350,000 BOE/d, 11% lower than 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).

Zacks Rank & Stock Picks

Marathon Oil currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are PDC Energy (PDCE - Free Report) , Royal Dutch Shell (RDS.A - Free Report) and Pioneer Natural Resources Company (PXD - Free Report) . PDC Energy and Royal Dutch Shell sport a Zacks Rank #1 (Strong Buy), while Pioneer Natural Resources carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

PDC Energy has an expected earnings growth rate of 165.91% for the current year.  

Royal Dutch Shell has an expected earnings growth rate of 165.32% for the current year.

Pioneer Natural Resources has an expected earnings growth rate of 319.91% for the current year.

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