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Marathon (MRO) Beats on Q2 Earnings, Backs Shareholder Returns

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Marathon Oil Corporation (MRO - Free Report) reported second-quarter 2022 adjusted net income per share of $1.32, beating the Zacks Consensus Estimate of $1.23 and soaring from the year-ago period’s profit of 22 cents.

Marathon Oil’s bottom line was favorably impacted by stronger liquid realizations and solid domestic production.

Marathon Oil reported revenues of $2.3 billion, which jumped from the year-ago sales of $1.1 billion and came 9.8% above the consensus mark.

In good news for investors, the company is using the excess cash from a supportive environment to reward them with dividends and buybacks. As part of that, MRO has executed $2.3 billion of share repurchases since October and hiked dividend five times in the past six quarters.

 

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 343,000 barrels of oil equivalent per day (BOE/d) compared to 348,000 BOE/d in the year-ago period.

U.S. E&P: This U.S. upstream unit reported an income of $846 million, surging from $207 million in the year-ago period due to stronger commodity realizations.

Marathon Oil’s average realized liquids prices (crude oil and condensate) of $110.10 per barrel were significantly above the year-earlier level of $64.73. Natural gas liquids average price realizations increased 66.8% to $40.32 a barrel. Moreover, average realized natural gas prices jumped 162.1% year over year to $6.84 per thousand cubic feet.

Meanwhile, production costs were $5.80 per BOE, representing a 31.5% year-over-year rise.

Net production of 283,000 BOE/d remained unchangeed from the second-quarter 2021. Total U.S. output comprised 55.5% oil, or 157,000 barrels per day (bpd).

Higher year-over-year production from Bakken and Oklahoma buoyed the company’s quarterly performance, which was offset by lower volumes from the Eagle Ford area. The Eagle Ford region recorded an average production of 84,000 BOE/d, down 7.7% from the ,level in second-quarter 2021 but output from Bakken was 114,000 BOE/d compared with 107,000 BOE/d in the year-ago quarter. On a further encouraging note, Oklahoma output came in at 56,000 BOE/d, reflecting a 2,000 BOE/d rise from the year-ago level.

International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $160 million compared with $68 million in the year-ago period due to higher liquids prices.

Marathon reported production available for sale of 60,000 BOE/d, down from 65,000 Boe/d in second-quarter 2021.

Marathon’s average realized liquids prices (crude oil and condensate) of $79.74 per barrel reflected a 51.1% improvement 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, the same as the corresponding period of 2021.

Financial Position

Total costs in the quarter were $1 billion, $29 million lower than the prior-year period. Marathon Oil reported an adjusted operating cash flow of $1.6 billion for the second quarter, up significantly from $701 million a year ago.

As of Jun 30, it had cash and cash equivalents worth $1.2 billion and long-term debt of 3.7 billion. The debt-to-capitalization ratio of the company was 24.3.

Marathon Oil spent $375 million in capital and exploratory expenditures during the quarter and raked in a record $1.2 billion in adjusted free cash flow.

2022 Guidance

Marathon has maintained the capital budget guidance at $1.3 billion for this year. Meanwhile, MRO continues to target shareholder returns over production growth. The Zacks Rank #3 (Hold) company is targeting production in the range of 340,000 BOE/d to 350,000 BOE/d – essentially unchanged from the last year. Further, Marathon expects oil volumes in the band of 168,000-176,000 barrels per day. Assuming $60 WTI, Marathon Oil expects to return a minimum of 40% of its cash flow from operations. The company has guided for some $4.5 billion in free cash flow in 2022 at $100 oil and $6 gas.

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

Some Key E&P Earnings

While we have discussed MRO’s second-quarter results in detail, let’s see how some other exploration and production companies have fared this earnings season.

ConocoPhillips (COP - Free Report) reported second-quarter adjusted earnings per share of $3.91, beating the Zacks Consensus Estimate of $3.78. Further, COP’s bottom line significantly improved from the prior-year quarter’s $1.27 per share. One of the world’s largest independent oil and gas producers based in Houston, TX, ConocoPhillips’ strong quarterly results have been aided by increased oil-equivalent production volumes and realized commodity prices.

ConocoPhillips revised higher its expected 2022 return of capital to shareholders. The new guidance is $15 billion versus the prior projection of $10 billion. COP’s incremental returns to stockholders will get distributed through share repurchases and variable returns of cash tiers.

Another upstream giant, EOG Resources (EOG - Free Report) , reported second-quarter adjusted earnings per share of $2.74, missing the Zacks Consensus Estimate of $2.99. EOG’s weaker-than-expected earnings were attributed to higher lease and well expenses, as well as transportation costs. However, the bottom line jumped from the year-ago quarter’s earnings of $1.73 due to increased volumes and prices.

For the quarter under review, EOG Resources’ production increased 11% year over year, while it generated $1.3 billion in free cash flow. Committed to shareholder returns, EOG announced a special dividend of $1.50 per share.

Finally, we have Pioneer Natural Resources Company (PXD - Free Report) , which reported second-quarter earnings of $9.36 per share (excluding one-time items), beating the Zacks Consensus Estimate of $8.81. The bottom line surged from the year-ago quarter’s profit of $2.55 per share. PXD’s robust bottom line can be attributed to higher production volumes and commodity price realizations.

Pioneer Natural announced a dividend payment of $8.57 per share of common stock, which includes a variable dividend of $7.47 per share and a base dividend of $1.10. This suggests a 16.1% increase from the prior dividend of $7.38 per share.