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Marathon Oil (MRO) Up 16.1% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Marathon Oil (MRO - Free Report) . Shares have added about 16.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Marathon Oil due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Marathon Oil Corporation 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.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
Currently, Marathon Oil has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Marathon Oil has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Marathon Oil is part of the Zacks Oil and Gas - Integrated - United States industry. Over the past month, Antero Midstream Corporation (AM - Free Report) , a stock from the same industry, has gained 3.2%. The company reported its results for the quarter ended June 2022 more than a month ago.
Antero Midstream Corporation reported revenues of $228.91 million in the last reported quarter, representing a year-over-year change of -1.7%. EPS of $0.20 for the same period compares with $0.23 a year ago.
Antero Midstream Corporation is expected to post earnings of $0.20 per share for the current quarter, representing a year-over-year change of -9.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.2%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Antero Midstream Corporation. Also, the stock has a VGM Score of D.
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Marathon Oil (MRO) Up 16.1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Marathon Oil (MRO - Free Report) . Shares have added about 16.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Marathon Oil due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Marathon Oil Reports Better-Than-Expected Q2 Earnings
Marathon Oil Corporation 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.
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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
Currently, Marathon Oil has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Marathon Oil has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Marathon Oil is part of the Zacks Oil and Gas - Integrated - United States industry. Over the past month, Antero Midstream Corporation (AM - Free Report) , a stock from the same industry, has gained 3.2%. The company reported its results for the quarter ended June 2022 more than a month ago.
Antero Midstream Corporation reported revenues of $228.91 million in the last reported quarter, representing a year-over-year change of -1.7%. EPS of $0.20 for the same period compares with $0.23 a year ago.
Antero Midstream Corporation is expected to post earnings of $0.20 per share for the current quarter, representing a year-over-year change of -9.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.2%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for Antero Midstream Corporation. Also, the stock has a VGM Score of D.