It has been about a month since the last earnings report for Marathon Oil . Shares have lost about 4.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Marathon Oil due for a breakout? 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 drivers.

Marathon Oil Reports Better-Than-Expected Q3 Earnings

Marathon Oil Corporation reported third-quarter 2022 adjusted net income per share of $1.24, beating the Zacks Consensus Estimate of $1.19 and soaring from the year-ago period’s profit of 39 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 $1.5 billion and came 8.6% 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 $3.4 billion of share repurchases since October 2021 and hiked dividend six times in the past seven 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 352,000 barrels of oil equivalent per day (BOE/d) compared to 344,000 BOE/d in the year-ago period.

U.S. E&P: This U.S. upstream unit reported an income of $723 million, surging from $305 million in the year-ago period due to stronger production and commodity realizations.

Marathon Oil’s average realized liquids prices (crude oil and condensate) of $93.67 per barrel were significantly above the year-earlier level of $69.40. Natural gas liquids average price realizations increased 10.8% to $34 a barrel. Moreover, average realized natural gas prices jumped 88% year over year to $7.84 per thousand cubic feet.

Meanwhile, production costs were $6.40 per BOE, representing a 39.4% year-over-year rise.

Net production of 295,000 BOE/d was up 3.9% from third-quarter 2021. Total U.S. output comprised approximately 56% oil, or 166,000 barrels per day (bpd).

Higher year-over-year production from Bakken buoyed the company’s quarterly performance, which was partly offset by lower volumes from the Eagle Ford area. The Eagle Ford region recorded an average production of 90,000 BOE/d, down 5.3% from the level in third-quarter 2021 but output from Bakken was 118,000 BOE/d compared with 107,000 BOE/d in the year-ago quarter. Meanwhile, Oklahoma output came in at 54,000 BOE/d, essentially unchanged from the year-ago level of 55,000 BOE/d.

International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $181 million compared with $93 million in the year-ago period due to higher liquids prices.

Marathon reported production available for sale of 57,000 BOE/d, down from 61,000 Boe/d in third-quarter 2021.

Marathon’s average realized liquids prices (crude oil and condensate) of $74.01 per barrel reflected a 31.3% 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 $1.1 billion, $37 million higher than the prior-year period. Marathon Oil reported an adjusted operating cash flow of $1.4 billion for the third quarter, up significantly from $775 million a year ago.

As of Sep 30, it had cash and cash equivalents worth $1.1 billion and long-term debt of 3.6 billion. The debt-to-capitalization ratio of the company was 24.2.

Marathon Oil spent $413 million in capital and exploratory expenditures during the quarter and raked in $1 billion in adjusted free cash flow.

2022 Guidance

Marathon raised the capital budget guidance by $100 million to $1.4 billion for this year. Meanwhile, MRO continues to target shareholder returns over production growth. The company is targeting production in the range of 340,000 BOE/d to 350,000 BOE/d – essentially unchanged from 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.





 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Marathon Oil has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 upward for the stock, and the magnitude of these revisions looks promising. 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, Hess (HES Quick QuoteHES - Free Report) , a stock from the same industry, has gained 0.9%. The company reported its results for the quarter ended September 2022 more than a month ago.

Hess reported revenues of $3.16 billion in the last reported quarter, representing a year-over-year change of +74.3%. EPS of $1.89 for the same period compares with $0.28 a year ago.

Hess is expected to post earnings of $1.87 per share for the current quarter, representing a year-over-year change of +120%. Over the last 30 days, the Zacks Consensus Estimate has changed -14.7%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Hess. Also, the stock has a VGM Score of C.