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Marathon (MRO) Stock Down Since Q4 Earnings: Here's Why
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The stock of independent energy explorer Marathon Oil Corporation (MRO - Free Report) has lost 3.5% since its fourth-quarter results were announced on Feb 15. The negative response, despite bottom-line outperformance, could be attributed to the company’s tepid crude realizations and lower year-over-year revenues.
What Did Marathon Oil’s Earnings Unveil?
Marathon Oil reported fourth-quarter 2022 adjusted net income per share of 88 cents, beating the Zacks Consensus Estimate of 80 cents and improving from the year-ago profit of 77 cents.
Marathon Oil’s bottom line was favorably impacted by stronger oil realizations in the United States and lower overall costs.
The company reported revenues of $1.7 billion, which came 1.1% above the consensus mark but fell 3.7% from the year-ago sales of $1.8 billion due to and lower domestic production.
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 executed $2.8 billion in share repurchases in 2022 and hiked dividend seven times in the past eight quarters.
Marathon Oil Corporation Price, Consensus and EPS Surprise
This Texas-based energy explorer’s total net production (from U.S. and International units) in the quarter under review came in at 333,000 barrels of oil equivalent per day (BOE/d) compared to 353,000 BOE/d in the year-ago period.
U.S. E&P: This U.S. upstream unit reported an income of $510 million, down from $553 million in the year-ago period due to weaker production and higher costs, partly offset by higher oil realizations.
Marathon Oil’s average realized liquids prices (crude oil and condensate) of $84.29 per barrel were higher than the year-earlier level of $77.03. However, natural gas liquids average price realizations decreased 25.6% to $26.02 a barrel. Moreover, average realized natural gas prices fell 5.9% year over year to $4.93 per thousand cubic feet.
Meanwhile, production costs were $6.29 per BOE, representing a 28.4% year-over-year rise.
Net production of 278,000 BOE/d was down 8.6% from fourth-quarter 2021. Total U.S. output comprised approximately 56% oil, or 156,000 barrels per day (bpd).
Lower year-over-year production from Bakken adversely affected the company’s quarterly performance, which was compounded by lower volumes from the Eagle Ford area. The Eagle Ford region recorded an average production of 91,000 BOE/d, down 2.2% from the level in fourth-quarter 2022, while output from Bakken was 94,000 BOE/d compared with 124,000 BOE/d in the year-ago quarter. Meanwhile, Oklahoma output came in at 50,000 BOE/d, down from the year-ago level of 56,000 BOE/d.
International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $129 million compared with $106 million in the year-ago period due to higher output.
Marathon reported production available for sale of 55,000 BOE/d, up from 49,000 Boe/d in fourth-quarter 2021.
Marathon’s average realized liquids prices (crude oil and condensate) of $59.27 per barrel reflected a 16.9% deterioration 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 $985 million, $76 million lower than the prior-year period. Marathon Oil reported an adjusted operating cash flow of $1.1 billion for the fourth quarter, essentially unchanged from a year ago.
As of Dec 31, 2022, it had cash and cash equivalents worth $334 million and long-term debt of 5.5 billion. The debt-to-capitalization ratio of the company was 34.2.
Marathon Oil spent $344 million in capital and exploratory expenditures during the quarter and raked in $763 million in adjusted free cash flow.
2023 Guidance
Marathon has budgeted capital spending between $1.9 billion and 42 billion this year. Meanwhile, MRO continues to prioritize shareholder returns over production growth. The company is targeting production in the range of 385,000 BOE/d to 405,000 BOE/d – up more than 15% (at the midpoint) from last year.
Further, Marathon expects oil volumes in the band of 185,000-195,000 barrels per day. Assuming $60 WTI, Marathon Oil expects to return a minimum of 40% of its cash flow from operations.
Zacks Rank & Key Picks
Marathon — a leading upstream oil and gas company — carries a Zacks Rank #3 (Hold) at present.
Meanwhile, investors interested in the energy sector might look at operators like Murphy USA (MUSA - Free Report) , Valero Energy (VLO - Free Report) and Sunoco LP (SUN - Free Report) , each carrying a Zacks Rank #1 (Strong Buy) currently.
Murphy USA: Over the past 30 days, this El Dorado, AR-based Murphy USA has seen the Zacks Consensus Estimate for 2023 improve 5.7%. MUSA, which enjoys an overall VGM Score of A, is valued at around $5.8 billion.
Murphy USA beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 43.4%. MUSA has seen its shares gain 42% in a year.
Valero Energy: Valero Energy is valued at some $52.1 billion. The Zacks Consensus Estimate for VLO’s 2023 earnings has been revised 5.5% upward over the past 30 days.
Valero Energy, headquartered in San Antonio, TX, beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. VLO shares have gained 63.4% in a year.
Sunoco LP: SUN beat the Zacks Consensus Estimate for earnings twice in the trailing four quarters. Sunoco has a trailing four-quarter earnings surprise of 21.6%, on average.
Sunoco is valued at around $4.6 billion. SUN has seen its shares gain 5.6% in a year.
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Marathon (MRO) Stock Down Since Q4 Earnings: Here's Why
The stock of independent energy explorer Marathon Oil Corporation (MRO - Free Report) has lost 3.5% since its fourth-quarter results were announced on Feb 15. The negative response, despite bottom-line outperformance, could be attributed to the company’s tepid crude realizations and lower year-over-year revenues.
What Did Marathon Oil’s Earnings Unveil?
Marathon Oil reported fourth-quarter 2022 adjusted net income per share of 88 cents, beating the Zacks Consensus Estimate of 80 cents and improving from the year-ago profit of 77 cents.
Marathon Oil’s bottom line was favorably impacted by stronger oil realizations in the United States and lower overall costs.
The company reported revenues of $1.7 billion, which came 1.1% above the consensus mark but fell 3.7% from the year-ago sales of $1.8 billion due to and lower domestic production.
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 executed $2.8 billion in share repurchases in 2022 and hiked dividend seven times in the past eight quarters.
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 333,000 barrels of oil equivalent per day (BOE/d) compared to 353,000 BOE/d in the year-ago period.
U.S. E&P: This U.S. upstream unit reported an income of $510 million, down from $553 million in the year-ago period due to weaker production and higher costs, partly offset by higher oil realizations.
Marathon Oil’s average realized liquids prices (crude oil and condensate) of $84.29 per barrel were higher than the year-earlier level of $77.03. However, natural gas liquids average price realizations decreased 25.6% to $26.02 a barrel. Moreover, average realized natural gas prices fell 5.9% year over year to $4.93 per thousand cubic feet.
Meanwhile, production costs were $6.29 per BOE, representing a 28.4% year-over-year rise.
Net production of 278,000 BOE/d was down 8.6% from fourth-quarter 2021. Total U.S. output comprised approximately 56% oil, or 156,000 barrels per day (bpd).
Lower year-over-year production from Bakken adversely affected the company’s quarterly performance, which was compounded by lower volumes from the Eagle Ford area. The Eagle Ford region recorded an average production of 91,000 BOE/d, down 2.2% from the level in fourth-quarter 2022, while output from Bakken was 94,000 BOE/d compared with 124,000 BOE/d in the year-ago quarter. Meanwhile, Oklahoma output came in at 50,000 BOE/d, down from the year-ago level of 56,000 BOE/d.
International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $129 million compared with $106 million in the year-ago period due to higher output.
Marathon reported production available for sale of 55,000 BOE/d, up from 49,000 Boe/d in fourth-quarter 2021.
Marathon’s average realized liquids prices (crude oil and condensate) of $59.27 per barrel reflected a 16.9% deterioration 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 $985 million, $76 million lower than the prior-year period. Marathon Oil reported an adjusted operating cash flow of $1.1 billion for the fourth quarter, essentially unchanged from a year ago.
As of Dec 31, 2022, it had cash and cash equivalents worth $334 million and long-term debt of 5.5 billion. The debt-to-capitalization ratio of the company was 34.2.
Marathon Oil spent $344 million in capital and exploratory expenditures during the quarter and raked in $763 million in adjusted free cash flow.
2023 Guidance
Marathon has budgeted capital spending between $1.9 billion and 42 billion this year. Meanwhile, MRO continues to prioritize shareholder returns over production growth. The company is targeting production in the range of 385,000 BOE/d to 405,000 BOE/d – up more than 15% (at the midpoint) from last year.
Further, Marathon expects oil volumes in the band of 185,000-195,000 barrels per day. Assuming $60 WTI, Marathon Oil expects to return a minimum of 40% of its cash flow from operations.
Zacks Rank & Key Picks
Marathon — a leading upstream oil and gas company — carries a Zacks Rank #3 (Hold) at present.
Meanwhile, investors interested in the energy sector might look at operators like Murphy USA (MUSA - Free Report) , Valero Energy (VLO - Free Report) and Sunoco LP (SUN - Free Report) , each carrying a Zacks Rank #1 (Strong Buy) currently.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Murphy USA: Over the past 30 days, this El Dorado, AR-based Murphy USA has seen the Zacks Consensus Estimate for 2023 improve 5.7%. MUSA, which enjoys an overall VGM Score of A, is valued at around $5.8 billion.
Murphy USA beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average being 43.4%. MUSA has seen its shares gain 42% in a year.
Valero Energy: Valero Energy is valued at some $52.1 billion. The Zacks Consensus Estimate for VLO’s 2023 earnings has been revised 5.5% upward over the past 30 days.
Valero Energy, headquartered in San Antonio, TX, beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. VLO shares have gained 63.4% in a year.
Sunoco LP: SUN beat the Zacks Consensus Estimate for earnings twice in the trailing four quarters. Sunoco has a trailing four-quarter earnings surprise of 21.6%, on average.
Sunoco is valued at around $4.6 billion. SUN has seen its shares gain 5.6% in a year.