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Why Is Marathon Oil (MRO) Down 6% Since the Last Earnings Report?

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It has been more than a month since the last earnings report for Marathon Oil Corporation (MRO - Free Report) . Shares have lost about 6% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Second-Quarter 2017 Results

Marathon Oil posted second-quarter adjusted loss of $0.24 per share, wider than the Zacks Consensus Estimate of a loss of $0.14. Lower-than-expected production from the U.S. land markets impacted results. The loss was also slightly wider than the year-earlier adjusted loss figure of $0.23.

Quarterly revenues of $1,059 million surpassed the Zacks Consensus Estimate of $965 million. However, revenues were down from the prior-year figure of $1,103 million.

Segmental Performance

North America E&P: Marathon Oil’s North American upstream segment reported a loss of $107 million, wider than the year-ago loss of $70 million. Lower output impacted results.

Marathon Oil reported production available for sale of 222,000 oil-equivalent barrels per day (BOE/d), down from 224,000 BOE/d in the second quarter of 2016. The deterioration was mainly due to reduced drilling and completion activities mainly in the Eagle Ford and Bakken Basins.

The company realized liquids (crude oil, condensate and natural gas liquids) price of $39.00 per barrel, higher than the year-earlier quarter level of $35.07 per barrel, reflecting an increase of 11.2%. Natural gas realizations increased 55.6% year over year to $3.05 per thousand cubic feet (Mcf).

International E&P: The segment’s income increased to $59 million, compared with the year-ago income of $55 million. Higher price realizations and increased production boosted profit margin.

The company reported production available for sale (excluding Libya) of 127,000 BOE/d, up from the 120,000 BOE/d in the second quarter of 2016. The increase in output in Equatorial Guinea and U.K. was responsible for growth.

The company realized liquids price of $37.11 per barrel, a 15.6% rise from the year-earlier quarter level of $32.11 per barrel. Natural gas realizations increased 7.5% year over year to 57 cents per thousand cubic feet (Mcf).

Costs & Expenses

Marathon Oil’s total quarterly cost and expenses declined by 10.1% to $1,085 million in the reported quarter compared with the prior-year figure of $1,207 million. The decrease is attributed to the lower exploration, production, marketing and general/ administrative costs. However, the decrease was partially offset by higher depreciation expenses and other operating costs.

Balance Sheet

As of Mar 31, 2017, Marathon Oil had cash and cash equivalents of $2,614 million. The long-term debt of the company was $6,715 million, leading to a debt capitalization ratio of 35.1%.

Production Guidance

Marathon Oil has raised its production guidance for the full-year 2017 and expects the production available for sale from the combined North America and International E&P segments, excluding Libya, to average 345,000–360,000 BOE/d, about 7% higher than 2016.

Marathon Oil expects third-quarter 2017 North America E&P output available for sale in the range of 230,000–240,000 BOE/d and International E&P (excluding Libya) output in the range of 115,000–125,000 BOE/d.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimate flatlined during the past month. There have been two revisions higher for the current quarter compared to two lower.

VGM Scores

At this time, Marathon Oil's stock has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for growth based on our styles scores.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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