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Why Is Marathon Oil (MRO) Up 17.7% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for Marathon Oil Corporation (MRO - Free Report) . Shares have added about 17.7% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is MRO 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.

First-Quarter 2018 Results

Marathon Oil posted first-quarter adjusted income of 18 cents per share, turning around from the year-ago quarter’s loss of 7 cents. The bottom line was also ahead of the Zacks Consensus Estimate of 15 cents.

The strong numbers are attributed to higher production from the U.S. E&P segment and recovery in crude prices. In particular, total quarterly output rose 20.6% year over year to 398,000 oil-equivalent barrels per day (BOE/d).

Quarterly revenues of $1,733 million comfortably beat the Zacks Consensus Estimate of $1,347 million and also rose from the prior-year quarter level of $1,072 million.

Segmental Performance

United States E&P: Marathon Oil’s United States upstream segment reported a profit of $125 million, turning around from the loss of $79 million a year ago. Higher oil prices and production improved the results.

Marathon Oil reported production available for sale of 284,000 BOE/d, up from 208,000 BOE/d in the first quarter of 2017. The improvement was mainly due impressive contribution from U.S. resource plays in Eagle Ford, Bakken, Oklahoma and Northern Delaware.

The company realized liquids (crude oil and condensate) price of $62.22 per barrel, 28.4% higher than the year-earlier quarter’s level of $48.46 per barrel. Natural gas liquids price realizations also witnessed a year-over-year increase of 18.7% to stand at $22.95 a barrel. However, natural gas realizations decreased 14.2% year over year to $2.59 per thousand cubic feet (Mcf).

International E&P: The segment’s income increased 42% from the prior-year quarter to $132 million. Substantially higher liquids realizations led to the profit growth.

Marathon Oil reported production available for sale (excluding Libya) of 114,000 BOE/d, down from 122,000 BOE/d in the first quarter of 2017. The decrease in output could be blamed on planned turnaround activity in Equatorial Guinea.

The company realized liquids (crude oil and condensate) price of $66.23 per barrel, reflecting a 31.4% rise from the year-earlier quarter’s level of $50.41 per barrel. Also, natural gas realizations were up 18.2% year over year to 65 cents per thousand cubic feet (Mcf). However, natural gas liquids realizations fell to $1.83 a barrel compared with $3.86 per barrel in the first quarter of 2017.

Costs & Expenses

The company’s exploration expenses in the quarter came in at $52 million, higher than $28 million in the year-earlier quarter. Moreover, Marathon Oil’s total quarterly cost and expenses rose 16.1% to 1,161 million compared with the prior-year quarter.

Capex & Balance sheet

During the quarter, Marathon Oil’s capex stood at $618 million. As of Mar 31, 2018, Marathon Oil had cash and cash equivalents of $2,490 million and long-term debt of around $5,723 million. Debt-to-capitalization ratio of the company was 31.2%.

Guidance

Marathon Oil expects second-quarter 2018 United States E&P output available for sale in the range of 270,000-280,000 BOE/d and International E&P output within 115,000-125,000 BOE/d.

For the full year, Marathon Oil forecasts 25-30% annual growth in U.S. shale plays, up from the prior guidance of 20-25%. Full-year capital expenditure budget remains intact at $2.3 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter.

Marathon Oil Corporation Price and Consensus

VGM Scores

At this time, MRO has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 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.

Based on our scores, the stock is more suitable for growth and momentum investors than value investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, MRO has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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