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Marathon Oil (MRO) Q2 Earnings & Revenues Miss, Improve Y/Y

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Marathon Oil Corporation (MRO - Free Report) posted second-quarter adjusted income from continuing operations of 15 cents per share, turning around from the year-ago quarter’s loss of 24 cents. The strong numbers are attributed to higher production in its United States E&P unit. However, the bottom line missed the Zacks Consensus Estimate of 21 cents, due to rise in operating cost and expenses.

Quarterly revenues of $1,417 million missed the Zacks Consensus Estimate of $1,495 million due to lower year-over-year production from the International E&P segment. However, the figure increased from the prior-year level of $1,059 million due to higher liquids prices.

Marathon Oil Corporation Price, Consensus and EPS Surprise

 

Marathon Oil Corporation Price, Consensus and EPS Surprise | Marathon Oil Corporation Quote

Segmental Performance

United States E&P: Marathon Oil’s United States upstream segment reported a profit of $123 million against a loss of $107 million a year ago. Higher oil prices and production improved the segment’s results.

Marathon Oil reported production available for sale of 298,000 barrels of oil equivalent (BOE/d), up from 222,000 BOE/d in the second quarter of 2017. The output also surpassed the Zacks Consensus Estimate of 288 BOE/d. 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 $66.03 per barrel, 44.1% higher than the year-earlier quarter’s level of $45.81 per barrel. Natural gas liquids (NGLs) price realizations also recorded a year-over-year increase of 25.44% to stand at $22.09 a barrel. However, natural gas realizations decreased 28.5% year over year to $2.18 per thousand cubic feet (Mcf).

International E&P: The segment’s income increased from $59 million in the prior-year quarter to $142 million in the second quarter of 2018 on higher realized liquids and NGLs.

Marathon Oil reported production available for sale (excluding Libya) of 121,000 BOE/d, down from 127,000 BOE/d in the second quarter of 2017. The decrease in output was primarily due to a fall in natural gas production from Equatorial Guinea and United Kingdom.

The company realized liquids (crude oil and condensate) price of $66.12 per barrel, reflecting a 40.6% rise from the year-earlier quarter’s $47.04 per barrel. Also, natural gas liquids realizations rose to $2.91 a barrel compared with $1.77 per barrel in the second quarter of 2017. However, natural gas realizations were down to 52 cents per thousand cubic feet (Mcf) from 57 cents a year ago.

Costs & Expenses

The company’s exploration expenses in the quarter came in at $65 million, higher than $30 million in the year-earlier quarter. Production costs rose to $205 million from $178 million in the year-ago period.

Moreover, Shipping, handling and other operating costs surged to $126 million from $111 million in second-quarter 2017. All these led to total quarterly cost and expenses of $1,212 million for the company compared with the prior-year quarter’s $1,084 million.

Capex & Balance sheet

During the quarter, Marathon Oil’s capital expenditure came in at $608 million. As of Jun 30, 2018, Marathon Oil had cash and cash equivalents of $1.7 billion and a $3.4 billion worth undrawn revolving credit facility. At the end of the quarter, the company had long-term debt of around $5.5 billion. Debt-to-capitalization ratio of the company was 31.2%.

Guidance

Marathon Oil expects third-quarter 2018 United States E&P output available for sale in the range of 290,000-300,000 BOE/d. International E&P output is expected to remain within 105,000-115,000 BOE/d, down from the second-quarter level owing to planned maintenance in the United Kingdom and Equatorial Guinea.

Marathon Oil increased its full-year guidance to 400,000-415,000 BOE/d from prior expectation of 390,000-410,000 BOE/d, with capital expenditure budget remaining intact at $2.3 billion.

Zacks Rank & Key Picks

Currently, Houston, TX-based Marathon Oil has a Zacks Rank #3 (Hold). Investors interested in the Energy sector can opt for some better-ranked stocks like Canadian Natural Resources Limited (CNQ - Free Report) , ConocoPhillips (COP - Free Report) and Cheniere Energy, Inc. (LNG - Free Report) . While Canadian Natural Resources sports a Zacks Rank #1 (Strong Buy), ConocoPhillips and Cheniere Energy both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Calgary, Canada-based Canadian Natural Resources is an upstream energy company. The company’s top line for 2018 is anticipated to improve 35.3% year over year, while its bottom line is expected to increase more than 170%.

Houston, TX-based ConocoPhillips is an integrated energy company. The company’s top line for 2018 is likely to improve 14.4% year over year. In the last four reported quarters, the company delivered an average positive earnings surprise of 27.6%.

Houston, TX-based Cheniere Energy mainly focuses on liquefied natural gas-related businesses. The company’s top line for 2018 is anticipated to improve 25.9% year over year, while its bottom line is expected to increase more than 225%.

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