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Marathon (MRO) Q4 Earnings Beat on Higher U.S. Production

Marathon Oil Corporation MRO reported fourth-quarter 2023 adjusted net income per share of 69 cents, beating the Zacks Consensus Estimate of 62 cents. The outperformance reflects strong domestic oil and gas production.

However, the company’s bottom line fell from the year-ago adjusted profit of 88 cents due to weaker oil realizations.

The company reported revenues of $1.7 billion, which came 2% above the consensus mark but fell 2.4% from the year-ago sales.

Marathon Oil Corporation Price, Consensus and EPS Surprise

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

Marathon Oil Corporation price-consensus-eps-surprise-chart | Marathon Oil Corporation Quote

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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 404,000 barrels of oil equivalent per day (BOE/d) compared with 333,000 BOE/d in the year-ago period.

U.S. E&P: This U.S. upstream unit reported an income of $468 million, down from $510 million in the year-ago period due to lower commodity price realizations and higher costs, partly offset by stronger production. We modeled the segment income at $441.3 million.

Marathon Oil’s average realized liquids price (crude oil and condensate) of $77.28 per barrel were 8.3% lower than the year-earlier level of $84.29 and narrowly missed our projection of $77.80. Additionally, natural gas liquids’ average price realizations decreased 19.6% to $20.92 a barrel. Finally, average realized natural gas prices plunged 52.9% year over year to $2.32 per thousand cubic feet and missed our estimate of $2.84.

Meanwhile, production costs were $6.51 per BOE, representing a 3.5% year-over-year rise.

Net production of 352,000 BOE/d was up 26.6% from fourth-quarter 2022. Total U.S. output, which came ahead of our projection of 330,000 BOE/d, comprised approximately 56% oil, or 198,000 barrels per day (bpd).

Significantly higher year-over-year production from Eagle Ford favored the company’s quarterly performance. The Eagle Ford region recorded an average production of 144,000 BOE/d, surging 58.2% from the fourth-quarter 2022 level, while output from Bakken was 118,000 BOE/d compared with 94,000 BOE/d in the year-ago quarter. Meanwhile, the Oklahoma output came in at 49,000 BOE/d, just down from the year-ago level of 50,000 BOE/d.

International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $51 million compared with $129 million in the year-ago period and our projection of $33.5 million. These results could be primarily blamed on lower output and liquid prices.

Marathon reported production available for sale of 52,000 BOE/d, down from 55,000 Boe/d in fourth-quarter 2022 and below our projection of 67,000 BOE/d.

Marathon’s average realized liquids prices (crude oil and condensate) of $47.43 per barrel reflected a 20% 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 2022.

 

Financial Position

Total costs in the quarter were $1.2 billion, up 18.9% from the prior-year period and exceeded our expectation by 8.5%. Marathon Oil reported an adjusted operating cash flow of $1.2 billion for the fourth quarter, up 18.9% from a year ago.

As of Dec 31, 2023, it had cash and cash equivalents worth $155 million and long-term debt of $3.4 billion. The debt-to-capitalization ratio of the company was 23.2.

Marathon Oil spent $360 million in capital and exploratory expenditures during the quarter and raked in $624 million in adjusted free cash flow. This Zacks Rank #3 (Hold) company also executed $352 million in share repurchases during the period.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2024 Guidance

Marathon has budgeted its capital spending between $1.9 billion and $2.1 billion this year. Meanwhile, MRO continues to prioritize shareholder returns over production growth. The company is targeting production between 380,000 BOE/d and 400,000 BOE/d. Further, Marathon expects oil volumes in the band of 185,000-195,000 barrels per day.

Some Key E&P Earnings

While we have discussed Marathon Oil’s fourth-quarter results in detail, let’s see how some other upstream companies have fared this earnings season.

One of the world’s largest independent oil and gas producers, ConocoPhillips COP, reported fourth-quarter 2023 adjusted earnings per share of $2.40, beating the Zacks Consensus Estimate of $2.08. The bottom line, however, declined from the prior-year quarter’s $2.71 per share. ConocoPhillips’ higher oil equivalent production volumes — up 8.2% year over year — led to a better-than-expected bottom line. The positives were partially offset by lower average realized oil equivalent prices.

As of Dec 31, 2023, ConocoPhillips had $5.6 billion in cash and cash equivalents. COP’s total long-term debt was $17.9 billion, while it had a short-term debt of $1.1 billion. Capital expenditure and investments totaled $2.9 billion. Net cash provided by operating activities was $5.3 billion.

Natural gas producer EQT Corporation EQT reported fourth-quarter 2023 adjusted earnings from continuing operations of 48 cents per share, in line with the Zacks Consensus Estimate. The bottom line increased from the year-ago quarter’s adjusted earnings of 42 cents. EQT’s better-than-expected profits were driven by higher sales volumes, which increased to 564 billion cubic feet equivalent (Bcfe) from the year-ago quarter’s 458.6 Bcfe.

EQT’s adjusted operating cash flow was $774.6 million in the quarter, up from $621.8 million a year ago. Free cash flow in the quarter was $236 million, up from $225.5 million. Total capital expenditure for the company amounted to $538.5 million, up from $398.1 million a year ago. As of Dec 31, 2023, EQT had $81 million in cash and cash equivalents. Net debt was $5.7 billion.

Another U.S. energy operator APA Corporation APA reported fourth-quarter 2023 adjusted earnings of $1.15 per share, missing the Zacks Consensus Estimate of $1.38 and declining from the year-ago adjusted figure of $1.48. APA’s underperformance primarily reflects lower oil and natural gas prices, partly offset by strong production.

During the quarter under review, APA generated $1 billion of cash from operating activities while it incurred $520 million in upstream capital expenditures. The company reported an adjusted operating cash flow of $1 billion. It also registered a free cash flow of $292 million, though it dropped from $360 million a year ago. As of Dec 31, APA had approximately $87 million in cash and cash equivalents and $5.2 billion in long-term debt. The debt-to-capitalization ratio of the company was 66.1.

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