Marathon Oil (MRO) Q1 Earnings Beat Estimates, Revenues Miss

Marathon Oil Corporation MRO reported first-quarter 2021 adjusted earnings per share of 21 cents, outpacing the Zacks Consensus Estimate of 13 cents. The bottom line also reversed the year-earlier quarter’s loss of 16 cents per share. Results were favorably impacted by a stringent cost control and better-than-expected contribution from its International E&P segment. Precisely, the International E&P reported a profit of $50 million, beating the respective Zacks Consensus Estimate of $30.9 million.

However, Marathon Oil reported revenues of $1.07 billion that missed the Zacks Consensus Estimate of $1.09 billion and further fell 12.9% year over due to lower production.

Segmental Performances

This Texas-based energy explorer’s total net production (from U.S. and International units) in the quarter under review came in at 345,000 barrels of oil equivalent per day (BOE/d) compared with 422,000 BOE/d in the year-ago period.

U.S. E&P: This U.S. upstream unit reported earnings of $212 million against a loss of $20 million in the year-ago period on improved oil price realizations.

Marathon Oil’s average realized liquids prices (crude oil and condensate) of $55.38 per barrel were above the year-earlier level of $44.23. Moreover, natural gas liquids average price realizations skyrocketed 140.1% to $23.94 a barrel. Additionally, average realized natural gas prices were up 294.4% year over year to $6.31 per thousand cubic feet.

Production costs were $4.46 per BOE, representing a 3.7% year-over-year decline.

Net production of 276,000 BOE/d decreased from 340,000 BOE/d in first-quarter 2020. The total U.S. output comprised 58% oil or 160,000 barrels per day (bpd), down 22.7% year over year.

The lower year-over-year production, especially from Eagle Ford and Oklahoma dragged down the company’s quarterly performance. Notably, Oklahoma output came in at 53,000 BOE/d, reflecting a 28.4% fall from the year-ago level. The Eagle Ford region recorded production of 77,000 BOE/d, down 32.5% from the level in first-quarter 2020. On a somewhat positive note, output from Bakken was 110,000 BOE/d, in line with the year-ago quarter.

International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $50 million, against the year-ago period’s loss of $1 million, attributable to higher realized oil prices.

Marathon Oil reported production available for sale of 69,000 BOE/d, down from 82,000 Boe/d in first-quarter 2020.

Marathon Oil’s average realized liquids prices (crude oil and condensate) of $44.13 per barrel reflected a 19.7% rise 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, same as reported in the corresponding period of 2020.

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

Financials

Total costs in the quarter were $954 million, down $261 million from the prior-year period. Marathon Oil reported an operating cash flow of $622 million in the first quarter, down from $701 million a year ago.

As of Mar 31, it had cash and cash equivalents worth $1.1billion and a long-term debt of $5.5 billion. Debt-to-capitalization ratio of the company was 31.5.

The company met its initial gross debt-reduction goal of $500 million and is now aiming to lower another $500 million in gross debt by 2021, hiking the overall debt-reduction target to at least $1 billion.

Marathon Oil also increased its quarterly base dividend above 30% from 3 cents to 4 cents per share.

2021 Guidance

Marathon Oil has set a capital budget of $1 billion for this year, down from $1.2 billion it spent in 2020. The company is envisions production in the range of 330,000-350,000 BOE/d, 11% below the 2020 production at the midpoint. Further, Marathon Oil expects oil volumes in the band of 169,000-175,000 barrels per day (91% at the midpoint).

Zacks Rank & Key Picks

Marathon Oil currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are Whiting Petroleum Corporation WLL, Matador Resources Company MTDR and Continental Resources, Inc. CLR, each presently flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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