Marathon Oil (MRO) Q2 Loss Wider Than Expected, Revenues Beat

Houston, TX-based leading upstream energy firm Marathon Oil Corporation (NYSE:MRO) posted second-quarter adjusted loss of 24 cents per share, wider than the Zacks Consensus Estimate of a loss of 14 cents. 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 23 cents.

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.

Marathon Oil Corporation Price, Consensus and EPS Surprise

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.

Zacks Rank and Key Picks

Marathon Oil is a leading exploration and production company with extensive operations across four core regions – Africa, Middle East, Europe and North America. The company carries a Zacks Rank #4 (Sell).

Some better-ranked players in the energy space include TransCanada Corporation (TO:TRP) , Global Partners LP (NYSE:GLP) and Braskem S.A. (NYSE:BAK) . All three firms sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TransCanada posted positive average earnings surprise of 4.06% in the preceding four quarters.

Global Partners delivered positive average earnings surprise of 415.30% in the preceding four quarters.

Braskem reported positive average earnings surprise of 107.79% in the trailing four quarters.

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