Marathon Oil Beats on Q1 Earnings & Revs - Analyst Blog

Oil and natural gas exploration and production (E&P) firm, Marathon Oil Corporation (MRO) reported better-than-expected first-quarter 2014 earnings amid solid production growth from the U.S. resource plays and an 84% decline in exploration costs.

Following the earnings release, Marathon Oil’s shares gained about 1.5% in the after-market trading session on May 6.

The Houston, TX-based company reported first-quarter adjusted earnings of 88 cents per share, a substantial improvement from 51 cents in first-quarter 2013. The reported figure also easily surpassed the Zacks Consensus Estimate of 72 cents.

Revenues came in at $3,529.0 million, exceeding the Zacks Consensus Estimate of $3,403.0 million. However, the top line declined from the prior-year quarter level by 12.2%. A weak performance by the company’s International E&P segment, with lower output and realizations, led to the year-over-year fall.

Marathon Oil Corporation - Quarterly Earnings Per Share | FindTheBest

Segmental Performance

North America E&P: Income from Marathon Oil’s North American upstream segment totaled $242.0 million in the reported quarter, compared with a loss of 59.0 million in previous-year period. Production growth and a significant rise in natural gas realizations led to the segment’s strong performance.

Marathon Oil reported production (available for sale) of 213,000 oil-equivalent barrels per day (BOE/d), up from 198,000 BOE/d in the first quarter of 2013. The increase was primarily driven by higher output from the U.S. resource plays, partially offset by weather-related disruptions.

The company realized crude oil and condensate price of $92.48 per barrel, below the year-earlier quarter level of $94.68 per barrel, while natural gas realizations increased by 36.8% year over year to $5.28 per thousand cubic feet (Mcf).  

International E&P: The segment’s income was down 27.1% year over year to $331.0 million from $454.0 million. Lower volumes and a decrease in price realization affected the segment’s results.

Marathon Oil reported production (excluding Libya and Angola) of 190,000 oil-equivalent barrels per day (BOE/d), compared with 222,000 BOE/d in the first quarter of 2013. Natural decline from the North Sea assets, unplanned downtime and unfavorable weather conditions impacted the results.

Marathon’s natural gas realizations decreased nearly 23.0% year over year to $1.98 per thousand cubic feet (Mcf).

Oil Sands Mining: Marathon’s Oil Sands Mining segment recorded an income of $64.0 million against $38.0 million in the comparable year-ago period. The rise came on the back of higher realizations, partially offset by lower volumes.

Synthetic crude oil sales volumes in the oil sands business fell about 16.0% year over year to 37,000 barrels per day due to planned maintenance activity and lower mine reliability.

Price realization from Synthetic Crude Oil came in at $88.50 per barrel, up 10.7% from $79.98 per barrel in the year-ago period.

Capital Expenditure

During the reported quarter, Marathon Oil spent $1,153.0 million on capital programs (90.0% on E&P).
 
Guidance

Marathon Oil expects second-quarter North America E&P output in the range of 220,000–230,000 BOE/d, International E&P (excluding Libya and Angola) output in the range of 182,000–192,000 BOE/d and Oil Sands Mining output in the range of 37,000–42,000 BOE/d.

Zacks Rank & Other Stocks to Consider

Marathon Oil currently holds a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.

Apart from Marathon Oil, investors interested in the energy sector could consider stocks like Clayton Williams Energy, Inc. (CWEI), Pioneer Energy Services Corp. (PES) and Unit Corporation (UNT). All of these have a Zacks Rank #1 (Strong Buy).

WILLIAMS(C)ENGY (CWEI): Free Stock Analysis Report

MARATHON OIL CP (MRO): Free Stock Analysis Report

PIONEER EGY SVC (PES): Free Stock Analysis Report

UNIT CORP (UNT): Free Stock Analysis Report

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