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Marathon (MRO) Q3 Earnings Top as U.S. Output Grows, Cost Falls

Marathon Oil Corporation MRO reported third-quarter 2023 adjusted net income per share of 77 cents, beating the Zacks Consensus Estimate of 69 cents. The outperformance reflects strong domestic oil and gas production, to go with lower unit costs.

However, the company’s bottom line fell from the year-ago adjusted profit of $1.24 due to weaker oil realizations.

The company reported revenues of $1.8 billion, which came 3.4% above the consensus mark but fell 19.3% from the year-ago sales of $2.2 billion.

In important news for investors, MRO’s board of directors recently declared a quarterly cash dividend of 11 cents per share to its common shareholders of record on Nov 15. The payout, which represents a 10% sequential increase, will be made on Dec 11.

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

 

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 421,000 barrels of oil equivalent per day (BOE/d) compared to 353,000 BOE/d in the year-ago period.

U.S. E&P: This U.S. upstream unit reported an income of $505 million, down from $723 million in the year-ago period due to lower commodity price realizations, partly offset by stronger production and lower costs. We modeled the segment income at $479.8 million.

Marathon Oil’s average realized liquids prices (crude oil and condensate) of $80.90 per barrel were 13.6% lower than the year-earlier level of $93.67 but beat our projection of $79.56. Additionally, natural gas liquids’ average price realizations decreased 37.1% to $21.37 a barrel. Finally, average realized natural gas prices plunged 70.9% year over year to $2.28 per thousand cubic feet and missed our estimate of $2.44.

Meanwhile, production costs were $5.07 per BOE, representing a 20.8% year-over-year fall.

Net production of 369,000 BOE/d was up 25.1% from third-quarter 2022. Total U.S. output, which came ahead of our projection of 352 BOE/d, comprised approximately 51% oil, or 189,000 barrels per day (bpd).

Significantly higher year-over-year production from Eagle Ford favored the company’s quarterly performance, which was partly offset by lower volumes from the Oklahoma area. The Eagle Ford region recorded an average production of 158,000 BOE/d, surging 75.6% from the third-quarter 2022 level, while output from Bakken was 121,000 BOE/d compared with 118,000 BOE/d in the year-ago quarter. Meanwhile, the Oklahoma output came in at 46,000 BOE/d, down from the year-ago level of 54,000 BOE/d.

International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $62 million compared with $181 million in the year-ago period and our projection of $74.6 million. These results could be primarily blamed on lower output and liquids prices.

Marathon reported production available for sale of 52,000 BOE/d, down from 58,000 Boe/d in third-quarter 2022 but in line with our expectations.

Marathon’s average realized liquids prices (crude oil and condensate) of $64.30 per barrel reflected a 13.1% 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 $1.1 billion, essentially unchanged from the prior-year period and marginally below our expectations. Marathon Oil reported an adjusted operating cash flow of $1.1 billion for the third quarter, down 20.6% from a year ago.

As of Sep 30, 2023, it had cash and cash equivalents worth $174 million and long-term debt of $4.9 billion. The debt-to-capitalization ratio of the company was 33.8.

Marathon Oil spent $449 million in capital and exploratory expenditures during the quarter and raked in $718 million in adjusted free cash flow. The company also executed $415 million in share repurchases during the period.

2023 Guidance

Marathon has maintained its budgeted capital spending between $1.9 billion and $2 billion this year. Meanwhile, MRO continues to prioritize shareholder returns over production growth. The company is targeting production toward the high end of its range of 385,000 BOE/d to 405,000 BOE/d. Further, Marathon expects oil volumes in the band of 185,000-195,000 barrels per day.

Zacks Rank & Key Picks

Marathon — a leading upstream oil and gas company — carries a Zacks Rank #2 (Buy) at present.       

Apart from MRO, investors interested in the energy sector might also look at operators like Marathon Petroleum MPC, Imperial Oil Limited IMO and CVR Energy CVI. Each of these companies has a Zacks Rank of 2.

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

Metroleum Petroleum: MPC beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters at an average of 11.9%.

Marathon Petroleum is valued at around $54.5 billion. MPC has seen its shares move up 17% in a year.

Imperial Oil: Imperial Oil beat the Zacks Consensus Estimate for earnings in three of the last four quarters and met in the other. IMO has a trailing four-quarter earnings surprise of 9.4%, on average.

Imperial Oil is valued at around $30.4 billion. IMO has seen its shares drop 5.4% in a year.

CVR Energy: CVI beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. Over the past 60 days, CVR Energy saw the Zacks Consensus Estimate for 2023 move up 3.8%.

CVR Energy is valued at around $3.2 billion. CVI has seen its shares lose 19.8% in a year.

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Marathon Oil Corporation (MRO) : Free Stock Analysis Report

Imperial Oil Limited (IMO) : Free Stock Analysis Report

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