Marathon Oil Corporation (MRO)

Just Sayin':"Is Marathon Oil (MRO) a Great Value Stock Right Now?" Zacks Equity ResearchTue, May 10, 2022, 9:40 AM Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.One stock to keep an eye on is Marathon Oil (MRO). MRO is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 6.29. This compares to its industry's average Forward P/E of 7.89. Over the past year, MRO's Forward P/E has been as high as 30.69 and as low #$%$50, with a median of 9.67.Another valuation metric that we should highlight is MRO's P/B ratio of 1.75. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 2.63. Over the past year, MRO's P/B has been as high as 1.90 and as low as 0.79, with a median of 1.15.Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. MRO has a P/S ratio of 2.79. This compares to its industry's average P/S of 3.9.StoryIf you're looking for another solid Oil and Gas - Integrated - United States value stock, take a look at Occidental Petroleum (OXY). OXY is a # 2 (Buy) stock with a Value score of A.Shares of Occidental Petroleum currently holds a Forward P/E ratio of 7.39, and its PEG ratio is 0.22. In comparison, its industry sports average P/E and PEG ratios of 7.89 and 0.35.Over the last 12 months, OXY's P/E has been as high as 213.02, as low as -117.16, with a median of 10.86, and its PEG ratio has been as high as 9.92, as low #$%$45, with a median of 0.29.Occidental Petroleum sports a P/B ratio of 5.76 as well; this compares to its industry's price-to-book ratio of 2.63. In the past 52 weeks, OXY's P/B has been as high #$%$76, as low as 2.42, with a median of 3.20.These figures are just a handful of the metrics value investors tend to look at, but they help show that Marathon Oil and Occidental Petroleum are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, MRO and OXY feels like a great value stock at the moment."

Outstanding first quarter financial delivery highlighted by $940 million of adjusted free cash flow at 27% reinvestment rate
Returned 50% of first quarter cash flow from operations (CFO) to equity investors through $592 million of share repurchases and $52 million base dividend
First quarter oil-equivalent production of 345,000 net boed; oil production of 168,000 net bopd
Continue to build on peer-leading return of capital track record, exceeding minimum commitment to return at least 40% of CFO to equity investors
Returned approximately 60% of CFO to equity investors through share repurchases and dividends over trailing two quarters
Executed $1.6 billion of share repurchases since October 1st, reducing share count by 11%; includes $900 million of share repurchases year-to-date1
Board of Directors approved increasing share repurchase authorization to $2.5 billion as of May 4th
Raised quarterly base dividend by approximately 15%; fifth consecutive quarterly base dividend raise for cumulative increase of 167% since beginning of 2021
Expect over $4.5 billion of 2022 adjusted free cash flow at a reinvestment rate of approximately 20% on a $1.3 billion capital budget, assuming $100/bbl WTI and $6/MMBtu Henry Hub
Uplift of $1.5 billion in adjusted free cash flow from original 2022 financial outlook at $80/bbl WTI and $4/MMBtu Henry Hub and a reduction in the Company's expected reinvestment rate
Updated 2022 capital budget incorporates 8% inflation adjustment to reflect sustained $100/bbl WTI and $6/MMBtu commodity price environment
Raising 2022 Equatorial Guinea equity income guidance by $200 million
"Amid tremendous macro volatility, Marathon Oil(MRO) remains resolutely focused on delivering on all elements of our framework for success, including strong corporate returns, sustainable free cash flow generation, market-leading return of capital to shareholders, and ESG excellence," said Chairman, President, and CEO Lee Tillman. "Our constancy of purpose, differentiated execution, and commitment to providing investors with the first call on cash flow through our unique percentage of cash flow framework are all paying off. In the last two quarters, we've returned approximately 60% of our total CFO back to our equity investors, meaningfully exceeding our minimum 40% commitment. We've executed $1.6 billion of share repurchases over the last seven months, driving significant per share growth through an 11% reduction to our outstanding share count, and have announced five consecutive increases to our quarterly base dividend. With over $4.5 billion of adjusted free cash flow generation expected this year, we remain well positioned to continue delivering financial results and return of capital that are compelling not only relative to the best companies in energy, but relative to the best in the S&P 500."

Return of Capital
Marathon Oil's (MRO) percentage of CFO framework provides clear visibility to significant return of capital to equity investors and ensures the shareholder gets the first call on cash flow generation. In a $60/bbl WTI or higher price environment, the Company targets returning a minimum of 40% of CFO to equity investors. Over the last two quarters, Marathon Oil(MRO) has significantly exceeded this minimum commitment, returning approximately 60% of CFO to equity investors. In the current environment, Marathon Oil's(MRO) preferred return of capital approach includes a competitive and sustainable base dividend in addition to significant share repurchases.

Since October 1st, Marathon Oil(MRO) has executed more than $1.6 billion of share repurchases, reducing its outstanding share count by 11%. This includes approximately $900 million of share repurchases year-to-date.

During first quarter, Marathon Oil(MRO) returned 50% of CFO to equity investors, again exceeding its minimum 40% commitment. First quarter return of capital included $592 million of share repurchases and the $52 million base dividend.

Additionally, the Company's Board of Directors approved an increase in total share repurchase authorization to $2.5 billion, as of May 4th. The Board also approved an increase of approximately 15% to the quarterly base dividend, from 7 cents per share to 8 cents per share. This is the fifth consecutive increase to the quarterly base dividend, representing a cumulative increase of 167% since the beginning of 2021.