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Marathon Oil (MRO) Q4 Loss Narrower than Expected


Houston, TX-based Marathon Oil Corp. MRO – a leading upstream energy firm – posted fourth quarter adjusted loss of 10 cents per share, narrower than the Zacks Consensus Estimate for a loss of 13 cents and the year-earlier adjusted loss of 48 cents.

The better-than-expected results came thanks to the recovery in crude prices and cost control initiatives.

Quarterly revenues of $1,389 million beat the Zacks Consensus Estimate of $1,186 million but fell from the prior-year quarter level of $1,475 million amid lower volumes.

Segmental Performance

North America E&P: Marathon Oil’s North American upstream segment reported a loss of $91 million, narrower than the loss of $219 million a year ago. Higher commodity prices buoyed the result.

Marathon Oil reported production available for sale of 212,000 oil-equivalent barrels per day (BOE/d), down from 260,000 BOE/d in the fourth quarter of 2015. The deterioration was mainly due to reduced drilling and completion activities.

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 $32.47 per barrel. Natural gas realizations increased 35% year over year to $2.87 per thousand cubic feet (Mcf).

International E&P: The segment’s income jumped almost fivefold year over year to $110 million. Substantially higher liquids realizations magnified the profits.

Marathon Oil – which spun off its refining/sales business into a separate, independent and publicly traded company Marathon Petroleum Corp. MPC) in 2011 – reported production available for sale (excluding Libya) of 129,000 BOE/d, up from the 123,000 BOE/d in the fourth quarter of 2015. The increase in output in Equatorial Guinea was responsible for the growth.

The company realized liquids price of $37.85 per barrel, a 30% rise from the year-earlier quarter level of $29.18 per barrel. However, natural gas realizations fell 9% year over year to 53 cents per thousand cubic feet (Mcf).

Oil Sands Mining: Marathon’s Oil Sands Mining segment recorded a profit of $16 million compared with loss of $6 million in the year-ago quarter. The improvement stemmed from higher Synthetic Crude Oil realizations, which came in at $43.35 per barrel, up 25% from $34.65 per barrel a year ago.

Synthetic crude oil sales volumes in the oil sands business was 47,000 barrels per day, down slightly from the prior-year quarter level of 49,000 barrels per day.

Costs & Expenses

The company’s exploration expenses for the quarter came at $34 million, significantly lower than $532 million in the year-earlier quarter. Moreover, Marathon Oil’s total quarterly cost and expenses fell 44% to 1,336 million.

Marathon Oil Corporation Price, Consensus and EPS Surprise

Marathon Oil Corporation Price, Consensus and EPS Surprise | Marathon Oil Corporation Quote

Capital Expenditure

During the year, Marathon Oil spent $1,069 million on capital programs, $200 million less than the revised guidance. As oil prices expanded their rout to most of 2016, major energy companies chopped costs in an effort to shore up dwindling cash flows.

In 2015, Marathon Oil became the first major shale producer to cut dividend and was subsequently followed by major producers like Anadarko Petroleum Corp. APC and ConocoPhillips COP.

However, as crude continues to improve post the OPEC agreement, Marathon Oil announced a 2017 capital program of $2,200 million – a jump of 100% year-over-year – with 90% of the outlay earmarked for high return U.S. resource plays.

Production Guidance

Marathon Oil expects first-quarter 2017 North America E&P output available for sale in the range of 195,000–205,000 BOE/d, International E&P (excluding Libya) output in the range of 120,000–125,000 BOE/d and Oil Sands Mining output of 45,000–50,000 BOE/d. The Zacks Rank #3 (Hold) company said that quarterly volumes will be impacted by severe winter weather in North America and downtime events internationally. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For full year, Marathon Oil forecasts sale-ready output from the combined North America and International E&P segments – excluding Libya – to average 335,000 to 355,000 net BOE/d. On a divestiture-adjusted basis, production is expected to be 5% higher than 2016. Meanwhile, Marathon Oil is looking to churn out 40,000-50,000 BOE daily in the Oil Sands Mining unit – similar to last year.

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