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Marathon Oil’s Permian Growth to be Backed by Lucid Energy


Marathon Oil Corporation’s MRO subsidiary, Marathon Oil Permian LLC recently inked a long-term deal to receive midstream services from the Dallas, TX-based private company, Lucid Energy Group. Marathon Oil’s operations in southeast New Mexico are expected to be largely benefited as a result of the gas gathering and processing agreement.

Permian Support

Through the deal, Marathon Oil’s entire operated acreage in Lea County and a section of its operations in Eddy County, NM — which are part of the larger Permian Basin — are entitled to Lucid Energy’s services. The move is expected to support the company’s growing output from these regions, primarily located in the Delaware Basin. Also, Lucid Energy will likely expand its gathering and compression infrastructure network at the site for catering to Marathon Oil’s production growth.

The deal could prove to be a major competitive advantage for Marathon Oil at a time when other producers are struggling with Permian takeaway capacity bottlenecks. Notably, in the second quarter, the company’s production from its Northern Delaware assets averaged 17,000 net barrels of oil equivalent per day, up 6% sequentially.

Lucid Energy also has plans to put into service its cryogenic processing plant in October, at its natural gas processing complex of Red Hills, located in Lea County. The facility has a processing capacity of 200 million cubic feet of natural gas per day (MMcf/d). The new plant will also support Marathon Oil’s growing operations in the region. Notably, the new facility will increase Lucid Energy’s total processing capacity to 750 MMcf/d in the region.

Price Performance

Marathon Oil has gained 72.8% in the past year compared with 38.9% collective growth of its industry.

Zacks Rank and Stocks to Consider

Houston, TX-based Marathon Oil currently has a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for other top-ranked stocks like McDermott International, Inc. MDR, Subsea 7 S.A. SUBCY and Helix Energy Solutions Group, Inc. HLX, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based McDermott is an equipment provider for energy companies. The company’s top line for 2018 is likely to improve 145% year over year. In the last four reported quarters, the company delivered an average positive earnings surprise of 101.7%.

Luxembourg-based Subsea is an oilfield service providing company. In the last four reported quarters, the company delivered an average positive earnings surprise of 318.6%.

Houston, TX-based Helix Energy’s bottom line surpassed the consensus mark in three of the last four quarters, with the average positive earnings surprise being 66.7%.

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