Why is Marathon Oil (MRO) up 8.1% since its last earnings report?

It’s been about a month since Marathon Oil’s (MRO) last earnings report. Shares have risen about 8.1% in that time, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Marathon Oil headed for a decline? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the key drivers.

Marathon Oil reports better-than-expected first-quarter earnings

Marathon Oil Company reported first-quarter 2024 adjusted net earnings per share of 55 cents, beating the Zacks Consensus Estimate of 52 cents. The better results reflect higher prices for domestic liquids.

However, the company’s profits fell from an adjusted profit of 67 cents a year earlier due to weaker production results.

The company reported revenue of $1.7 billion, which was 1.4% below the consensus and down 7.7% from year-ago sales.

Segment efficiency

The Texas-based energy explorer’s total net production (from U.S. and international units) for the quarter under review was 371,000 barrels of oil equivalent per day (BOE/d), compared to 396,000 BOE/d in the year-ago period.

American exploration and mining: The U.S. mining unit reported revenue of $334 million, up from $425 million in the year-ago period due to lower production and higher costs, partially offset by a slight increase in oil supplies. We modeled segment revenue of $421.3 million.

Marathon Oil’s average realized liquids price (crude oil and condensate) of $75.39 per barrel was 0.9% above the prior-year level of $74.69 but slightly off our forecast of $75.54. Meanwhile, average natural gas liquids price realizations fell 8.4% to $22.24 per barrel. Finally, average realized natural gas prices declined 33.2% year over year to $1.97 per thousand cubic feet, although this amount was higher than our estimate of $1.92.

In terms of production costs, they averaged $6.77 per BOE, up 16.3% year over year.

Net production of 326,000 BOE/d decreased 4.4% compared to the first quarter of 2023. Total U.S. production, which was within our forecast of 339,000 BOE/d, consisted of approximately 53% oil, or 172 000 barrels per day (bpd).

Eagle Ford’s lower year-over-year production impacted the company’s quarterly results. The Eagle Ford region reported average production of 127,000 BOE/d, down 11.8% from Q1 2023 levels, while Bakken production was 105,000 BOE/d down from 95,000 BOE/ d in the quarter of last year. Production in Oklahoma was 45,000 BOE/d, down from 54,000 BOE/d a year ago. In the Permian Basin, MRO produced 48,000 BOE/d compared to 45,000 BOE/d a year ago.

The story continues

International exploration and mining: The Equatorial Guinea oil and gas exploration and production segment posted a profit of $82 million, compared to $89 million in the year-ago period and our forecast of $59.2 million. These results can be attributed primarily to lower production.

Marathon reported production available for sale was 45,000 Boe/d, up from 55,000 Boe/d in the first quarter of 2023, which is in line with our forecast.

Marathon’s average realized liquids prices (crude oil and condensate) of $61.86 per barrel reflect a 5.6% improvement compared to the prior-year quarter. Average natural gas and natural gas liquids price realizations were $3.71 per thousand cubic feet and $1 per barrel, respectively, compared to 24 cents and $1 for the same period in 2022.

Financial position

Total first-quarter costs were $1.1 billion, up 2.6% from the prior-year period and exceeding our expectations by 5.1%. Marathon Oil reported adjusted operating cash flow of $861 million, down 8.6% from the prior year.

As of March 31, 2024, Marathon Oil had cash and cash equivalents of $49 million and long-term debt of $4.6 billion. The company’s debt to capitalization ratio was 29.1.

Marathon Oil spent $603 million on investments and exploration during the quarter and earned $239 million in adjusted free cash flow. During this period, the company also repurchased shares worth USD 285 million.

Guidelines 2024

Marathon continues to project capital spending of $1.9 billion to $2.1 billion this year. Meanwhile, MRO continues to prioritize shareholder profits over production growth. The company plans production at a level from 380,000 BOE/d to 400,000 BOE/d. Additionally, Marathon expects oil volumes in the range of 185,000-195,000 barrels per day.

How have estimates changed since then?

It turns out, revision estimates have flattened over the past month.

VGM results

At this point, Marathon Oil’s average Growth Score is a C, but its Momentum Score is performing much better at an A. Plotting a somewhat similar path, the stock is rated a B on the Value side, placing it in the second quintile for this investment strategy.

Overall, the stock has a Total VGM Score of B. If you’re not focused on one strategy, this score should interest you.

Perspectives

Marathon Oil carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

Marathon Oil belongs to the Zacks Oil and Gas – Integrated – United States industry. Another stock in the same industry, Antero Midstream Corporation (AM), has gained 2.9% over the past month. More than a month has passed since the company announced its results for the quarter ended March 2024.

Antero Midstream reported revenue of $279.05 million in the most recent quarter, representing a +7.5% year-over-year change. EPS of $0.24 for the same period compared to $0.21 a year ago.

Antero Midstream is expected to report earnings per share of $0.23 for the current quarter, which would represent a year-over-year change of +4.6%. The Zacks Consensus Estimate has remained unchanged over the past 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Antero Midstream. The stock also has a VGM Rating of C.

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