Yahoo Finance Marathon (MRO) Q1 Earnings Beat on Higher Oil & Gas Output
Marathon Oil Corporation MRO reported first-quarter 2023 adjusted net income per share of 67 cents, beating the Zacks Consensus Estimate of 57 cents. The outperformance reflects higher domestic oil and gas production.
However, the company’s bottom line fell from the year-ago adjusted profit of $1.02 due to weaker oil realizations in the United States and higher overall costs.
The company reported revenues of $1.7 billion, which came 4.4% above the consensus mark but fell 4.2% from the year-ago sales of $1.8 billion.
In good news for investors, the company is using the excess cash from a supportive environment to reward them with dividends and buybacks. As part of that, MRO executed $334 million in share repurchases in the first quarter.
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 396,000 barrels of oil equivalent per day (BOE/d) compared to 345,000 BOE/d in the year-ago period.
U.S. E&P: This U.S. upstream unit reported an income of $425 million, down from $661 million in the year-ago period due to lower oil realizations and higher costs, partly offset by stronger production.
Marathon Oil’s average realized liquids prices (crude oil and condensate) of $74.69 per barrel were lower than the year-earlier level of $94.43. Additionally, natural gas liquids average price realizations decreased 35% to $24.27 a barrel. Finally, average realized natural gas prices plunged 38.4% year over year to $2.95 per thousand cubic feet.
Meanwhile, production costs were $5.82 per BOE, representing a 4.1% year-over-year rise.
Net production of 341,000 BOE/d was up 21.4% from first-quarter 2022. Total U.S. output comprised approximately 52% oil, or 176,000 barrels per day (bpd).
Significantly higher year-over-year production from Eagle Ford favorably affected the company’s quarterly performance, which was partly offset by lower volumes from the Bakken area. The Eagle Ford region recorded an average production of 144,000 BOE/d, surging 80% from the level in first-quarter 2022, while output from Bakken was 94,000 BOE/d compared with 118,000 BOE/d in the year-ago quarter. Meanwhile, Oklahoma output came in at 54,000 BOE/d, up from the year-ago level of 52,000 BOE/d.
International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $89 million compared with $115 million in the year-ago period due to lower output.
Marathon reported production available for sale of 55,000 BOE/d, down from 64,000 Boe/d in first-quarter 2022.
Marathon’s average realized liquids prices (crude oil and condensate) of $58.57 per barrel reflected a 1.8% 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, $127 million higher than the prior-year period. Marathon Oil reported an adjusted operating cash flow of $942 million for the first quarter, down 26.4% from a year ago.
As of Mar 31, 2023, it had cash and cash equivalents worth $178 million and long-term debt of 5.7 billion. The debt-to-capitalization ratio of the company was 33.4.
Marathon Oil spent $601 million in capital and exploratory expenditures during the quarter and raked in $309 million in adjusted free cash flow.
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 in the range of 385,000 BOE/d to 405,000 BOE/d, up more than 15% (at the midpoint) from last year. Further, Marathon expects oil volumes in the band of 185,000-195,000 barrels per day. Assuming $80 WTI, Marathon Oil expects to return a minimum of 40% of its cash flow from operations.
Zacks Rank & Key Picks
Marathon — a leading upstream oil and gas company — carries a Zacks Rank #3 (Hold) at present.
Meanwhile, investors interested in the energy sector might consider operators like Weatherford International WFRD, Riley Exploration Permian REPX and Sunoco LP SUN. Each of the companies has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Weatherford International: WFRD beat the Zacks Consensus Estimate for earnings in two of the trailing four quarters. Weatherford International has a trailing four-quarter earnings surprise of 0.5%, on average.
WFRD is valued at around $4.3 billion. Weatherford International has seen its shares inch up 78.9% in a year.
Sunoco LP: SUN beat the Zacks Consensus Estimate for earnings twice in the trailing four quarters. Over the past 30 days, Sunoco saw the Zacks Consensus Estimate for 2023 move up 0.7%.
Sunoco is valued at around $4.6 billion. SUN has seen its shares gain 1% in a year.
Riley Exploration Permian: Riley Exploration Permian beat the Zacks Consensus Estimate for earnings in three of the last four quarters. REPX has a trailing four-quarter earnings surprise of roughly 12.7%, on average.
Riley Exploration Permian is valued at around $814 million. REPX has seen its shares surge 56.2% in a year.
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