Marathon Oil Corporation MRO reported first-quarter 2024 adjusted net income per share of 55 cents, beating the Zacks Consensus Estimate of 52 cents. The outperformance reflects higher domestic liquids price.
However, the company’s bottom line fell from the year-ago adjusted profit of 67 cents due to weaker production numbers.
The company reported revenues of $1.7 billion, which came 1.4% below the consensus mark and fell 7.7% from year-ago sales.
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 371,000 barrels of oil equivalent per day (BOE/d) compared with 396,000 BOE/d in the year-ago period.
U.S. E&P: This U.S. upstream unit reported an income of $334 million, down from $425 million in the year-ago period due to lower production and higher costs, partly offset by a slight uptick in oil realizations. We modeled the segment income at $421.3 million.
Marathon Oil’s average realized liquids price (crude oil and condensate) of $75.39 per barrel was 0.9% higher than the year-earlier level of $74.69 but narrowly missed our projection of $75.54. Meanwhile, natural gas liquids’ average price realizations decreased 8.4% to $22.24 a barrel. Finally, average realized natural gas prices plunged 33.2% year over year to $1.97 per thousand cubic feet though the figure outperformed our estimate of $1.92.
As far as production costs are concerned, they averaged $6.77 per BOE, or a 16.3% year-over-year increase.
Net production of 326,000 BOE/d was down 4.4% from first-quarter 2023. Total U.S. output, which came under our projection of 339,000 BOE/d, comprised approximately 53% oil, or 172,000 barrels per day (bpd).
Lower year-over-year production from Eagle Ford affected the company’s quarterly performance. The Eagle Ford region recorded an average production of 127,000 BOE/d, dropping 11.8% from the first-quarter 2023 level, while output from Bakken was 105,000 BOE/d compared with 95,000 BOE/d in the year-ago quarter. The Oklahoma output came in at 45,000 BOE/d, down from the year-ago level of 54,000 BOE/d. In the Permian Basin, MRO produced 48,000 BOE/d compared with 45,000 BOE/d a year ago.
International E&P: The segment, which explores and produces oil and gas in Equatorial Guinea, reported earnings of $82 million compared with $89 million in the year-ago period and our projection of $59.2 million. These results could be primarily blamed on lower output.
Marathon reported production available for sale of 45,000 BOE/d, down from 55,000 Boe/d in first-quarter 2023 and in line with our projection.
Marathon’s average realized liquids prices (crude oil and condensate) of $61.86 per barrel reflected a 5.6% improvement from the year-earlier quarter. Natural gas and natural gas liquids’ average price realizations came in at $3.71 per thousand cubic feet and $1 a barrel, respectively, compared to 24 cents and $1 in the corresponding period of 2022.
Financial Position
Total costs in the first quarter were $1.1 billion, up 2.6% from the prior-year period and exceeded our expectation by 5.1%. Marathon Oil reported an adjusted operating cash flow of $861 million, down 8.6% from a year ago.
As of Mar 31, 2024, Marathon Oil had cash and cash equivalents worth $49 million and long-term debt of $4.6 billion. The debt-to-capitalization ratio of the company was 29.1.
Marathon Oil spent $603 million in capital and exploratory expenditures during the quarter and raked in $239 million in adjusted free cash flow. This Zacks Rank #3 (Hold) company also executed $285 million in share repurchases during the period.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
2024 Guidance
Marathon continues to budget its capital spending between $1.9 billion and $2.1 billion this year. Meanwhile, MRO continues to prioritize shareholder returns over production growth. The company is targeting production between 380,000 BOE/d and 400,000 BOE/d. Further, Marathon expects oil volumes in the band of 185,000-195,000 barrels per day.
Important Energy Earnings So Far
While we have discussed Marathon Oil’s first-quarter results in detail, let’s take a look at some other key energy reports of this season.
SLB SLB, the largest oilfield contractor, announced first-quarter 2024 earnings of 75 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 74 cents. SLB’s bottom line also increased from the year-ago quarter’s earnings of 63 cents.
SLB’s strong quarterly earnings resulted from higher evaluation and stimulation activities in the international market. As of Mar 31, 2024, the company had approximately $3.5 billion in cash and short-term investments. It had a long-term debt of $10.7 billion at the end of the quarter.
Independent oil refiner and marketer Valero Energy VLO reported first-quarter 2024 adjusted earnings of $3.82 per share, which beat the Zacks Consensus Estimate of $3.18, driven by a decline in total cost of sales. Adjusted operating income in the Refining segment totaled $1.7 billion, down from $4.1 billion in the year-ago quarter. The figure also missed our estimate of $1.6 billion.
Valero’s total cost of sales declined to $29.8 billion from the year-ago figure of $32.1 billion. The figure is also below our estimate of $30.4 billion, primarily due to lower material costs and operating expenses. The first-quarter capital investment totaled $661 million, of which $563 million was allotted for sustaining the business.
Meanwhile, oil supermajor Chevron CVX reported adjusted first-quarter earnings per share of $2.93, ahead of the Zacks Consensus Estimate of $2.84. The outperformance could be attributed to higher-than-expected U.S. production in the company’s key upstream segment. The unit’s domestic output of 1,573 thousand oil-equivalent barrels per day (MBOE/d) came in above the consensus mark of 1,544 MBOE/d.
CVX recorded $6.8 billion in cash flow from operations compared to $7.2 billion a year ago. The decrease in cash flow could be attributed to weaker price realizations in the upstream business. Chevron’s free cash flow for the quarter was $2.7 billion.
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