Oil and natural gas exploration and production (E&P) firm Marathon Oil Corp. (MRO) reported impressive third-quarter 2013 earnings. Robust performance by the North America E&P segment along with higher price realization of liquid hydrocarbon boosted the results.
Houston, TX-based Marathon Oil, which spun off its refining/sales business into a separate, independent and publicly traded company Marathon Petroleum Corp. (MPC) in 2011 – announced earnings (excluding special items) of 87 cents per share, surpassing the Zacks Consensus Estimate of 78 cents. Moreover, the company’s per share adjusted profits were 35.9% higher than the third-quarter 2012 level of 64 cents.
However, revenues at $3,914.0 million were down 5.9% year over year and were also below the Zacks Consensus Estimate of $4,019.0 million. Lower production in Libya and Norway affected the results.
Segment Analysis
North America E&P: Income from Marathon Oil’s North American upstream segment totaled $242.0 million during the quarter, up by a significant 126.2% from $107.0 million in the previous-year period. Increased price realization from liquid hydrocarbon along with reduced exploration costs aided the results.
International E&P: The segment’s income was down 20.7% year over year from $405.0 million to $321.0 million. Decrease in output at Libya and Norway, owing to planned turnaround activities, along with increased exploration costs affected the results.
Oil Sands Mining: Price realization from Synthetic Crude Oil came in at $102.64 per barrel, up 26.5% from $81.13 per barrel in the year-ago period. As a result, Marathon Oil’s Oil Sands Mining segment recorded a profit of $106.0 million, up 60.6% from an income of $66.0 million in the corresponding quarter of last year.
However, Synthetic crude oil sales volumes in the oil sands business fell 7.5% year over year from 53,000 barrels per day to 49,000 barrels per day.
Capital Expenditure
During the quarter, Marathon Oil spent $1,162.0 million on capital programs (93.4% on E&P).
Guidance
Marathon Oil maintained its previous guidance for 2013 output from North America E&P and International E&P business units (excluding Libya), at 410,000–425,000 oil-equivalent barrels per day. The company also retained its previous projection for oil sands volumes in the range of 40,000-44,000 barrels per day.
Zacks Rating
Marathon Oil currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at energy firms like SM Energy Company (SM) and Matador Resources Company (MTDR) that offer better prospects. Both the stocks sport a Zacks Rank #1 (Strong Buy).
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