Oil and natural gas exploration and production (E&P) firm Marathon Oil Corporation (MRO) reported weak fourth quarter results due to lower price realizations and rising exploration costs.
The Houston, Texas-based company announced adjusted earnings of 60 cents per share, below the Zacks Consensus Estimate of 74 cents. However, earnings increased from the fourth quarter 2012 level of 55 cents.
Revenues at $3,294.0 million were down 22.2% year over year and below the Zacks Consensus Estimate of $3,534.0 million.
For 2013, Marathon Oil reported per share profits of $2.64, which missed the Zacks Consensus Estimate of $3.08 but improved from the 2012 earnings of $2.45 per share. Revenues of $14,959.0 million decreased 7.8% from the prior-year figure. However, revenues beat the Zacks Consensus Estimate of $14,781.0 million.
Segmental Performance
North America E&P: Income from Marathon Oil’s North American upstream segment totaled $125.0 million during the quarter, up 23.8% from $101.0 million in the previous-year period on an increase in production volumes.
Marathon Oil reported production (available for sale) of 206,000 oil-equivalent barrels per day (BOE/d), up from 200,000 BOE/d in the third quarter of 2013.
Marathon realized crude oil and condensate price of $87.61 per barrel, below the year-earlier quarter level of $89.72 per barrel, while natural gas realizations decreased by 14.4% year over year to $3.76 per thousand cubic feet (Mcf).
International E&P: The segment’s income was down 19.4% year over year at $350.0 million from $434.0 million. Lower volumes from Libya and Angola and a decrease in price realization affected the segment’s results.
Marathon Oil reported production (excluding Libya and Angola) of 206,000 oil-equivalent barrels per day (BOE/d), up from 193,000 BOE/d in the third quarter of 2013.
Marathon’s natural gas realizations decreased 13.0% year over year to $2.14 per thousand cubic feet (Mcf).
Oil Sands Mining: Marathon’s Oil Sands Mining segment recorded income of $42.0 million against $17.0 million in the corresponding quarter of last year. An increase in output, supported by improved price realizations was the reason for the improvement in the segment results.
Synthetic crude oil sales volumes in the oil sands business improved 12.2% quarter over quarter to 46,000 barrels per day. Price realization from Synthetic Crude Oil came in at $78.77 per barrel, up 3.2% from $76.36 per barrel in the year-ago period.
Proved Reserves
As of the end of 2013, Marathon Oil had approximately 2.2 billion oil-equivalent barrels in proved reserves (80% liquids and 71% developed). For the three-year period ended Dec 31, 2013, the company added net proved reserves of over 1 billion oil-equivalent barrels, excluding dispositions.
Capital Expenditure
During the reported quarter, Marathon Oil spent $1,295.0 million on capital programs (88.3% on E&P).
Guidance
Marathon Oil expects first quarter North America E&P output in the range of 214,000–223,000 BOE/d, International E&P (excluding Libya and Angola) output in the range of 186,000–197,000 BOE/d and Oil Sands Mining output in the range of 40,000–45,000 BOE/d.
For full year 2014, total E&P volumes are likely to be between 405,000 BOE/d and 435,000 BOE/d, while Oil Sands Mining volumes are likely to be between 40,000 BOE/d and 50,000 BOE/d.
Zacks Rank
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 consider better-ranked players in the energy sector such as Swift Energy Co. (SFY), Helmerich & Payne, Inc. (HP) and Cabot Oil & Gas Corporation (COG). All these stocks currently sport a Zacks Rank #1 (Strong Buy).
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