Shares of leading integrated energy player Marathon Oil Corporation (MRO) fell roughly 7% to hit a 52-week low of $27.16 on Dec 8, 2014. The fall came after West Texas Intermediate (WTI) crude dipped further when oil touched $63.05 per barrel, the lowest level since Jul 16, 2009.
What Led to the Share Price Decline?
It has been an over-supplied oil market especially in the face of lackluster global demand. Plentiful supply of shale oil owing to shale revolution in the U.S has been dragging the WTI crude prices since August this year. On top of that, the international cartel of oil producers’ – Organization of the Petroleum Exporting Countries (OPEC) – decision against an oil production cut on Thanksgiving Day added fuel to the oversupply concern.
Moreover, Morgan Stanley – a U.S. investment bank – recently declared in a report that oil price may fall further in 2015.
These come as a devastating blow for Marathon Oil which has extensive upstream operations. The exploration and production activities especially in the weak crude pricing scenario are not profitable. Hence, investors reacted negatively as reflected by the fall in the share price of the company.
The weak crude pricing environment during July to September this year also affected Marathon Oil’s third-quarter results. The company reported earnings per share of 57 cents, which failed to beat the Zacks Consensus Estimate by a penny.
Zacks Rank
Currently, Marathon Oil carries a Zacks Rank #5 (Strong Sell), implying that the stock will significantly underperform the broader U.S. equity market over the next one to three months.
Meanwhile, one can consider better-ranked players in the energy sector like Murphy USA Inc. (MUSA), SandRidge Mississippian Trust I (SDT) and Sandridge Mississippian Trust II (SDR). All the stocks sport a Zacks Rank #1 (Strong Buy).
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