Houston, TX-based Marathon Oil Corp. MRO – a leading upstream energy firm – posted second quarter adjusted loss from continuing operations of 23 cents per share, narrower than the Zacks Consensus Estimate for a loss of 27 cents. The better-than-expected results came thanks to higher production from the U.S. resource plays and cost control initiatives.
However, the bottom line deteriorated considerably from the second-quarter 2014 adjusted earnings of 62 cents amid a freefall in oil prices.
Quarterly revenues of $1,531 million missed the Zacks Consensus Estimate of $1,788 million and also declined from the prior-year quarter level of $2,941 million.
Segmental Performance
North America E&P: Marathon Oil’s North American upstream segment reported a loss of $45 million, compared with a profit of $302 million a year ago. Lower commodity prices hampered the result.
Marathon Oil reported production available for sale of 274,000 oil-equivalent barrels per day (BOE/d), up from 227,000 BOE/d in the second quarter of 2014. The improvement was mainly driven by increased output from the U.S. resource plays.
The company realized liquids (crude oil, condensate and natural gas liquids) price of $45.96 per barrel, significantly lower than the year-earlier quarter level of $86.43 per barrel. Natural gas realizations also decreased 44.8% year over year to $2.76 per thousand cubic feet (Mcf).
International E&P: The segment’s income plunged over 74% year over year to $41 million. Substantially low liquids realizations, reduced sales, falling income from equity interests in Equatorial Guinea – all pulled down the profits.
Marathon Oil reported production available for sale (excluding Libya and Discontinued Operations) of 108,000 BOE/d, down from the 120,000 BOE/d in the second quarter of 2014. The decline in output in Equatorial Guinea on the back of planned turnaround activities hampered growth.
The company realized liquids price of $44.70 per barrel, a 40.7% drop from the year-earlier quarter level of $75.41 per barrel. However, natural gas realizations rose more than 13% year over year to 78 cents per thousand cubic feet (Mcf).
Oil Sands Mining: Marathon’s Oil Sands Mining segment recorded a loss of $77 million compared with profit of $55 million in the year-ago quarter. The underperformance stemmed from lower Synthetic Crude Oil realizations, which came in at $52.46 per barrel, down 44.3% from $94.17 per barrel a year ago.
Also, synthetic crude oil sales volumes in the oil sands business was 25,000 barrels per day, lower than 36,000 barrels per day in the prior-year quarter, mainly attributable to planned turnarounds and unplanned downtime.
Costs & Expenses
The company’s exploration expenses for the quarter came at $111 million, lower than $145 million in the year-earlier quarter. Moreover, Marathon Oil’s total quarterly cost and expenses fell 20.8% to 1,865 million.
Capital Expenditure
During the reported quarter, Marathon Oil spent $678 million on capital programs (96% was on E&P), less than half of the $1,423 million incurred a year ago. The company – like many other oil and gas players including ConocoPhillips COP and Apache Corp. APA – has adjusted its spending plans considerably amid diving crude prices.
Guidance
Marathon Oil expects third-quarter 2015 North America E&P output available for sale in the range of 260,000–270,000 BOE/d, International E&P (excluding Libya and discontinued operations) output in the range of 105,000–115,000 BOE/d and Oil Sands Mining output of 43,000–48,000 BOE/d.
For 2015, the Zacks Rank #3 (Hold) company upwardly revised the lower end of its output target and now sees volumes in the 375,000–390,000 BOE/d band, achieving a 5-7% year over year production growth.
Marathon Oil – which spun off its refining/sales business into a separate, independent and publicly traded company Marathon Petroleum Corp. MPC in 2011 – expects to limit its capital spending for the year to $3,300 million.
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