Marathon Oil Misses Earnings and Revenues due to higher North America Costs

Leading integrated oil and gas firm Marathon Oil Corporation (MRO) reported weak first quarter profits, given the rise in exploration costs. The company announced earnings (excluding special items) of 51 cents per share, far below the Consensus Estimate of 71 cents and the first quarter 2012 level of 67 cents.

Revenues at $4,106.0 million were up 1.6% year over year due to robust volumes from key resource plays. However, it was below the Consensus Estimate of $4,259.0 million

Segmental Performance

North America Exploration and Production (E&P): Loss from the segment totaled $59.0 million during the quarter compared to a profit of $104.0 million in the previous-year period. This was mainly on account of increased exploration costs, which skyrocketed 310.4% to $435.0 million. Lower crude oil realization was also responsible for the loss.

International E&P: Income from the segment was up 11.3% year over year, from $407.0 million to $453.0 million, buoyed by stronger oil price realizations from United Kingdom.

Marathon Oil reported production (available for sale) of 471,000 oil-equivalent barrels per day (BOE/d) from all segments, reflecting a 15.2% increase from 409,000 BOE/d achieved in the first quarter of 2012. This primarily reflects improved output in Marathon’s U.S. resource plays.

Oil Sands Mining: Synthetic crude oil sales volumes in the oil sands business improved 15.9% year over year to 51,000 barrels per day. This was aided by high bitumen production rate from the Jack Pine and Muskeg River mines. As a result, Marathon’s Oil Sands Mining segment recorded a profit of $38.0 million remaining flat year over year.

Capital Expenditure

During the quarter, Marathon Oil spent $1,270.0 million on capital programs (94.1% on E&P).

Guidance

Marathon Oil expects full year volumes to be between 405,000 and 425,000 BOE/d.

Rank

Marathon Oil currently retains a 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, there are other energy firms that are expected to perform well in the coming 1 to 3 months. These include EPL Oil & Gas Inc. (EPL) with a Rank #1 (Strong Buy), and McMoRan Exploration Co. (MMR) and Stone Energy Corporation (SGY) with a Rank #2 (Buy).

 

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