What's In Store For Marathon Oil (MRO) This Earnings Season?
Zacks Investment Research | Oct 27, 2017 01:13AM ET
Energy explorer Marathon Oil Corporation (NYSE:MRO) is set to release third-quarter 2017 results after the closing bell on Nov 1.
In the last quarter, the Houston, TX-based company reported a wider-than-expected loss on lower production from the U.S. land markets. However, Marathon Oil has topped estimates in three out of the last four quarters with an average beat of 1.57%.
Let’s see how things are shaping up for this announcement.
Which Way are Estimates Treading?
Let’s look at the estimate revisions in order to get a clear picture of what analysts are thinking about the company before earnings release.
The Zacks Consensus Estimate for 2017 for loss for the current quarter has been revised downward by 13.33% over the last 30 days. Further, the Zacks Consensus Estimate for 2017 for loss has also moved south by 10.42% over the last 30 days.
Factors to Consider
Marathon Oil’s strong inventory of development projects poise it for growth in the coming years. The company has been improving the quality of assets and is well positioned to augur production.Optimizing its core Bakken and Oklahoma programs, Marathon Oil expects its 2017 production to grow by approximately 7% with U.S. resource play output increasing by 23-27%. The recent oil sands mining divestiture and Permian acquisitions are expected to boost the company’s prospects.
Marathon Oil recently stated that its third-quarter 2017 average production for sale from the United States will be toward the high end of its guidance despite Hurricane Harvey’s impact. It had guided production of around 230,000-240,000 net barrels of oil equivalent per day (BOE/d).The current Zacks Consensus Estimate for the quarterly output is pegged at 237,000 BOE/d, higher than the 222,000 BOE/d reported in the prior quarter.
The company foresees its global E&P operations, excluding Libya, to produce 345,000-360,000 net BOE/d. The Zacks Consensus Estimate for total sales volume stands at 372,000 BOE/d as against 357,000 BOE/d in second-quarter 2017.
However, the persistent weakness in the commodity price environment is likely weigh on Marathon Oil’s cash flows and revenues. The Zacks Consensus Estimate for average realized gas price in the international markets is pegged at 52 cents per thousand cubic feet (Mcf), lower than the prior quarter figure of 57 cents. The crude price realization in the international markets is estimated at $41.61 per barrel, lower than the $47.04 per barrel recorded in second-quarter 2017. Even for the North American segment, The Zacks Consensus Estimate for crude price realization is pegged at $44.24 per barrel, lower than the $45.81 per barrel in the prior quarter. Lower price realizations may put the company’s earnings under pressure.
Further, 2017 capex budget of $2.2 billion doubles 2016’s level of spending. This might also hurt the near term financials of the company.
Price performance in Q3
During the quarter, Marathon Oil rallied more than 14% outperforming the broader Zacks Investment Research
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