Marathon Oil is an energy company engaged globally in oil and gas exploration and production (E&P). The company has more than 1.6 bboe of proved reserve and approximately 400 mboed (million barrels of oil equivalents per day) of production, including over 40 mboed from oil sands.
Marathon Oil's operations supply liquid hydrocarbons and natural gas to the growing world energy markets. In June 2011, the company completed the spin-off of its refining, marketing and transportation business, now known as Marathon Petroleum Corp.
The Houston, Texas-based company is on track to increase oil and liquids production significantly in unconventional plays onshore North America and has spent more than $4.2 billion since the fourth quarter of 2011 on two transactions in the Eagle Ford, making this prolific liquids-rich play its largest core asset.
Marathon Oil would acquire 20,000 net acres in the Eagle Ford, mostly in the heart of the liquids-rich window, including 7 mboed of current production (70 percent liquids), which could increase to 9-10 mboed by the end of the year. Marathon's average working interest is 90 percent, and 45 percent of the acreage is held by production.
For the first quarter, adjusted earnings were 67 cents a share, below the consensus estimate of 87 cents a share and down 24 percent from a year ago on weaker North American price realizations and an unfavorable mix of production from higher tax jurisdictions. The company had a solid quarter operationally with the E&P segment delivering production available for sale at an average 371,000 barrels of oil equivalent per day (boed).
For the second quarter, Marathon Oil forecasts production available for sale to be between 350,000 and 365,000 boed, excluding Libya. The company estimates net synthetic crude oil production for the quarter will be between 38,000 and 43,000 barrels per day, or bbld.
For fiscal 2012, Marathon Oil sees anticipated E&P production available for sale to be between 360,000 and 380,000 boed.
"We expect earnings of $2.1 billion this year, or $3.02/ share, and $2.8 billion next year, or $3.89/share. We estimate operating cash flow of $5.1 billion this year and $4.5 billion next year, and EBITDA of $9.0 billion this year and $9.3 billion," Oppenheimer analyst Fadel Gheit wrote in a note to clients.
Gheit says the shares are trading at 5.8 times to price to earnings and 3.3 times price to cash flow based on 2012 consensus, a discount of 47 percent and 21 percent, respectively, compared to its peers of large-cap E&Ps.
The recent fall in stock prices makes it compelling and attractive. Shares of Marathon Oil declined 21 percent year-to-date versus a 14 percent drop for large E&P peers and a 3 percent gain for the S&P 500. They were trading more than 50 percent off its 52-week high and 28 percent above the low, compared to 33 percent and 17 percent for peers and 9 percent and 21 percent for the S&P. Providing quality reviews, articles and writings on crude oil, energy and gas online.
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