Key for Investors: Marathon Oil’s Earnings Fell in Fiscal 3Q15
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Marathon Oil’s fiscal 4Q15 production guidance
Marathon Oil (MRO) provided its guidance for fiscal 4Q15 in its latest earnings press release on November 4. As the following table shows, its North America production guidance for the next quarter, at its midpoint, is lower than its fiscal 3Q15 production.
As crude oil prices continue to remain low, the company expects to reduce its well completion activities in the Bakken. The Bakken has more expensive exploration and production break-even costs among the unconventional resource shales. In addition, Marathon Oil disposed of natural gas assets in east Texas, north Louisiana, and Wilburton, Oklahoma. This will lead to lower production next quarter.
International production guidance for fiscal 4Q15
In fiscal 4Q15, Marathon Oil’s production outside North America is expected to rise as it adds new wells and executes a wireline intervention program in Equatorial Guinea. Marathon Oil doesn’t expect to resume its Libyan operation soon. Marathon Oil’s OSM (oil sands mining) production could fall in fiscal 4Q15 after planned maintenance activities at the company’s mines.
Overall, its full-year 2015 production guidance is 380,000–390,000 barrels of oil equivalent per day. This is 7% higher than its 2014 production. Pioneer Natural Resources (PXD) is another independent upstream producer. It forecasts a 10%–11% annual growth rate in 2015. In fiscal 3Q15, Pioneer Natural Resources produced 211,000 barrels of oil equivalent—compared to 434,000 barrels of oil equivalent for Marathon Oil. Marathon Oil accounts for 0.9% of the Vanguard Energy ETF (VDE).
Why did Marathon Oil reduce its dividend and capex?
On October 29, Marathon Oil slashed its quarterly dividend to $0.05 per share—compared to a dividend of $0.21 per share in the last quarter. In the press release, Lee M. Tillman, Marathon Oil’s president and CEO, commented that “We believe the revised dividend appropriately addresses the uncertainty of a lower for longer commodity price environment. The decision aligns with our priority of maintaining a strong balance sheet through the cycle and provides us additional capital flexibility to support growth from our deep inventory of investment opportunities in the U.S. resource plays when commodity prices improve.”
The company also lowered its 2015 capex to $3.1 billion. It was 40% lower than the capex in 2014. In 2016, it expects an even lower capex of ~$2.2 billion. As of September 30, Marathon Oil had $5.4 billion in liquidity including $2.4 billion in cash and short-term investments.
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