Key Highlights before Marathon Oil's 2Q15 Earnings
Marathon Oil’s market performance
Since January 1, Marathon Oil Corporation (MRO) has underperformed the upstream energy industry and most of its peers. During this period, Marathon Oil’s stock has posted a -8.5% return. Year-to-date, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) has posted a -5.9% return. Marathon Oil accounts for 1.44% of XOP.
Marathon Oil’s performance relative to industry peers
Since the beginning of the year, Marathon Oil has underperformed its industry peers Continental Resources (CLR) and Concho Resources (CXO). CLR has returned 3.5% since the start of the year. CXO, which has a market capitalization close to MRO’s, returned 10.9% year-to-date.
Meanwhile, in 2015, Marathon Oil did outperform some of its bigger market capitalization peers like Pioneer Natural Resources (PXD), which has produced a -9% return since the start of the year.
Why energy stock returns have been low
Most energy stocks have tumbled since June 2014, when crude oil started to crash. This negatively affected oil producers’ revenues and margins. Many upstream energy companies cut expansion investment.
The US oil rig count has slumped since September 2014, and approximately 56% of these rigs have been idle since September. This also explains why upstream industry ETF XOP’s returns have been so poor.
What can change this underperformance?
If energy prices start rising, upstream stocks may start to look up again, as they drill more and as production increases. Investors may note that the Energy Select Sector SPDR ETF (XLE), which tracks an index comprising a broader set of energy stocks, continues to produce negative returns in 2015.
Marathon Oil is slated to announce its 2Q15 earnings on August 4. In this series, we’ll check out its recent operational and financial performance, and we will also see what the market expects from the company in the second quarter of 2015.
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