A Raymond James report reviewed the company's most
recent financial and production numbers.
In an August 2 research note, analyst Pavel Molchanov with Raymond James
reported that against a backdrop of increased production and high cash flow
in Q2/18, Marathon Oil Corp.'s (MRO:NYSE) earnings per share (EPS)
was a miss and the company still has not reinstated a share buyback.
As for overall production, in Q2/18, the first quarter following the sale
of its Libya asset, it was 419 thousand barrels of oil equivalent per day
(419 Mboe/d), higher than Raymond James' expected 411 Mboe/d and at the upper
end of the Marathon's 2018 guidance range of 395–415 Mboe/d, relayed
Molchanov.
In terms of U.S. production, it grew 5% in Q2/18 to 298 Mboe/d. The
Bakken, up 11% to 82 Mboe/d, saw the greatest jump. SCOOP/STACK production
increased 7% to 80 Mboe/d. The Permian was up 7% and the Eagle Ford, 2%.
International volumes increased 6% during the quarter. For Q3/18, production
is expected to be between 395 and 415 Mboe, a 3% quarter-over-quarter drop.
Molchanov indicated that for the second time, Marathon Oil increased its
full year 2018 production, this time to 400–415 MBoe/d. This is despite the
sale in July of three assets cumulatively producing about 5 Mboe/d:
nonoperated Gunflint and Troika in the Gulf of Mexico and a CO2 Waterflood in
West Texas. The company also is divesting of its nonoperated Sarsang and
Atrush blocks, its only Kurdistan assets.
Marathon Oil's Q2/18 adjusted EPS was $0.15, below Raymond James' estimate
of $0.26 and consensus' forecast of $0.20. Molchanov explained,
"Realized liquids pricing drove the miss versus our model, a common
enough story this cycle amid the relentless volatility in crude price
spreads."
The company's Q2/18 operating cash flow was $638 million ($638M), which
"more than covered capital spending," wrote Molchanov. This
compares to Q1/1 cash flow of $638M. In 2018,"we project $1.1 billion
($1.1B) of free cash flow, the highest since 2011, before the refining spinoff."
At Q2/18E, Marathon's cash balance was $1.7B, making it "an excellent
candidate to reinstate share buyback, last seen in H1/14, and following such
peers as Anadarko, Cabot, Devon and Hess. Alas, management is not pulling the
trigger yet, but we haven't given up hope!"
About Marathon Oil in general, Molchanov highlighted that it
differentiates itself by having a significant presence in all four of the
U.S. liquids-rich plays: the Eagle Ford, Bakken, Permian and SCOOP/STACK, the
latter being "our favorite part of the story and with the most room to
surprise."
Raymond James has a Strong Buy rating and a $25 per share target price on
Marathon Oil, whose stock is trading currently at around $20.09 per share.
"The stock offers some of the highest leverage among large caps to our
forecast for oil prices reaching cyclical highs over the medium term,"
added Molchanov.
[NLINSERT]
Disclosure:
1) Doresa Banning compiled this article for Streetwise Reports LLC and
provides services to Streetwise reports as an independent contractor. She or
members of her household own securities of the following companies mentioned
in the article: None. She or members of her household are paid by the
following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors
of Streetwise Reports: None. Click here
for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not
of Streetwise Reports or its officers. The information provided above is for
informational purposes only and is not a recommendation to buy or sell any
security.
4) The article does not constitute investment advice. Each reader is
encouraged to consult with his or her individual financial professional and
any action a reader takes as a result of information presented here is his or
her own responsibility. By opening this page, each reader accepts and agrees
to Streetwise Reports' terms of use and full legal disclaimer.
This article is not a solicitation for investment. Streetwise Reports does
not render general or specific investment advice and the information on
Streetwise Reports should not be considered a recommendation to buy or sell
any security. Streetwise Reports does not endorse or recommend the business,
products, services or securities of any company mentioned on Streetwise
Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers,
employees or members of their families, as well as persons interviewed for
articles and interviews on the site, may have a long or short position in
securities mentioned. Directors, officers, employees or members of their
immediate families are prohibited from making purchases and/or sales of those
securities in the open market or otherwise from the time of the interview or
the decision to write an article, until one week after the publication of the
interview or article.
Disclosures from Raymond James, Marathon Oil Corp., August 2, 2018
ANALYST INFORMATION
Analyst Compensation: Equity research analysts and associates at
Raymond James are compensated on a salary and bonus system. Several factors
enter into the compensation determination for an analyst, including i)
research quality and overall productivity, including success in rating stocks
on an absolute basis and relative to the local exchange composite Index
and/or a sector index, ii) recognition from institutional investors, iii)
support effectiveness to the institutional and retail sales forces and
traders, iv) commissions generated in stocks under coverage that are
attributable to the analyst's efforts, v) net revenues of the overall Equity
Capital Markets Group, and vi) compensation levels for analysts at competing
investment dealers.
The views expressed in this report accurately reflect the personal
views of the analyst(s) covering the subject securities. No part of said
person's compensation was, is, or will be directly or indirectly related to
the specific recommendations or views contained in this research report. In
addition, said analyst has not received compensation from any subject company
in the last 12 months.
RAYMOND JAMES RELATIONSHIP DISCLOSURES
Raymond James & Associates makes a market in shares of MRO.
Additional Risk and Disclosure information, as well as more information
on the Raymond James rating system and suitability categories, is available here.
