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Part 1 – Introduction
texas energy exploration corp. marathon oil co. (New York Stock Exchange: NYSE: MRO) released its second quarter 2023 results on August 2, 2023.
notes: This article updates my June 6, 2023 article. I’ve been following MRO on Seeking Alpha since December 2020.
The company has a multi-basin portfolio in the United States. In addition, MRO also produces oil from Equatorial Guinea in West Africa.
The company expects Equatorial Guinea’s financials to improve significantly in 2024 as the old Henry Hub contract expires and global LNG exposure increases.
notes: MRO owns a 63% working interest in the Alba field and an 80% working interest in Block D under a production sharing contract. In addition, MRO owns a 52% interest in Alba Plant LLC, accounted for as an equity method investment, which uses an onshore liquefied petroleum gas processing plant on Bioko Island.
Repair and overhaul assets Map Q2 2023 (MRO Demo)
2023 1st to 2nd Quarter Performance Overview
Marathon Oil reports second-quarter 2023 adjusted net income per share of $0.48, Compared with $1.32 a year ago, it beat analysts’ expectations. The decline was due to lower U.S. oil production and higher production costs.
The company reported revenue of $1.513 billiondown 34.3% This was an increase from sales of $2.303 billion in the same period last year.Company Maintains Quarterly Dividend $0.10 per share and execute $372 million Share repurchases in the second quarter.
Marathon Oil Domestic Production 399K barrel Compared to last year’s 343K Boepd. Free cash flow for the second quarter of 2023 is $442 million.
For the full year 2023, the company’s total oil equivalent production trend is above the midpoint of the annual guidance range.
MRO Q2 2023 Highlights (MRO Demo)
2 – Stock performance
A quick one-year comparison with some E&Ps (mostly domestic) shows that MRO is lagging the industry and is on the rise 6% On a yearly basis.
3 – Investment Thesis
Marathon Petroleum Corporation is an attractive exploration and production company and an important exploration and production producer in the United States. 89.2% % of total oil equivalent production in the second quarter of 2023 comes from the United States (of which 51.8% Oil). Provides solid support for the company’s long-term prospects.
I think the recent acquisition of Ensign Resources’ Eagle Ford Assets was a good decision and it has delivered impressive results with 156 Boepd in 2Q23.
Marathon Oil acquired 130,000 net acres (99% operating, 97% working interest) from Ensign Natural Resources across Live Oak, Bee, Karnes and Dewitt counties, across Eagle Ford’s condensate, wet gas and Dry gas window. Production in Q4 2022 is expected to be 67,000 net boe (22,000 net boed). Marathon Oil believes production will remain flat in the fourth quarter and will sell about 1 rig and 35 to 40 wells a year.
Additionally, oil prices have been bullish since July and support steady cash flow generation.
On the downside, the company’s dividend is fairly low, with a dividend yield of 1.5%.
MRO 1 Year Brent vs NG Chart (Fun Trading Stock Charts)
Therefore, I recommend trading in LIFO for approximately 45-50% Your position can take advantage of these fluctuations while maintaining a core long-term position.
CEO Lee Tillman said in the conference call:
We delivered another very strong quarter across all fronts, highlighted by sequential growth in our cash flow from operations, free cash flow and total company oil and oil equivalent production. We delivered approximately $530 million in free cash flow in the second quarter, a substantial increase from the first quarter due to strong execution, improving production trends and catch-up in EG’s cash distribution.
Marathon Oil – Second Quarter 2023 Financial Statements – Raw Data
| marathon oil | Q2 2022 | 3Q22 | Q4 2022 | 1Q23 | Q2 2023 |
| Contract revenue (millions of dollars) | 2,168 | 2,008 | 1,603 people | 1,567 | 1,484 |
| Revenue and others (millions of dollars) | 2,303 people | 2,247 | 1,733 | 1,680 | 1,513 |
| Net profit (millions of dollars) | 966 | Chapter 817 | Chapter 525 | Chapter 417 | Chapter 287 |
| EBITDA in millions of dollars | 1,608 | 1,333 | 1,574 | 1,025 | 988 |
| Diluted earnings per share | 1.37 | 1.22 | 0.82 | 0.66 | 0.47 |
| Operating cash flow ($ million) | 1,678 | 1,556 | 1,127 | Chapter 865 | 1,076 |
| Capex ($ million) | Chapter 355 | Chapter 430 | Chapter 333 | Chapter 532 | Chapter 634 |
| Free Cash Flow ($M) | 1,323 | 1,126 | Chapter 794 | Chapter 333 | Chapter 442 |
| Total cash in millions of dollars | 1,162 | 1,109 people | Chapter 334 | 178 | 215 |
| Long-Term Debt ($M) | 3,982 | 3,981 | 5,923 | 5,854 | 5,855 |
| Dividend per share (USD/share) | 0.08 | 0.09 | 0.10 | 0.10 | 0.10 |
| Shares outstanding (diluted), unit: million | 705 | Chapter 672 | Chapter 639 | 629 | 615 |
| oil production | Q2 2022 | 3Q22 | Q4 2022 | 1Q23 | Q2 2023 |
| Oil equivalent production (K Boe/d) | Chapter 343 | Chapter 352 | Chapter 333 | Chapter 396 | Chapter 399 |
| U.S. onshore crude oil price (USD/barrel) | 110.10 | 93.67 | 84.29 | 74.69 | 72.49 |
source: marathon oil release.
Part II – Analysis: Revenue, Earnings Details, Free Cash Flow, Debt, and Oil & Gas Production
1 – Total revenue of $1.513 billion in Q2 2023
MRO Quarterly Revenue History (fun trade)
Revenue for the second quarter was $1.513 billiondown 34.3% Compared with the same period last year and the same period 9.9% in turn.
The total cost for the second quarter of 2023 is $1.059 billion The same period last year was 1.009 billion US dollars.CFO of Marathon Oil $1.076 billion Sales in the second quarter were down sharply from $1.678 billion a year earlier.
1.1 – US Exploration and Production
The segment reported revenue of $365 millionIt was down from $846 million a year earlier due to lower oil production and higher costs, but was partly made up by higher production.
1.2 – International Exploration and Development
In Equatorial Guinea, the company reported earnings of $30 million That compares with $160 million a year earlier. Lower production in the quarter contributed to the lower earnings.
2 – Ordinary free cash flow of $442 million in the second quarter of 2023
MRO Quarterly Free Cash Flow History (fun trade)
notes: General free cash flow is cash from operating activities minus capital expenditures.
Free cash flow for the trailing twelve months was $2.695 billion2Q23 free cash flow is $442 million. Dane Whitehead said on the conference call:
The second quarter was a huge financial quarter for us as we generated $531 million in adjusted free cash flow and returned $434 million in capital to shareholders. Shareholder distributions increased by 10% compared to the first quarter. Importantly, we expect further improvement in financial delivery in the second half of the year.
The quarterly dividend was maintained at $0.10 per share or dividend yield 1.48%which is particularly low for this industry.
3 – 399K Boepd oil equivalent production in Q2 2023
MRO Quarterly Production and U.S. Production History (fun trade)
3.1 – US Section
U.S. total output (356K barrels) approximately 51.8% Oil or 181K Bopd.
The output of Eagle Ford increased significantly year-on-year, of which 156K barrels pumping huge 85.7% Year-over-year growth after the acquisition of Ensign.
However, the Bakken yield is 108K barrels Compared with 114K Boepd in the same period last year.Finally, the output for Oklahoma is 50K barrels/daylower than the level of 56K Boepd in the same period last year.
The US unit production cost is $5.88 per barrel second quarter.
- Marathon Oil’s average realized liquids price (crude oil and condensate) is $72.49 The price per barrel dropped from US$110.10 in the same period last year.
- Average Realized Natural Gas Prices Decrease 72.4% YoY to $1.89 Per Macf.
- Realized 53.6% drop in average LNG price $18.72 a barrel.
MRO Production by Market Segment in Q1 and Q2 2023 (fun trade)
MRO highlights for each basin (MRO Demo)
3.2 – Equatorial Guinea
Yield is 43K barrels In the second quarter of 2023, down from 60,000 barrels per day last year.
The average liquid price for a marathon is $53.64 barrel, drop 32.7% From the same period last year.The average price realized for natural gas and natural gas liquids is $0.24 per thousand cubic feet and 1 A barrel, unchanged from a year ago.
On March 30, 2023, Marathon Oil signed an HOA with Chevron (CVX) and the Republic of Equatorial Guinea to advance the following phases (Phase II and Phase III) of the Equatorial Guinea Regional Gas Megahub (GMH) development. The first phase has been completed. The second phase will substantially increase MRO Global’s LNG risk and cash flow (see chart below).
MRO EG Regional Gas Center (MRO Demo)
3.3 – Oil and gas prices
Marathon Oil’s average realized liquids price (crude oil and condensate) is $72.49 The price per barrel was down from $110.10 a year earlier.
The average price of LNG realized as $18.72 a barrel.
In addition, the average realized price of natural gas is $1.89 per thousand cubic feet in the second quarter of 2023.
MRO Quarterly Oil and Gas Prices (fun trade)
4 – Net debt of $5.64 billion in Q2 2023
MRO Quarterly Cash and Debt History (fun trade)
Value of cash and cash equivalents owned by MRO as of June 30, 2023 $215 million and long-term debt 5.855 billionincluding the current.
Note: The company redeemed $131 million of its 8.125% senior notes in July, reducing year-to-date debt to $200 million.
Marathon Oil’s total liquidity at the end of the second quarter was $2.1 billion. Available borrowing on the company’s revolving credit facility has been extended until 2027.
The company’s debt-to-capital ratio is 34.2.
5 – 2023 guidance unchanged
Marathon Oil announced $1.9 to $2 billion 2023 Capital Expenditure Budget.
Marathon Oil expects oil output 190K net BOPD At the midpoint of the 2023 guidance range.
The company’s total oil equivalent production is expected to be 395K Net boepd at midpoint of guidance, including downtime related to planned second quarter Equatorial Guinea overhaul.
In addition, Marathon expects oil production at 185K-195K barrel per day, with 177K-185K US barrels per day.
MRO 2023 Production and Capital Expenditure Guidance (MRO Demo)
CEO Lee Tillman said in the conference call:
Specifically, for the third quarter, we expect total company oil and oil-equivalent production to be at or above the upper end of our annual guidance range and then to decline slightly sequentially into the fourth quarter. For full-year 2023, we reiterated our production guidance range for future trends above the midpoint of our oil equivalent guidance.
Technical analysis (short term) and commentary
MRO TA short-term chart (Fun Trading Stock Charts)
notes: The chart is adjusted for dividends.
MRO stock forms an ascending triangle pattern with resistance at $27.25 and support in $25.75. RSI is now 66 And it’s near overbought levels, suggesting a pullback could be imminent.
Rising channel patterns, or ascending channels, are short-term bullish as stocks move higher within the ascending channel, but these patterns often form as continuation patterns during long-term downtrends. An ascending channel pattern is usually accompanied by lower prices, but only after a break below the lower trendline.
The trading strategy is to sell approximately 45-50% Your MRO position is between $27.2 and $27.50, may have higher resistance $28.50.
Instead, I recommend buying MRO stock between $25.5 and $26a potential lower support level $25.1.
Follow oil and gas prices like a hawk.
warn: TA charts must be updated frequently to be relevant. This is what I do in my stock tracker. The validity period of the image above may be about one week. Remember, the TA chart is just a tool to help you take the right strategy. This is not the way to see the future. No one and nothing is fine.
