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Factors Likely to Impact Marathon Oil (MRO) in Q3 Earnings

Higher commodity price realizations are expected to have boosted Marathon Oil's (MRO) Q3 earnings and cash flows.

This story originally appeared on Zacks

Marathon Oil Corporation MRO is set to release third-quarter 2021 results on Nov 3,after the closing bell. The current Zacks Consensus Estimate for the to-be-reported quarter’s earnings is 31 cents per share and the same for revenues is $1.32 billion.

- Zacks

Let’s delve into the factors that might have impacted this independent oil and gas producer’s performance in the September quarter.

But it’s worth taking a look at the company’s previous-quarter performance first.

Highlights of Q2 Earnings & Surprise History

In the last reported quarter, this Houston, TX-based upstream player posted an adjusted net income per share of 22 cents, beating the Zacks Consensus Estimate of 18 cents. In the year-ago period, the company had incurred a loss per share of 60 cents.

Marathon Oil’s bottom line was favorably impacted by stronger liquids realizations and better-than-expected domestic production. Volumes in the United States came in at 283,000 barrels of oil equivalent per day (BOE/d), beating the Zacks Consensus Estimate of 272,000 BOE/d.

The company reported revenues of $1.1 billion that jumped from the year-ago quarter’s sales of $272 million but missed the Zacks Consensus Estimate by 0.4%. This was due to the lower-than-expected international segment production available for sale, which at 65,000 BOE/d fell short of the Zacks Consensus Estimate by 3,000 BOE/d.

Marathon Oil’s earnings beat the Zacks Consensus Estimate in three of the last four quarters and met the mark in the remaining one, delivering an earnings surprise of 30.94%, on average. This is depicted in the graph below:

Marathon Oil Corporation Price and EPS Surprise

Marathon Oil Corporation Price and EPS Surprise

Marathon Oil Corporation price-eps-surprise | Marathon Oil Corporation Quote

Factors to Consider

According to the U.S. Energy Information Administration, in the months of July, August and September during 2020, the average monthly WTI crude price was $40.71, $42.34 and $39.63 per barrel, respectively. In 2021, average prices were $72.49 in July, $67.73 in August and $71.65 in September, reflecting an increase year over year.

Data shown on the natural gas front is even better. In the third quarter of 2020, U.S. Henry Hub average natural gas prices were $1.77 per MMBtu in July and rose to $2.30 in August before falling to $1.92 in September. Coming to 2021, the fuel was trading at $3.84, $4.07 and $5.16 per MMBtu in July, August and September, respectively. The bottomline is that natural gas traded higher in all the three months.

This price rise is likely to boost the third-quarter results of the upstream operator Marathon Oil.

On a bearish note, the company is likely to have faced a decline in sales. Marathon Oil’s net sales volumes totaled 348,000 barrels of oil equivalent per day (BOE/d) in the second quarter, down 11.22% from the year-ago quarter’s output of 392,000 BOE/d. This year-over-year drop is most likely to have continued in the third quarter due to fewer wells brought to sales.

The Zacks Consensus Estimate for total sales volumes is pegged at 346,000 BOE/d, indicating a 6% dip from the year-ago quarter's reported figure. This downside is expected to have hurt the company’s third-quarter revenues and cash flows.

What Does Our Model Say?

The proven Zacks model does not conclusively predict a beat for Marathon Oil this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Marathon  Oil has an Earnings ESP of -1.84%.

Zacks Rank: Marathon Oil currently sports a Zacks Rank of 1.

Stocks to Consider

While an earnings beat looks uncertain for Marathon Oil, here are some firms from the energy space that you may want to consider on the basis of our model:

Whiting Petroleum Corporation WLL has an Earnings ESP of +5.63% and is Zacks #1 Ranked, currently. The firm is scheduled to release earnings on Nov 4.

Targa Resources Corp. TRGP has an Earnings ESP of +15.01% and a Zacks Rank of 1 at present. The firm is scheduled to release earnings on Nov 4.

TC Energy Corporation TRP has an Earnings ESP of +2.53% and is presently Zacks #3 Ranked. The firm is scheduled to release earnings on Nov 5.

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Marathon Oil Corporation (MRO): Free Stock Analysis Report


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