{"id":56527,"date":"2023-09-03T18:06:20","date_gmt":"2023-09-03T22:06:20","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/marathon-oil-low-dividend-payout-is-not-helping-the-long-narrative-nysemro\/"},"modified":"2023-09-03T18:06:29","modified_gmt":"2023-09-03T22:06:29","slug":"marathon-oil-low-dividend-payout-is-not-helping-the-long-narrative-nysemro","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=56527","title":{"rendered":"Marathon Oil: Low Dividend Payout Is Not Helping The Long Narrative (NYSE:MRO)"},"content":{"rendered":"
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Part I – Introduction<\/h2>\n

Texas-based energy explorer Marathon Oil Corporation<\/strong> (NYSE: NYSE:MRO<\/span>) released its second-quarter 2023 results on August 2, 2023. <\/p>\n

Note:<\/strong> This article updates my June 6, 2023 article. I have followed MRO on Seeking Alpha since Dec. 2020.<\/p>\n

The company owns a multi-basin portfolio in the USA. Furthermore, MRO is also producing oil from Equatorial Guinea, West Africa.<\/p>\n

The company expects a significant financial uplift in Equatorial Guinea in 2024 from increasing global LNG exposure due to legacy Henry Hub contracts expiration.<\/p>\n

Note:<\/strong> MRO owns a 63% operated working interest under a production sharing contract in the Alba field and an 80% operated working interest in Block D. Also, MRO owns a 52% interest in Alba Plant LLC, accounted for as an equity method investment, which uses an onshore LPG processing plant located on Bioko Island.<\/p>\n

\"Map\"<\/span>
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MRO Assets Map 2Q23 <\/span>(MRO Presentation)<\/span><\/p>\n<\/figcaption><\/figure>\n

1 – 2Q23 Results Snapshot<\/h3>\n

Marathon Oil Corporation reported a second-quarter 2023 adjusted net income per share of $0.48,<\/strong> which beat analysts’ expectations compared to $1.32 a year ago. The decrease was due to weaker oil realizations and higher production costs in the USA.<\/p>\n

The company reported revenues of $1.513 billion<\/strong>, down 34.3%<\/strong> from the year-ago sales of $2.303 billion. The company maintained a quarterly dividend of $0.10<\/strong> per share and executed $372 million<\/strong> in share repurchases in the second quarter.<\/p>\n

Marathon Oil’s domestic production of 399K Boepd<\/strong> compared to 343K Boepd last year. Free cash flow in 2Q23 was $442 million.<\/strong><\/p>\n

The full-year 2023 total Company oil equivalent production is trending above the midpoint of the annual guidance range.<\/p>\n

\"Table\"<\/span>
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MRO 2Q23 Key Takeaways (MRO Presentation)<\/span><\/p>\n<\/figcaption><\/figure>\n

2 – Stock performance<\/h3>\n

A quick one-year comparison with a few E&P (primarily domestic) shows that MRO underperformed the industry and is up 6%<\/strong> on a one-year basis.<\/p>\n

\"Chart\"
Data by YCharts<\/figcaption><\/figure>\n

3 – Investment thesis<\/h3>\n

Marathon Oil is an attractive E&P company and a significant U.S. E&P producer, with 89.2%<\/strong> of the total oil equivalent production in 2Q23 coming from the USA (with 51.8%<\/strong> oil). It provides solid support for the company’s long-term outlook. <\/p>\n

I regard the recent acquisition Of Eagle Ford Assets Of Ensign Resources as a good decision, which has already delivered impressive results, with 156 Boepd in 2Q23.<\/p>\n

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The 130,000 net acres (99% operated, 97% working interest) Marathon Oil is acquiring from Ensign Natural Resources span Live Oak, Bee, Karnes, and Dewitt Counties across the condensate, wet gas, and dry gas phase windows of the Eagle Ford. Estimated fourth quarter 2022 oil equivalent production is 67,000 net boed (22,000 net bopd of oil). Marathon Oil believes it can hold fourth quarter production flat with approximately 1 rig and 35 to 40 wells to sales per year.<\/p>\n<\/blockquote>\n

Also, oil prices have been bullish since July and support a solid cash flow generation.<\/p>\n

On the negative side, the company dividend is quite low, with a dividend yield of 1.5%.<\/strong> <\/p>\n

\"Chart\"<\/span>
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MRO 1-Year Chart Brent versus NG (Fun Trading StockCharts)<\/span><\/p>\n<\/figcaption><\/figure>\n

Thus, I recommend trading LIFO for about 45-50%<\/strong> of your position to take advantage of those fluctuations while keeping a core long-term position. <\/p>\n

CEO Lee Tillman said in the conference call:<\/p>\n

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we delivered another very strong quarter on all fronts, highlighted by sequential increases to our cash flow from operations, free cash flow and our total company oil and oil-equivalent production. We delivered around $530 million of free cash flow during the second quarter, with a significant increase from first quarter driven by strong execution and improving production trend and a catch-up in EG cash distributions.<\/p>\n<\/blockquote>\n

Marathon Oil – Financial Table 2Q23 – The Raw Numbers<\/h2>\n

<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n<\/colgroup>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Marathon Oil<\/strong><\/td>\n2Q22<\/strong><\/td>\n3Q22<\/strong><\/td>\n4Q22<\/strong><\/td>\n1Q23<\/strong><\/td>\n2Q23<\/strong><\/td>\n<\/tr>\n
Revenues from contracts in $ million<\/td>\n2,168<\/td>\n2,008<\/td>\n1,603<\/td>\n1,567<\/td>\n1,484<\/td>\n<\/tr>\n
Revenues and others in $ Million<\/td>\n2,303<\/td>\n2,247<\/td>\n1,733<\/td>\n1,680<\/td>\n1,513<\/td>\n<\/tr>\n
Net Income in $ Million<\/td>\n966<\/td>\n817<\/td>\n525<\/td>\n417<\/td>\n287<\/td>\n<\/tr>\n
EBITDA $ Million<\/td>\n1,608<\/td>\n1,333<\/td>\n1,574<\/td>\n1,025<\/td>\n988<\/td>\n<\/tr>\n
EPS diluted in $\/share<\/td>\n1.37<\/td>\n1.22<\/td>\n0.82<\/td>\n0.66<\/td>\n0.47<\/td>\n<\/tr>\n
Operating cash flow in $ Million<\/td>\n1,678<\/td>\n1,556<\/td>\n1,127<\/td>\n865<\/td>\n1,076<\/td>\n<\/tr>\n
CapEx in $ Million<\/td>\n355<\/td>\n430<\/td>\n333<\/td>\n532<\/td>\n634<\/td>\n<\/tr>\n
Free cash flow in $ Million<\/td>\n1,323<\/td>\n1,126<\/td>\n794<\/td>\n333<\/td>\n442<\/td>\n<\/tr>\n
Total cash $ million<\/td>\n1,162<\/td>\n1,109<\/td>\n334<\/td>\n178<\/td>\n215<\/td>\n<\/tr>\n
Long-Term Debt in $ million<\/td>\n3,982<\/td>\n3,981<\/td>\n5,923<\/td>\n5,854<\/td>\n5,855<\/td>\n<\/tr>\n
Dividend per share in $\/share<\/td>\n0.08<\/td>\n0.09<\/td>\n0.10<\/td>\n0.10<\/td>\n0.10<\/td>\n<\/tr>\n
Shares outstanding (diluted) in Million<\/td>\n705<\/td>\n672<\/td>\n639<\/td>\n629<\/td>\n615<\/td>\n<\/tr>\n
Oil Production<\/strong><\/td>\n2Q22<\/strong><\/td>\n3Q22<\/strong><\/td>\n4Q22<\/strong><\/td>\n1Q23<\/strong><\/td>\n2Q23<\/strong><\/td>\n<\/tr>\n
Oil Equivalent Production in K Boe\/d<\/td>\n343<\/td>\n352<\/td>\n333<\/td>\n396<\/td>\n399<\/td>\n<\/tr>\n
US Onshore Crude oil price ($\/b)<\/td>\n110.10<\/td>\n93.67<\/td>\n84.29<\/td>\n74.69<\/td>\n72.49<\/td>\n<\/tr>\n<\/table>\n

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