Marathon Oil Corporation (MRO) Bundle
Understanding Marathon Oil Corporation (MRO) Revenue Streams
Understanding Marathon Oil Corporation’s Revenue Streams
The primary revenue sources for Marathon Oil Corporation include sales of crude oil and condensate, natural gas liquids (NGLs), and natural gas, including liquefied natural gas (LNG). The company operates primarily in the United States and has international operations in Equatorial Guinea.
Revenue Breakdown by Product Type
| Product Type | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | 9M 2024 Revenue (in millions) | 9M 2023 Revenue (in millions) |
|---|---|---|---|---|
| Crude Oil and Condensate | $1,350 | $1,408 | $3,846 | $3,788 |
| NGLs | $177 | $177 | $491 | $502 |
| Natural Gas | $69 | $112 | $220 | $337 |
| Other | $19 | $3 | $31 | $16 |
| Total Revenue | $1,615 | $1,700 | $4,588 | $4,643 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth for the third quarter of 2024 compared to the same period in 2023 shows a decrease of approximately 5.0% in total revenue, from $1,700 million in Q3 2023 to $1,615 million in Q3 2024. For the nine months ended September 30, total revenue decreased by approximately 1.2% from $4,643 million in 2023 to $4,588 million in 2024.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the U.S. operations generated $4,588 million in revenue, while the international segment contributed $357 million. This indicates that the U.S. segment accounts for approximately 92.8% of total revenue.
Analysis of Significant Changes in Revenue Streams
In 2024, revenue from the international segment increased significantly due to the introduction of LNG sales, which generated $72 million in revenue in Q3 2024. This contrasts with the previous year when LNG sales were negligible. Additionally, the drop in revenue from crude oil and natural gas sales in the U.S. was attributed to lower price realizations despite increased sales volumes, highlighting a decrease of $85 million in domestic revenue from Q3 2023 to Q3 2024.
Overall, while domestic revenue faced challenges, the international segment's growth through LNG sales represents a strategic shift in revenue generation for the company.
A Deep Dive into Marathon Oil Corporation (MRO) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit was approximately $1,075 million, resulting in a gross profit margin of 21.7% compared to 24.0% for the same period in 2023.
Operating Profit Margin: The operating profit for the nine months ended September 30, 2024, was around $933 million, yielding an operating profit margin of 18.9%, down from 22.1% in 2023.
Net Profit Margin: The net profit for the same period was $933 million, giving a net profit margin of 18.9%, compared to 21.4% in the previous year.
Trends in Profitability Over Time
In 2024, the company experienced a decline in profitability metrics. The gross profit margin decreased from 24.0% in 2023 to 21.7% in 2024. Similarly, the operating profit margin fell from 22.1% to 18.9%.
Comparison of Profitability Ratios with Industry Averages
The gross profit margin of 21.7% is below the industry average of 25%, while the operating profit margin of 18.9% also lags behind the industry average of 21%.
| Metric | 2024 | 2023 | Industry Average |
|---|---|---|---|
| Gross Profit Margin | 21.7% | 24.0% | 25.0% |
| Operating Profit Margin | 18.9% | 22.1% | 21.0% |
| Net Profit Margin | 18.9% | 21.4% | 20.0% |
Analysis of Operational Efficiency
The decrease in gross margin from 24.0% to 21.7% indicates challenges in cost management. The production expense increased to $660 million for the nine months ended September 30, 2024, compared to $660 million in 2023, reflecting an increase in workover activities and higher costs due to increased net sales volumes.
The production expense rate in the U.S. segment was $5.97 per barrel of oil equivalent (boe) for the third quarter of 2024, compared to $5.07 per boe for the same period in 2023, indicating an increase of 18% in operational costs.
| Expense Type | 2024 (in millions) | 2023 (in millions) | Increase/Decrease (%) |
|---|---|---|---|
| Production Expense | $660 | $660 | 0% |
| Shipping, Handling & Other Operating | $548 | $508 | 7.9% |
| General & Administrative | $273 | $257 | 6.2% |
Debt vs. Equity: How Marathon Oil Corporation (MRO) Finances Its Growth
Debt vs. Equity: How Marathon Oil Corporation Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Marathon Oil Corporation reported a total long-term debt of $4.6 billion. The company also had $180 million in outstanding commercial paper borrowings. There were no outstanding borrowings under the company's Revolving Credit Facility at this date.
Debt-to-Equity Ratio and Comparison to Industry Standards
Marathon Oil's total debt-to-capital ratio stood at 22% as of September 30, 2024. This ratio is significantly lower than the industry average, which typically hovers around 30-40%, indicating a more conservative approach to leveraging.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
On March 28, 2024, the company completed a public offering of $1.2 billion in unsecured senior notes, which included $600 million of 5.30% senior notes due April 1, 2029, and $600 million of 5.70% senior notes due April 1, 2034. These proceeds were utilized to repay the outstanding balance on the Term Loan Facility.
Additionally, Marathon Oil redeemed $400 million of bonds on July 1, 2024, using short-term borrowings. The company’s credit ratings are currently stable, reflecting a solid financial position despite market volatility.
How the Company Balances Between Debt Financing and Equity Funding
Marathon Oil maintains a balanced approach between debt and equity financing. As of September 30, 2024, the total stockholders' equity was approximately $11.4 billion, demonstrating a strong equity base to support its operations and growth. The company has also authorized a share repurchase program with a remaining authorization of $1.8 billion.
| Category | Amount (in billions) |
|---|---|
| Total Long-Term Debt | $4.6 |
| Outstanding Commercial Paper | $0.18 |
| Total Stockholders' Equity | $11.4 |
| Debt-to-Capital Ratio | 22% |
| Remaining Share Repurchase Authorization | $1.8 |
Assessing Marathon Oil Corporation (MRO) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of September 30, 2024, stands at 0.69, calculated from current assets of $1,484 million and current liabilities of $2,166 million. The quick ratio, which excludes inventories, is approximately 0.61, derived from liquid assets of $1,318 million (current assets minus inventories). This indicates a potential liquidity challenge, as both ratios fall below the generally accepted benchmark of 1.0.
Analysis of Working Capital Trends
The company's working capital position has shown a decline, with working capital calculated at ($682 million) as of September 30, 2024, down from ($590 million) at the end of 2023. This trend signals increasing pressure on liquidity, as the liabilities continue to outpace the assets available for short-term obligations.
Cash Flow Statements Overview
The cash flow from operating activities for the first nine months of 2024 was $3,054 million, a slight increase from $3,007 million in the same period of 2023. The cash flow from investing activities was ($1,726 million), and cash flow from financing activities totaled ($1,410 million). The net cash decrease for the period was ($21 million), resulting in cash and cash equivalents of $134 million at the end of September 2024.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | 3,054 | 3,007 |
| Investing Activities | (1,726) | (1,673) |
| Financing Activities | (1,410) | (1,543) |
| Net Cash Decrease | (21) | (160) |
| Cash and Cash Equivalents | 134 | 174 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had $2.5 billion in liquidity, consisting of $134 million in cash and cash equivalents and $2.4 billion available under the Revolving Credit Facility. However, the outstanding commercial paper borrowings of $180 million and the total long-term debt of $4.6 billion raise concerns about the overall solvency. The total debt-to-capital ratio is reported at 22%, which is within safe limits but highlights the reliance on debt financing.
Is Marathon Oil Corporation (MRO) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key valuation ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current price-to-earnings (P/E) ratio is 9.05 based on a stock price of approximately $4.60 and earnings per share (EPS) of $0.51 for the last quarter.
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio stands at 0.39, calculated from a current stock price of $4.60 and a book value per share of $11.81.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value-to-EBITDA (EV/EBITDA) ratio is approximately 4.88, with an enterprise value of $22.45 billion and EBITDA of $4.60 billion for the trailing twelve months.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated significantly:
- 12-month high: $8.00
- 12-month low: $4.20
- Current stock price: $4.60
Dividend Yield and Payout Ratios
The current dividend yield is 2.39%, based on an annual dividend of $0.11 per share. The payout ratio is approximately 20%, calculated from the net income per share of $0.51.
Analyst Consensus on Stock Valuation
The analyst consensus rating is a Hold, with a majority of analysts recommending to maintain current positions rather than buy or sell.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 9.05 |
| P/B Ratio | 0.39 |
| EV/EBITDA Ratio | 4.88 |
| 12-Month High Stock Price | $8.00 |
| 12-Month Low Stock Price | $4.20 |
| Current Stock Price | $4.60 |
| Dividend Yield | 2.39% |
| Payout Ratio | 20% |
| Analyst Consensus | Hold |
Key Risks Facing Marathon Oil Corporation (MRO)
Key Risks Facing Marathon Oil Corporation
Overview of Internal and External Risks
Marathon Oil Corporation faces a range of internal and external risks that could impact its financial health. Key risks include:
- Industry Competition: The oil and gas industry is highly competitive, with numerous players vying for market share. As of September 30, 2024, Marathon Oil reported total revenues from contracts with customers amounting to $4.945 billion, indicating the competitive pressure to maintain and grow sales in a saturated market.
- Regulatory Changes: The company is subject to a myriad of regulatory requirements that can affect operational costs and profitability. The effective income tax rate for the third quarter of 2024 was 38%, up from 22% in 2023, due to increased provisions related to foreign tax credits.
- Market Conditions: Fluctuations in commodity prices pose a significant risk. For instance, revenue from crude oil and condensate sales was $3.846 billion for the nine months ended September 30, 2024, but lower price realizations could adversely affect future earnings.
Operational Risks
Operational risks include potential disruptions in production due to equipment failures or natural disasters. Marathon Oil’s production costs increased to $660 million for the nine months ended September 30, 2024, compared to $607 million in the same period of 2023, indicating rising operational challenges.
Financial Risks
Financial risks are highlighted by the company's debt management strategies. As of September 30, 2024, total long-term debt stood at $4.573 billion, with an additional $180 million in commercial paper borrowings. The company is also restricted under the Merger Agreement with ConocoPhillips from incurring additional debt beyond $1.5 billion except in emergencies.
Discussion of Recent Earnings Reports
The recent earnings report for the third quarter of 2024 showed a net income of $287 million, down from $453 million in the third quarter of 2023. This decline can be attributed to lower revenues from contracts with customers, which decreased by $85 million due to lower crude and natural gas price realizations.
Mitigation Strategies
To mitigate these risks, Marathon Oil has implemented several strategies:
- Hedging Strategies: The company utilizes commodity derivatives to hedge against price fluctuations in oil and gas markets. For the nine months ended September 30, 2024, the net loss on commodity derivatives was $14 million.
- Cost Management: Continuous evaluation of operational efficiencies has led to a focus on reducing production costs, which totaled $660 million for the nine months ended September 30, 2024.
| Risk Factor | Description | 2024 Impact |
|---|---|---|
| Industry Competition | High competition for market share | Total Revenues: $4.945 billion |
| Regulatory Changes | Increased compliance costs | Effective Tax Rate: 38% |
| Market Conditions | Price fluctuations affecting revenues | Crude Oil Revenue: $3.846 billion |
| Operational Risks | Potential production disruptions | Production Costs: $660 million |
| Financial Risks | Debt management and restrictions | Total Long-term Debt: $4.573 billion |
Future Growth Prospects for Marathon Oil Corporation (MRO)
Growth Opportunities
Future growth prospects for the company are supported by various key drivers including product innovations, market expansions, and strategic acquisitions. The following sections outline these growth drivers in detail.
Key Growth Drivers
- Product Innovations: Continuous enhancements in extraction technologies and operational efficiencies are expected to boost production capabilities.
- Market Expansions: Expansion into international markets is a priority, particularly in regions with growing energy demands.
- Acquisitions: The proposed merger with ConocoPhillips is anticipated to create significant synergies and enhance market position.
Future Revenue Growth Projections
Analysts project a revenue growth trajectory due to increased production and favorable market conditions. For 2024, the company has raised its annual oil production guidance to 192 mbopd from 190 mbopd, and annual oil equivalent production guidance to 393 mboed from 390 mboed.
| Year | Projected Revenue (in billions) | Projected Earnings (in millions) |
|---|---|---|
| 2024 | 5.0 | 933 |
| 2025 | 5.5 | 1,100 |
| 2026 | 6.0 | 1,200 |
Strategic Initiatives and Partnerships
The company is focusing on strategic initiatives such as the merger with ConocoPhillips, which is expected to close in late 2024. This merger is projected to enhance operational efficiencies and expand resource access, positioning the company for substantial growth.
Competitive Advantages
The company possesses several competitive advantages that position it favorably for growth:
- Diverse Asset Base: The company has a robust portfolio of assets across key U.S. resource plays including the Eagle Ford, Bakken, and Permian basins.
- Strong Financial Position: As of September 30, 2024, the company reported total assets of $19.422 billion and a long-term debt of $4.573 billion, indicating a solid financial foundation.
- Operational Efficiency: The company has been focusing on cost management, with production costs reported at $660 million for the first nine months of 2024.
Marathon Oil Corporation (MRO) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- Marathon Oil Corporation (MRO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Marathon Oil Corporation (MRO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Marathon Oil Corporation (MRO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.