Why Marathon Oil’s 2Q15 Revenue Expectations Are Mildly Bullish



Marathon Oil’s quarterly revenues

We discussed Marathon Oil’s (MRO) market performance earlier. In this article, we will compare MRO’s revenue performance against analyst estimates in the last few quarters.

In 2Q15, the analysts’ consensus revenue estimate for Marathon Oil is $1.61 billion. This is 5.3% higher than its 1Q15 adjusted revenues. Higher realized crude oil prices and steady production is expected to lead to higher 2Q15 revenues.

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Marathon Oil’s revenue declined sharply by 39% in 1Q15, following a 16% fall in 4Q14 over the corresponding previous quarters. West Texas Intermediate (or WTI) crude, which reflects US producers’ prices, declined nearly 60% between its June 2014 high and March 2015. Between 1Q13 and 3Q14, Marathon Oil’s adjusted revenue had already decreased 23%. This is primarily due to production disruptions in its Libyan operations and the company’s Norway business sale in 2Q14.

Compared to an 8% expected sequential revenue rise for Marathon Oil in 2Q15, Continental Resources’ (CLR) 2Q15 revenue is expected to increase by 11% compared with 1Q15. During the same period, analysts expect Pioneer Natural Resources’ (PXD) revenue to decrease 7%. Marathon Oil comprises 1.4% of the Energy Select Sector SPDR ETF (XLE) and 0.10% of the SPDR S&P 500 ETF (SPY).

Adjusted versus estimates

As noted in the graph above, Marathon Oil’s adjusted revenues have fallen short of estimates in many quarters in the past. In 1Q15, adjusted revenues fell short of consensus revenues by 4%. On average, adjusted revenues have underperformed analysts’ consensus revenues by ~6% in the past nine quarters.

We will discuss Marathon Oil’s earnings in the next part.


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