Marathon’s 2015 stock performance
In this final part of our series on Marathon Oil (MRO), we’ll compare the company’s stock movements to movements in the broader market, to crude oil and natural gas prices, and to the USDX (US Dollar Index).
As we saw in Part 1 of this series, Marathon Oil’s stock has fallen nearly 55% so far this year. The stock has been on a declining trend, mirroring crude oil and natural gas price movements.
The correlation coefficient between Marathon’s stock price and crude oil prices from January 2015 to the present is ~0.8. This indicates a strong degree of correlation between crude oil prices and Marathon’s stock prices. In the same period, the correlation coefficient between MRO and natural gas prices is 0.62. This also indicates a significantly positive correlation between the two.
Many upstream companies, including Chesapeake Energy (CHK) and ConocoPhillips (COP), have taken a hit due to weakening commodity prices. You can read a detailed overview of these companies at ConocoPhillips: the Investor’s Guide You’ve Been Waiting For and Will Chesapeake Energy Succumb to an Energy-Driven Debt Crisis? All these companies make up ~5% of the Energy Select Sector SPDR ETF (XLE).
From the above graph, we can see that MRO stock has given lower returns compared to WTI’s and natural gas’s returns on a YTD (year-to-date) basis.
When compared to the broader market, the S&P 500 ETF (SPY), MRO has underperformed SPY. As we can see in the graph, MRO is negatively correlated to the USDX. Since January 2015, USDX has returned ~7.6%.
Marathon Oil (MRO) has reduced production costs significantly and has also been divesting assets. The company has also lowered its dividend payouts to boost cash and strengthen its financial position. All these endeavors could place Marathon in a better position to withstand the lower crude oil price environment. However, a prolonged downtrend in crude oil prices could make some investors in the stock jittery.