Did Marathon Oil’s Free Cash Flow Improve in 2015?



Marathon Oil’s cash flows

In 4Q15, Marathon Oil (MRO) reported cash flow from operations (or CFO) of ~$352 million. This was ~70% lower than its CFO in 4Q14. The drop was mainly due to lower revenues on account of lower realized commodity prices (USO) (UNG). MRO’s fiscal 2015 CFO was ~$1.6 billion versus a CFO of $5.5 billion in fiscal 2014.

MRO’s 4Q15 revenues came in at ~$1.5 billion, down ~41% compared to ~$3 billion in 4Q14. The company’s full year revenues were ~$5.9 billion compared to the ~$11.2 billion it recorded in fiscal 2014. This represents a decline of ~47%.

Did Marathon Oil's Free Cash Flow Improve in 2015?

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Marathon’s free cash flows

MRO’s FCF (free cash flow) has remained negative since 4Q14 as you can see in the above graph. MRO’s FCF was -$176 million in 4Q15. For fiscal 2015, FCF was -$1.9 billion compared to $327 million in fiscal 2014.

However, in 2015, Marathon has seen reduced capex spending over quarters, leading to an improvement in its free cash flows. MRO aims to achieve positive free cash flow in 2016.

Marathon’s capex

MRO’s 4Q15 capex was $528 million. Fiscal 2015 capex was $3.1 billion, 60% lower than 2014 capital. As we saw in part two, MRO’s 2016 capital spending has fallen further to just $1.4 billion.

Many upstream companies have reduced their 2016 capex in response to lower energy prices. ConocoPhillips (COP) and Concho Resources (CXO) lowered their 2016 capex by 37% and 35%, respectively, while Apache (APA) and Anadarko Petroleum (APC) lowered their 2016 capex by 60% and 50%, respectively. These companies make up ~6% of the iShares Global Energy ETF (IXC).


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