Understanding Marathon Oil’s Retained Earnings Effectiveness



Marathon Oil’s retained earnings effectiveness

According to Marathon Oil’s (MRO) 2Q16 balance sheet, its retained earnings fell by ~$213 million. When divided by MRO’s 1Q16 stockholders’ equity of ~$19.4 billion, the company’s retained earnings effectiveness comes to about -1%.

In other words, due to its net loss in 2Q16, the negative change in Marathon Oil’s retained earnings impacted its 1Q16 stockholder equity by about -1%.

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Other upstream players

For 2Q16, almost all S&P 500 (SPY) upstream companies including Southwestern Energy (SWN), Devon Energy (DVN), and EOG Resources (EOG) reported negative changes in their retained earnings. These changes were mainly due to lower realized crude oil and natural gas prices and the impairment of these companies’ proved reserves.

In the next part, we’ll discuss free cash flow.


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