How the Decline in Crude Oil Prices Affected Marathon Oil

Although crude oil prices have rallied ~78% from their lows in February 2016, crude is still trading ~57% lower than its high two years ago.

Nicholas Chapman - Author

Nov. 20 2020, Updated 12:56 p.m. ET

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Crude oil prices

Although crude oil prices have rallied ~78% from their lows in February 2016, crude is still trading ~57% lower than its high two years ago. And when crude oil prices are in decline, profit margins for crude oil producers get affected adversely, making their stock prices fall along with crude oil prices.

Marathon Oil (MRO) is no exception. MRO has seen its stock price decline ~61% since the peak in crude oil prices in June 2014.

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S&P 500 (SPY) upstream companies EOG Resources (EOG), Occidental Petroleum (OXY), and Southwestern Energy (SWN) saw their share prices decline ~20%, ~18%, and ~70%, respectively, during the same period. The volatility in crude oil prices also impacts ETFs and ETNs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the Vanguard Energy ETF (VDE), and the VelocityShares 3x Long Crude Oil ETN (UWTI).

Marathon Oil’s downtrend

As you can see in the graph, MRO’s stock price was already in a downtrend from September 2014 to February 2016, making a clear pattern of lower highs and lower lows. The downtrend caused the stock to break its 200-day moving average in October 2014. In fact, MRO’s downtrend was so severe that it never tried to regain its 200-day moving average.

But since February 2016, due to higher trending crude oil prices, MRO’s stock price started to increase. In June 2016, Marathon Oil regained its 200-day moving average successfully and is currently trading ~23% above that average.

In this series

Is this bounce in Marathon Oil sustainable from a point of view of fundamentals? What are MRO’s operational strategies in light of the recent bounce in crude oil prices? How did the 2016 decline in crude oil prices affect Marathon Oil’s production, realized prices, and margins in 2Q16? Has MRO benefitted from its hedges during the crude oil decline?

In this series, we’ll answer all these questions and more by examining Marathon Oil’s operational strategies, past events, production, hedges, costs, and margins.

Let’s start with the Marathon Oil’s operational strategies.


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