uploads///MRO Q Cash Flow

Marathon Oil’s Free Cash Flow Remains Negative in 2Q16


Sep. 30 2016, Updated 10:04 a.m. ET

Marathon Oil’s revenues and operating cash flows

In 2Q16 Marathon Oil’s (MRO) operating revenue from crude oil (USO), natural gas (UNG), and natural gas liquids sales totaled ~$941 million—a ~40% fall from 2Q15. The lower operating revenue in 2Q16 was the direct result of lower production as well as lower realized prices for crude oil and natural gas production.

In 2Q16, MRO reported an OCF (operating cash flow) of ~$178 million, which was ~56% lower than its OCF of ~$408 million in 2Q15. The fall in 2Q16 OCF was primarily due to lower operating revenues.

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Free cash flow trend

In 2Q16, Marathon oil reported an FCF (free cash flows) of about -$121 million. In 1H16, Marathon Oil reported total FCF of about -$501 million.

As the graph shows, MRO has reported negative FCF since 4Q14. In 2015, Marathon oil reported its lowest-ever yearly FCF of about -$1.9 billion.

Due to the steep downward trend in energy prices, most S&P 500 (SPY) energy companies have reported negative FCF. Pioneer Natural Resources (PXD), Range Resources (RRC), and Murphy Oil (MUR) reported -$137 million (or -$0.84 per share), -$53 million (or -$0.31 per share), and -$322 million (or -$1.87 per share), respectively, in free cash flows in 2Q16.

Remember, FCF helps a company enhance its shareholder value and can be used to pay dividends, buy back stock, or repay debt. FCF is calculated by subtracting capital expenditure, or capex, from OCF.

Continue to the next part for a look at Marathon Oil’s capital expenditure.


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