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Marathon Oil’s Free Cash Flow Turns Positive—Finally

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Marathon Oil’s revenues and operating cash flows

In 3Q16, Marathon Oil’s (MRO) operating revenue from crude oil (USO), natural gas (UNG), and natural gas liquids sales totaled ~$1 billion, which represents a ~28% fall from 3Q15. The lower operating revenue in 3Q16 was the direct result of lower production and of lower realized prices for crude oil and natural gas production.

In 3Q16, MRO reported OCF (operating cash flow) of ~$366 million, which was ~26% lower than its OCF of ~$496 million in 3Q15. The fall in 3Q16 OCF was primarily due to lower operating revenues.

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Free cash flow trend

In 3Q16, Marathon oil reported positive FCF (free cash flows) of ~$136 million. In the first nine months of 2016, Marathon oil reported total FCF of nearly -$365 million, while it reported negative FCF from 4Q14 to 2Q16. In 2015, Marathon oil reported its lowest-ever yearly FCF of about -$1.9 billion.

By comparison, peers Pioneer Natural Resources (PXD), Occidental Petroleum (OXY), California Resources (CRC), and Range Resources (RRC) reported -$7 million, $4 million, $82 million, and -$71.8 million, respectively, in free cash flows in 3Q16.

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

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

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