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Understanding Marathon Oil’s Free Cash Flow Normalized to Production

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MRO’s FCF normalized to production

In 3Q16, Marathon Oil’s (MRO) reported FCF (free cash flow) normalized to total production of ~$3.68 per boe (barrel of oil equivalent), which was ~$6.9 higher than in 3Q15.

Marathon Oil’s FCF normalized to total production dropped steeply in 4Q14 and 1Q15. In fact, in 1Q15, Marathon Oil reported the lowest FCF normalized to total production, mainly due to its lower operating cash flows as a direct result of lower realized crude oil prices (USO) and lower hedging effectiveness. Sequentially, Marathon Oil’s 3Q16 FCF normalized to total production is ~$7.06 per boe higher.

For 3Q16, upstream companies Murphy Oil (MUR), and Energen (EGN), and Denbury Resources (DNR) have reported lower YoY (year-over-year) FCF normalized to total production.

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