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Could Marathon Oil Have Reduced Net Losses in 4Q16?

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Earnings estimates

Marathon Oil (MRO) is set to report its 4Q16 and fiscal 2016 earnings on February 15, 2017, after the market closes. For 4Q16, excluding one-time items, the current consensus EPS (earnings per share) estimate for Marathon Oil is -$0.15. Marathon Oil is expected to cut its losses by more than 69% in 4Q16 from the adjusted EPS of -$0.48 in 4Q15.

However, on a sequential basis and excluding one-time items, Marathon’s 4Q16 consensus EPS estimate is lower and indicates a ~26% loss from the adjusted EPS of -$0.11 in 3Q16.

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Marathon’s net income in 3Q16

In its most recent earnings release in November 2016, Marathon Oil reported negative but higher adjusted net income than it did in 3Q15. Correspondingly, Marathon’s adjusted EPS rose to -$0.11 in 3Q16 from -$0.20 in 3Q15.

Marathon’s 3Q16 adjusted net income excludes one-time charges of ~$95 million, of which the majority was related to the termination of rig contracts, pension settlement expenses, and non-cash impairments charges. At -$192 million, or -$0.23 per share, Marathon’s reported GAAP (generally accepted accounting principles) net income was higher than it was in 3Q15, when it was -$749 million, or -$1.11 per share.

Peers Devon Energy (DVN), Diamondback Energy (FANG), and EOG Resources (EOG) reported net income of approximately $993 million ($1.89 per share), -$2.2 million (-$0.03 per share), and -$190 million (-$0.35 per share), respectively, in 3Q16.

Fiscal 2016 EPS estimates

For fiscal 2016, excluding one-time items, Wall Street analysts expect Marathon Oil to report lower adjusted net income of approximately -$738 million, or -$0.93 a share, compared with -$869 million, or -$1.28 a share, in 2015. In the next part, we’ll take a look at Marathon’s revenue estimates.

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