In February 2016, Marathon Oil’s (MRO) stock price saw a significant reversal. Its stock price was in a downtrend from September 2014 to February 2016 due to falling crude oil (USO) prices. During these 18 months, Marathon Oil stock lost ~84% of its market capitalization.
Since February 2016, due to higher trending crude oil prices, Marathon Oil’s stock price has also been rising. Crude oil prices have risen ~104%, from $26.05 per barrel in February 2016 to $53.18 per barrel now. This strong rise in crude oil prices has added fuel to Marathon Oil’s rally. Its stock price has risen from a low of $6.38 in February 2016 to $15.91. The chart above reflects the relationship between crude oil prices and MRO stock’s rise.
After a disastrous 2015, Marathon Oil’s stock price rallied ~40% in 2016. So far in 2017, MRO’s stock price has fallen ~8%. Other oil and gas producers Occidental Petroleum (OXY), Range Resources (RRC), and Energen (EGN) have fallen ~9%, ~19%, and ~7%, respectively, in 2017.
The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) has fallen ~12% in 2017 and is underperforming SPDR S&P 500 ETF (SPY). SPY has risen ~4% year-to-date. According to the SPDR S&P500 ETF Trust prospectus, “The Trust seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500® Index.”
In this series
Is this uptrend in Marathon Oil sustainable from a fundamental point of view? What are MRO’s operational strategies in light of the recent bounce in crude oil prices? How have rising crude oil prices affected Marathon Oil’s production, realized prices, and margins in its most recent quarter? Did MRO benefit from its hedges in 4Q16?
We’ll try to answer all these questions in the coming parts of this series by studying Marathon Oil’s operational strategies, production, production mix, costs, and margins.
Let’s start with an update on Marathon Oil’s key operational strategies in light of its recent divestitures and acquisitions.