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MRO

Marathon Oil NYSE:MRO Stock Report

Last Price

US$20.68

Market Cap

US$15.0b

7D

-9.3%

1Y

59.9%

Updated

06 Jul, 2022

Data

Company Financials +
MRO fundamental analysis
Snowflake Score
Valuation5/6
Future Growth0/6
Past Performance3/6
Financial Health5/6
Dividends2/6

MRO Stock Overview

Marathon Oil Corporation operates as an independent exploration and production company in the United States and internationally.

Marathon Oil Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Marathon Oil
Historical stock prices
Current Share PriceUS$20.68
52 Week HighUS$33.24
52 Week LowUS$10.41
Beta2.57
1 Month Change-34.16%
3 Month Change-17.05%
1 Year Change59.94%
3 Year Change48.78%
5 Year Change80.93%
Change since IPO14.89%

Recent News & Updates

Jul 03

The New Liberal Order Makes Marathon Oil A Strong Buy

I'm starting this article by highlighting political issues related to the ongoing energy crisis. Supply has become a huge problem, which is unlikely to be solved anytime soon. This supports long-term oil prices while limiting the downside. Marathon Oil is one of the biggest beneficiaries. MRO has efficient operations and sky-high free cash flow (expectations) used to boost shareholder returns. Introduction Oil and gas research has become the cornerstone of my daily job as I'm on top of the energy crisis in Europe and directly involved via my own investments in the industry. Fossil fuels have become more than just one of many macro themes worth keeping an eye on to the single biggest risk to global wealth since the oil crisis in the 1970s. It's both a geopolitical weapon used by the Russians to pressure Europe and a project based on the vision of liberal politicians pushing for renewables. In this article, I will explain why this title isn't political clickbait and why I have added to Marathon Oil (MRO), one of my all-time favorite dividend stocks. It has everything to do with the long-term supply-driven oil bull case and Marathon's ability to boost shareholder returns. So, bear with me! The New Liberal Order & The Price Of Oil If there's one thing I believe is extremely important, it's keeping (biased) politics out of research and my articles. After all, I'm not here to sell you anything. However, it's impossible to keep doing this. After all, oil has become a geopolitical issue instead of just one of many macro forces as I briefly mentioned in the introduction above. For what it's worth, I'm politically independent. Both sides of the aisle (to use the American political term) annoy me. With that said, the other day, I was hit by the following headline: New York Post The New York Post - among many others - reported that National Economic Council director Brian Deese (Biden's personal advisor) had a somewhat unexpected answer to the following question asked by CNN: “What do you say to those families who say, ‘Listen, we can’t afford to pay $4.85 a gallon for months, if not years. This is just not sustainable’?” He answered: “What you heard from the president today was a clear articulation of the stakes,” Deese answered. “This is about the future of the liberal world order and we have to stand firm." This is not only interesting because it's stuff you usually read on conspiracy theory websites, but it perfectly confirms what we're currently dealing with on a global basis: the refusal to boost fossil fuel production for the sake of the environment. Don't get me wrong, I'm all for renewables. What bothers me is that governments are pushing too hard. The transition has become a total and utter mess causing energy shortages when it matters most. Bear in mind that fossil fuels still account for 79% of total energy consumption in the US. It's even higher in emerging markets. Inflation in fossil fuels works its way through the "system", as we all experience right now. EIA I could give you many examples. One is Biden's efforts to block new drilling permits as reported by the Wall Street Journal. Wall Street Journal According to the paper: Under even the quickest scenarios, that might not lead to new oil-and-gas leasing until 2024 or 2025 and new development potentially years after that. That delay frustrates some in the industry while environmentalists say it also undermines arguments from Mr. Manchin and other industry advocates that the plan is helpful to address rising prices. In my recent article covering Exxon Mobil (XOM), I also worked on these issues. I used the following graph to visualize the problem: Seeking Alpha Global oil capital spending is well below where it needs to be to service expected demand in 2030. The last time capital was at sufficient levels was in 2015, a year before the price of oil bottomed. The unwillingness to boost production is caused by risk management and the inability to hike output because of laws and regulations (not just in the US). Oil companies know that oil can fall again in the future. It fell hard in 2015 and 2020 because supply had increased so much. If oil falls again, a lot of companies are unsure if they will be able to get access to capital. After all, when oil prices are low, people think we can live without oil. When oil is high, oil companies are blamed for being greedy. Both large and small players (with exceptions) prefer to focus on free cash flow instead of production growth. It helps to reduce debt, distribute cash to shareholders, and build a financial wall against future problems. It's an incredibly tricky situation that is currently causing energy problems. High energy supply growth in the US has completely faded. EIA As far as I'm concerned, there are two ways to get us out of this mess. Governments need to drop strict environmental regulations and related measures to support the oil and gas industry. Inflation, rising rates, ongoing supply chain issues, and related problems cause a recession that crushes demand, lowering oil prices. Option 1 isn't very likely for the one big reason I mentioned at the start of this article. The leaders in charge aren't willing to change anything as it's not part of their worldview (what they call the new liberal world order). Option 2 is the biggest risk. Hence, I like to focus on oil companies that come with a healthy balance sheet, high free cash flow, and a willingness to return cash to shareholders. That's where Marathon Oil comes in. Why I Like Marathon Oil The last time I covered Marathon Oil was on October 3, 2021. Since then, a lot has happened. The company is now trading above $22 per share, giving the company a $16.0 billion market cap. The company produces in Permian, Eagle Ford, SCOOP/STACK, and Bakken Basins, as well as in Equatorial Guinea. In 2022, the company aims to produce 340 to 350 thousand barrels of oil equivalent per day. Oil production is expected to be between 168 and 176 thousand barrels per day. This year, the company has hedged 90 thousand barrels of oil per day. So far, no exposure beyond 2022 has been hedged, which is a big benefit if oil prices remain high. And even if oil drops, the company has a low breakeven price as I'm discussing in this article. Marathon Oil With oil trading above $100 - both WTI and Brent - we are now far above the threshold where Marathon Oil starts to return money to investors more aggressively. According to the company, $60 per barrel WTI is a point where it wants to return at least 40% of cash from operations annually. Marathon Oil Moreover, Marathon Oil is free cash flow breakeven (meaning production costs are covered) at $35 WTI, that's truly impressive as it tells us two things: Investors are protected against declining oil prices. I don't expect oil to fall below $40 unless something truly terrible happens. The shift in supply has limited the downside (somewhat). High oil prices result in a flood of cash. A company that is breakeven at $35 WTI makes a ton of money when oil is above $100. Current analyst estimates see free cash flow reaching $4.3 billion this year. That's 27% of the market cap. It's one of the highest implied free cash flow yields I've seen this year. It means there is plenty of cash to return to shareholders on top of lowering debt. TIKR.com Between 1Q21 and 3Q21, the company reduced gross debt by $1.4 billion. Net debt is set to fall to roughly 0.3x EBITDA this year. It's likely that even oil at $50 could end up pushing the net leverage ratio down to 0.5x EBITDA. Between 3Q21 and the end of 1Q22, the company bought back more than 11% of its own shares. It also helps that the company has no material debt maturities in 2022, which means more money for shareholders. In 2022, the company aims to return between 40% and 70% of cash from operations using $100 WTI and $6/MMBtu for natural gas as the foundation for its expected income. If $100 oil and $6 natural gas are sustainable, the company can achieve more than $4.5 billion in free cash flow. This implies a 28% free cash flow yield. Marathon Oil $120 oil and $8 gas imply a 33% free cash flow yield, allowing the company to return almost $6.0 billion in cash.

Jun 18
There's Been No Shortage Of Growth Recently For Marathon Oil's (NYSE:MRO) Returns On Capital

There's Been No Shortage Of Growth Recently For Marathon Oil's (NYSE:MRO) Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? In a...

Jun 14

Marathon Oil: Shareholder Distribution Could Reach +10%

Even after its strong rally, Marathon Oil is going to return more than 10% of its market cap to shareholders via repurchases and dividends. Marathon Oil is not ''more of the same'' E&P stock. I discuss what sets Marathon Oil apart from its peers. I estimate that Marathon Oil is now priced at just under 4x free cash flow. I lay out my estimates for Marathon Oil returning approximately $2.5 billion to shareholders. As always, happy to discuss my thesis further in the comments section.

Shareholder Returns

MROUS Oil and GasUS Market
7D-9.3%-6.3%0.7%
1Y59.9%27.3%-18.4%

Return vs Industry: MRO exceeded the US Oil and Gas industry which returned 27.3% over the past year.

Return vs Market: MRO exceeded the US Market which returned -18.4% over the past year.

Price Volatility

Is MRO's price volatile compared to industry and market?
MRO volatility
MRO Average Weekly Movement9.0%
Oil and Gas Industry Average Movement9.1%
Market Average Movement8.2%
10% most volatile stocks in US Market16.9%
10% least volatile stocks in US Market3.4%

Stable Share Price: MRO is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 9% a week.

Volatility Over Time: MRO's weekly volatility (9%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
18871,531Lee Tillmanhttps://www.marathonoil.com

Marathon Oil Corporation operates as an independent exploration and production company in the United States and internationally. The company engages in the exploration, production, and marketing of crude oil and condensate, natural gas liquids, and natural gas; and the production and marketing of products manufactured from natural gas, such as liquefied natural gas and methanol. It also owns and operates 32 central gathering and treating facilities; and the Sugarloaf gathering system, a 42-mile natural gas pipeline through Karnes and Atascosa Counties.

Marathon Oil Fundamentals Summary

How do Marathon Oil's earnings and revenue compare to its market cap?
MRO fundamental statistics
Market CapUS$14.95b
Earnings (TTM)US$2.15b
Revenue (TTM)US$6.21b

6.8x

P/E Ratio

2.4x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
MRO income statement (TTM)
RevenueUS$6.21b
Cost of RevenueUS$1.33b
Gross ProfitUS$4.88b
Other ExpensesUS$2.73b
EarningsUS$2.15b

Last Reported Earnings

Mar 31, 2022

Next Earnings Date

Aug 03, 2022

Earnings per share (EPS)3.04
Gross Margin78.65%
Net Profit Margin34.70%
Debt/Equity Ratio35.3%

How did MRO perform over the long term?

See historical performance and comparison

Dividends

1.5%

Current Dividend Yield

9%

Payout Ratio
We’ve recently updated our valuation analysis.

Valuation

Is MRO undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

5/6

Valuation Score 5/6

  • Price-To-Earnings vs Peers

  • Price-To-Earnings vs Industry

  • Price-To-Earnings vs Fair Ratio

  • Below Fair Value

  • Significantly Below Fair Value

  • PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for MRO?

Other financial metrics that can be useful for relative valuation.

MRO key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue3x
Enterprise Value/EBITDA4.8x
PEG Ratio-0.2x

Price to Earnings Ratio vs Peers

How does MRO's PE Ratio compare to its peers?

MRO PE Ratio vs Peers
The above table shows the PE ratio for MRO vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
CompanyPEEstimated GrowthMarket Cap
Peer Average22.9x
TPL Texas Pacific Land
35.2x25.7%US$11.4b
APA APA
4.4x-29.9%US$11.2b
CLR Continental Resources
11.3x-14.5%US$22.9b
HES Hess
40.9x7.7%US$30.4b
MRO Marathon Oil
6.8x-40.0%US$15.0b

Price-To-Earnings vs Peers: MRO is good value based on its Price-To-Earnings Ratio (6.8x) compared to the peer average (22.9x).


Price to Earnings Ratio vs Industry

How does MRO's PE Ratio compare vs other companies in the US Oil and Gas Industry?

Price-To-Earnings vs Industry: MRO is good value based on its Price-To-Earnings Ratio (6.8x) compared to the US Oil and Gas industry average (11.3x)


Price to Earnings Ratio vs Fair Ratio

What is MRO's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

MRO PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio6.8x
Fair PE Ratio8.6x

Price-To-Earnings vs Fair Ratio: MRO is good value based on its Price-To-Earnings Ratio (6.8x) compared to the estimated Fair Price-To-Earnings Ratio (8.6x).


Share Price vs Fair Value

What is the Fair Price of MRO when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: MRO ($20.68) is trading below our estimate of fair value ($36.53)

Significantly Below Fair Value: MRO is trading below fair value by more than 20%.


Price to Earnings Growth Ratio

PEG Ratio: MRO's earnings are forecast to decline next year, so we can't calculate its PEG ratio.


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Future Growth

How is Marathon Oil forecast to perform in the next 1 to 3 years based on estimates from 15 analysts?

Future Growth Score

0/6

Future Growth Score 0/6

  • Earnings vs Savings Rate

  • Earnings vs Market

  • High Growth Earnings

  • Revenue vs Market

  • High Growth Revenue

  • Future ROE


-40.0%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: MRO's earnings are forecast to decline over the next 3 years (-40% per year).

Earnings vs Market: MRO's earnings are forecast to decline over the next 3 years (-40% per year).

High Growth Earnings: MRO's earnings are forecast to decline over the next 3 years.

Revenue vs Market: MRO's revenue is expected to decline over the next 3 years (-12.3% per year).

High Growth Revenue: MRO's revenue is forecast to decline over the next 3 years (-12.3% per year).


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: MRO's Return on Equity is forecast to be low in 3 years time (12.2%).


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Past Performance

How has Marathon Oil performed over the past 5 years?

Past Performance Score

3/6

Past Performance Score 3/6

  • Quality Earnings

  • Growing Profit Margin

  • Earnings Trend

  • Accelerating Growth

  • Earnings vs Industry

  • High ROE


30.1%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: MRO has high quality earnings.

Growing Profit Margin: MRO became profitable in the past.


Past Earnings Growth Analysis

Earnings Trend: MRO has become profitable over the past 5 years, growing earnings by 30.1% per year.

Accelerating Growth: MRO has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.

Earnings vs Industry: MRO has become profitable in the last year, making it difficult to compare its past year earnings growth to the Oil and Gas industry (102.2%).


Return on Equity

High ROE: MRO's Return on Equity (18.9%) is considered low.


Discover strong past performing companies

Financial Health

How is Marathon Oil's financial position?

Financial Health Score

5/6

Financial Health Score 5/6

  • Short Term Liabilities

  • Long Term Liabilities

  • Debt Level

  • Reducing Debt

  • Debt Coverage

  • Interest Coverage

Financial Position Analysis

Short Term Liabilities: MRO's short term assets ($2.2B) exceed its short term liabilities ($2.0B).

Long Term Liabilities: MRO's short term assets ($2.2B) do not cover its long term liabilities ($4.6B).


Debt to Equity History and Analysis

Debt Level: MRO's net debt to equity ratio (29.3%) is considered satisfactory.

Reducing Debt: MRO's debt to equity ratio has reduced from 57.7% to 35.3% over the past 5 years.

Debt Coverage: MRO's debt is well covered by operating cash flow (91.8%).

Interest Coverage: MRO's interest payments on its debt are well covered by EBIT (8.3x coverage).


Balance Sheet


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Dividend

What is Marathon Oil current dividend yield, its reliability and sustainability?

Dividend Score

2/6

Dividend Score 2/6

  • Notable Dividend

  • High Dividend

  • Stable Dividend

  • Growing Dividend

  • Earnings Coverage

  • Cash Flow Coverage


1.55%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: MRO's dividend (1.55%) isn’t notable compared to the bottom 25% of dividend payers in the US market (1.61%).

High Dividend: MRO's dividend (1.55%) is low compared to the top 25% of dividend payers in the US market (4.27%).


Stability and Growth of Payments

Stable Dividend: MRO's dividend payments have been volatile in the past 10 years.

Growing Dividend: MRO's dividend payments have fallen over the past 10 years.


Earnings Payout to Shareholders

Earnings Coverage: With its low payout ratio (9.3%), MRO's dividend payments are thoroughly covered by earnings.


Cash Payout to Shareholders

Cash Flow Coverage: With its low cash payout ratio (9%), MRO's dividend payments are thoroughly covered by cash flows.


Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

4.0yrs

Average management tenure


CEO

Lee Tillman (60 yo)

8.92yrs

Tenure

US$12,997,292

Compensation

Mr. Lee M. Tillman has been the Chief Executive Officer, President and Director of Marathon Oil Corporation since August 1, 2013 and its Chairman since February 1, 2019. Mr. Tillman served as a Vice Presid...


CEO Compensation Analysis

Compensation vs Market: Lee's total compensation ($USD13.00M) is about average for companies of similar size in the US market ($USD13.41M).

Compensation vs Earnings: Lee's compensation has been consistent with company performance over the past year.


Leadership Team

Experienced Management: MRO's management team is considered experienced (4 years average tenure).


Board Members

Experienced Board: MRO's board of directors are considered experienced (4.3 years average tenure).


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: MRO insiders have only sold shares in the past 3 months.


Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Top Shareholders

Company Information

Marathon Oil Corporation's employee growth, exchange listings and data sources


Key Information

  • Name: Marathon Oil Corporation
  • Ticker: MRO
  • Exchange: NYSE
  • Founded: 1887
  • Industry: Oil and Gas Exploration and Production
  • Sector: Energy
  • Implied Market Cap: US$14.954b
  • Shares outstanding: 707.69m
  • Website: https://www.marathonoil.com

Number of Employees


Location

  • Marathon Oil Corporation
  • 990 Town and Country Boulevard
  • Houston
  • Texas
  • 77024-2217
  • United States

Listings


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2022/07/06 00:00
End of Day Share Price2022/07/06 00:00
Earnings2022/03/31
Annual Earnings2021/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.