| Snowflake Score | |
|---|---|
| Valuation | 5/6 |
| Future Growth | 0/6 |
| Past Performance | 3/6 |
| Financial Health | 5/6 |
| Dividends | 2/6 |
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
| Historical stock prices | |
|---|---|
| Current Share Price | US$22.55 |
| 52 Week High | US$33.24 |
| 52 Week Low | US$10.41 |
| Beta | 2.57 |
| 1 Month Change | -28.82% |
| 3 Month Change | -12.19% |
| 1 Year Change | 62.82% |
| 3 Year Change | 63.88% |
| 5 Year Change | 96.60% |
| Change since IPO | 25.28% |
Recent News & Updates
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.
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...
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
| MRO | US Oil and Gas | US Market | |
|---|---|---|---|
| 7D | 2.3% | 0.9% | -2.2% |
| 1Y | 62.8% | 28.8% | -21.2% |
Return vs Industry: MRO exceeded the US Oil and Gas industry which returned 28.8% over the past year.
Return vs Market: MRO exceeded the US Market which returned -21.2% over the past year.
Price Volatility
| MRO volatility | |
|---|---|
| MRO Average Weekly Movement | 8.7% |
| Oil and Gas Industry Average Movement | 8.9% |
| Market Average Movement | 8.1% |
| 10% most volatile stocks in US Market | 16.9% |
| 10% least volatile stocks in US Market | 3.3% |
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
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1887 | 1,531 | Lee Tillman | https://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
| MRO fundamental statistics | |
|---|---|
| Market Cap | US$15.96b |
| Earnings (TTM) | US$2.15b |
| Revenue (TTM) | US$6.21b |
7.4x
P/E Ratio2.6x
P/S RatioIs MRO overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| MRO income statement (TTM) | |
|---|---|
| Revenue | US$6.21b |
| Cost of Revenue | US$1.33b |
| Gross Profit | US$4.88b |
| Other Expenses | US$2.73b |
| Earnings | US$2.15b |
Last Reported Earnings
Mar 31, 2022
Next Earnings Date
Aug 03, 2022
| Earnings per share (EPS) | 3.04 |
| Gross Margin | 78.65% |
| Net Profit Margin | 34.70% |
| Debt/Equity Ratio | 35.3% |
How did MRO perform over the long term?
See historical performance and comparisonDividends
1.4%
Current Dividend Yield9%
Payout RatioValuation
Is MRO undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score
5/6Valuation 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.
| What is MRO's n/a Ratio? | |
|---|---|
| n/a Ratio | 0x |
| n/a | n/a |
| Market Cap | US$15.96b |
| Key Statistics | |
|---|---|
| Enterprise Value/Revenue | 3.1x |
| Enterprise Value/EBITDA | 5.1x |
| 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 |
|---|
| Company | PE | Estimated Growth | Market Cap |
|---|---|---|---|
| Peer Average | 24.7x | ||
TPL Texas Pacific Land | 37.2x | 25.7% | US$11.8b |
APA APA | 4.9x | -29.9% | US$12.1b |
CLR Continental Resources | 11.7x | -14.5% | US$23.5b |
HES Hess | 45.1x | 7.9% | US$32.6b |
MRO Marathon Oil | 7.4x | -40.0% | US$16.0b |
Price-To-Earnings vs Peers: MRO is good value based on its Price-To-Earnings Ratio (7.4x) compared to the peer average (24.7x).
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 (7.4x) compared to the US Oil and Gas industry average (11.8x)
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.
| Fair Ratio | |
|---|---|
| Current PE Ratio | 7.4x |
| Fair PE Ratio | 8.6x |
Price-To-Earnings vs Fair Ratio: MRO is good value based on its Price-To-Earnings Ratio (7.4x) 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 ($22.55) is trading below our estimate of fair value ($36.5)
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
0/6Future 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
3/6Past 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
5/6Financial 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
2/6Dividend Score 2/6
Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage
1.42%
Current Dividend Yield
Dividend Yield vs Market
Notable Dividend: MRO's dividend (1.42%) isn’t notable compared to the bottom 25% of dividend payers in the US market (1.6%).
High Dividend: MRO's dividend (1.42%) is low compared to the top 25% of dividend payers in the US market (4.25%).
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.
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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 ($USD13.34M).
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$15.958b
- 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
| Data | Last Updated (UTC time) |
|---|---|
| Company Analysis | 2022/07/03 00:00 |
| End of Day Share Price | 2022/07/01 00:00 |
| Earnings | 2022/03/31 |
| Annual Earnings | 2021/12/31 |
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.