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Marathon Oil Shares, Other Peers Fall After Capex Cut

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Shares of Marathon Oil Corporation (NYSE: MRO) were down as much as 9 percent after the company slashed its capital budget by 50 percent. It also said its 2016 total company production is expected to decline 6-8 percent on divestiture-adjusted basis due to low oil prices and market volatility.

The company also increased its target for non-core asset sales to a range of $750 million to $1 billion from at least $500 million. The company plans to spend $1.4 billion in 2016 through capital expenditures, and the cut in capex aims to protect balance sheet and operational flexibility. Decreasing profit margins and reduced expectations for a quick oil price recovery have prompted many operators to pull back on exploration spending.

Marathon Oil reported a fourth quarter 2015 adjusted net loss of $323 million, or 48 cents a share, which beat Wall Street expectations. The company had a quarterly net loss of $793 million, or $1.17 a share versus a profit of $926 million, or $1.37 a share a year-ago.

The energy company generated revenue of $1.48 billion in the period. In the same period last year, the company had revenues of about $2.5 billion. Net production averaged 432,000 barrel of oil equivalent per day (boed), essentially flat with third quarter 2015.

For the full year, the company forecasts production available for sale from the combined North America and International E&P segments, excluding Libya, to average 335,000 to 355,000 net boed.

Oil prices remained volatile after contradicting statement from EIA and API. U.S. Energy Information Administration (EIA) said crude supplies rose by 2.1 million barrels last week. On the other hand, the American Petroleum Institute (API) said Wednesday that the U.S. crude inventory dropped by 3.3 million barrels last week. Brent crude, the global benchmark, declined 0.4 percent to $34.35, while West Texas Intermediate rose 0.33 percent to $30.76.

Meanwhile, EIA said that U.S. Gulf of Mexico (GOM) crude oil production is estimated to increase to record high levels in 2017, even as oil prices remain low. EIA projects GOM production will average 1.63 million barrels per day (b/d) in 2016 and 1.79 million b/d in 2017, reaching 1.91 million b/d in December 2017.

Shares of other oil companies such as Legacy Reserves LP (NASDAQ: LGCY) were down 9 percent, and Whiting Petroleum Corp (NYSE: WLL) fell 10 percent.

Posted-In: Earnings News Guidance Commodities Markets Movers


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