At close, on Wednesday, Crude Oil WTI Futures for Aug. 21 (TQ1) traded at $74.34 per barrel, up 51.4% year to date and 18.3% above average. Brent Oil Futures for Sept. 21 (BU1) were at $75.13 per barrel, up 45% year to date and 15.2% above average.
With the resumption of travel following the improvement of the pandemic situation in many countries, there will be a greater demand for energy. The price of oil will get a boost, and economists are projecting crude oil to trade at $92.54 and Brent crude oil at $92.29 in 52-weeks’ time. OPEC expects the oil demand to increase by 6 million barrels per day in 2021.
Amid global explorers and producers of oil products, Marathon Oil Corp (MRO, Financial), a Houston, Texas-based independent energy operator, seems ready to rise on a strong energy market tailwind.
Marathon has operating activities in the United States and Equatorial Guinea. Its U.S. oil activities focus on the following shale plays: Eagle Ford in Texas, the Bakken in North Dakota, the South-Central Oklahoma Oil Province (SCOOP), the Sooner Trend Anadarko Canadian Kingfisher (STACK) in Oklahoma and the Permian in New Mexico. The American segment yields 80% of the total production of oil equivalent, while Equatorial Guinea gives the remaining 20%.
Shares of Marathon Oil Corp, up 99.41% so far this year, are expected to gain another 10%, according to analysts on Wall Street today.
Marathon Oil is targeting two objectives: a progressive improvement of the financial conditions of its balance sheet and the return of capital to shareholders through the payment of dividends.
The outstanding execution of the core portfolio enabled Marathon Oil to deleverage the balance sheet of $500 million, generating a strong free cash flow in the first quarter of 2021. Total funds of $443 million were opposed to outflows of 18 million in the prior-year quarter. For the second quarter of 2021, the energy operator must expect more free cash flow generation, as it has targeted to trim its debt by another portion of $500 million and has reaffirmed the capital spending budget at $1 billion.
With the output guidance staying unchanged for the year, indicating between 330 million and 350 million barrels of oil equivalent and between 169 million and 175 million barrels of oil to produce daily, the main catalyst for higher cahs flow will be the expected sharp rise in oil prices. Since there is a high chance of oil prices continuing to rise on increasing demand, Marathon Oil is, therefore, well-positioned to execute its plans.
In the most recent quarter, Marathon Oil hiked the quarterly cash dividend to 4 cents per common share paid on June 10, up from 3 cents per common share paid on March 10, leading to a trailing dividend yield of 0.73% and forward dividend yield of 1.17% as of June 30. Further dividend increases are possible, in my opinion, given the company's shareholder-focused goals.
Shares are trading around $13.62 apiece for a market capitalization of approximately $10.73 billion as of the writing of this article. The stock is not cheap as the share price is 52% above the middle point of the 52-week range of $3.73 to $14.15. Also, the enterprise-value-to-Ebitda ratio of 11.55 stands above the industry median of 10.09.
Disclosure: I have no positions in any security mentioned.
