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Marathon Oil Corp. Reports Operating Results (10-Q)

August 03, 2012 | About:

Marathon Oil Corp. (NYSE:MRO) filed Quarterly Report for the period ended 2012-06-30.

Marathon Oil Corporation has a market cap of $19.07 billion; its shares were traded at around $26.72 with a P/E ratio of 9 and P/S ratio of 1.3. The dividend yield of Marathon Oil Corporation stocks is 2.5%. Marathon Oil Corporation had an annual average earning growth of 8.9% over the past 10 years.

Highlight of Business Operations:

OSM segment revenues decreased $112 million in the second quarter and $39 million in the first six months of 2012 compared to the same periods of 2011. Net sales volumes improved in both periods of 2012 compared to the prior year because the upgrader expansion was completed and commenced operations in the second quarter of 2011. However, lower WTI prices and an increase in the discount of WCS to WTI resulted in the 21 percent and 9 percent decreases in average realizations during the second quarter and first six months of 2012. The following table gives details of net sales and average realizations of our OSM operations.

Cost of revenues decreased $365 million and $362 million in the second quarter and first six months of 2012 from the comparable periods of 2011 primarily due to the impact of lower commodity prices on our supply optimization activities. Comparatively, costs related to supply optimization were lower by $276 million for the second quarter and by $239 million for the first six months of 2012. OSM segment costs decreased in both periods of 2012 because the second quarter of 2011 included a $64 million accrual for estimated net costs to address water flow in a previously mined and contained area of the Muskeg River mine Additionally, Integrated Gas segment costs are lower in 2012 due to the sale of our interest in the Alaska LNG facility in the third quarter of 2011.

Provision for income taxes increased $408 million and $799 million in the second quarter and first six months of 2012 from the comparable periods of 2011 primarily due to the increase in pretax income in high tax rate jurisdictions, including the impact of the previously discussed resumption of sales in Libya in the first quarter of 2012.

United States E&P income decreased $56 million in the second quarter and increased $22 million in the first six months of 2012 compared to the same periods of 2011. The income decrease in the second quarter of 2012 was primarily the result of lower liquid hydrocarbon price realizations and increased exploration expenses, partially offset by higher liquid hydrocarbon sales volumes. For the six-month period, the increase in liquid hydrocarbon sales volumes and decreased DD&A were partially offset by lower liquid hydrocarbon realizations and increased exploration expenses.

Our main sources of liquidity are cash and cash equivalents, internally generated cash flow from operations, the issuance of notes, our committed revolving credit facility, and sales of non-strategic assets. Our working capital requirements are supported by these sources and we may issue commercial paper backed by our $2.5 billion revolving credit facility to meet short-term cash requirements. We issued $4.3 billion and repaid $3.7 billion of commercial paper in the first six months of 2012 leaving a balance of $550 million outstanding at June 30, 2012. After June 30, 2012, we continued to utilize our sources of liquidity, including additional issuances of commercial paper, to fund the Eagle Ford acquisition that closed on August 1, 2012 and working capital requirements. Because of the alternatives available to us as discussed above and access to capital markets, we believe that our short-term and long-term liquidity is adequate to fund not only our current operations, but also our near-term and long-term funding requirements including our capital spending programs, dividend payments, defined benefit plan contributions, repayment of debt maturities, and other amounts that may ultimately be paid in connection with contingencies.

Read the The complete Report

About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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