Marathon Oil (NYSE:MRO) recently announced its first-quarter earnings. The company reported a net income of $417 million, down from a fourth-quarter net income of $549 million in 2011. The downward move of its profits did not come as a surprise to analysts, who had predicted lower earnings for the quarter.
The company is making a push to find new supplies of oil and gas. The announcement of this intention was made recently when the company presented its plans in a PowerPoint presentation in New Orleans. The presentation included plans for the company to explore drilling possibilities in Northern Colorado. The plans are in line with the trend of oil and gas companies' huge investments to find rich sources of production for the industry.
This expansion, along with Marathon stock currently being considered undervalued, makes the company a very good buy for stockholders looking to add a safe bet to their portfolios. Marathon is also active in terms of its efforts to develop further in oil production. In recent news, it announced that first production at Block 31 offshore Angola is expected in the second half of this year.
Marathon was also able to protect its stock, as it predicted early on that the oil and gas industry would be prone to a takeover by more unconventional energy sources. Marathon was able to adjust before many competitors, and its strong showing in the market today may be due to the work of the company and its CEO Clarence Cazalot.
One of Marathon's main competitors, Chevron (NYSE:CVX), has not had much luck recently. The company has had to deal with two serious and long-standing lawsuits over the course of the last few years. Neither suit places the company in a good light, even if it is eventually found to be innocent of all charges. One lawsuit, which has lasted about 14 years, is related to the company's alleged conduct in Nigeria in 1999. Plaintiffs in the case, all local Nigerians, claim that Chevron hired local authorities to open fire on a supposedly peaceful protest, killing two people. Others were then taken ashore by the authorities and allegedly tortured. Chevron, already cleared of wrongdoing from the initial charges, was recently also cleared of wrongdoing in the alleged torture scenario. According to law, only private individuals -- not corporations -- can be sued for such wrongdoings. This unfortunately leaves stockholders with the perception that Chevron got off on a technicality, rather than its own innocence. The effect of the suit's outcome on Chevron's stock remains to be seen, but it certainly makes its competitors, including Marathon, look like more wholesome companies.
If that were the only issue facing Chevron at present, then it might be easy enough for the company to get over it and move on. However, there is another court case currently under way. Citizens of Ecuador are using video footage to try and prove that Chevron contaminated drinking water on purpose and then engaged in illegal activities to cover up its actions. Although the case seems solid, Chevron has also unveiled several videos which appear to prove that the entire case against it is based on fraud and deceit. The truth has yet to be determined, and Chevron may once again be able to escape serious penalties. However, it may find it more difficult to escape stockholders' distrust.
Another competitor facing a huge lawsuit currently is Royal Dutch Shell (NYSE:RDS.A). Shell is being sued due to its responsibility for an enormous oil spill in Nigeria. Recent news tells us that the spill was significantly worse than the company originally announced. This places the oil company in a very difficult position. If Shell is made to pay out an enormous settlement fee, the company's stock could take a hit. Such a hit might pave way for a company like Marathon to grab some of Shell's market share as it continues to produce.
BP (NYSE:BP) is, of course, still in the spotlight due to the backlash from the Gulf of Mexico spill. Most recently, shrimp processors have raised concerns regarding the fact that they have been unfairly excluded from the class action lawsuit. This means that the case may be delayed further as the issue is resolved. It also means that BP may be in the same position as Shell, where the company may be taking out its checkbook again soon.
Exxon Mobil (NYSE:XOM), another significant competitor, is nearing the end of its efforts to sell all of its company- and dealer-owned sites, something it began doing nearly four years ago. Exxon began by offering eligible dealers a Right of First Refusal and bona fide offer to purchase the sites, while all remaining sites are in the process of being sold to the highest bidders. All of the sites will continue to provide the Exxon fuel brand. This should provide Exxon with a significant influx of cash, the use of which remains to be seen.
The oil and gas industry is certainly not for the weak of heart. Investors must be wary of mechanical failures, legal disputes, and alternative sources of energy taking over the market. Marathon, however, has proven itself to be consistently ahead of the game, and has protected its shareholders well from any major downturns. Its commitment to finding new sources of oil and gas may be fruitful, and investors certainly hope that will be the case. If not, however, Marathon seems assured that it can survive.
Perhaps for Marathon owners the 2011 spin-off that created Marathon Petroleum (NYSE:MPC) was not such a great idea. That company's numbers are through the roof, and would have probably helped the middle-of-the-road Marathon Oil. The letdown is hindsight, however, and Marathon Oil must keep its production up if it still wants to attract investors and not fall prey to its competitors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.