For stockholders still wondering, Marathon Oil (MRO) is still one of the better oil and gas options to back at present.
There are a number of reasons why Marathon Oil remains a strong buy. So far this year, the oil company has underperformed in comparison to many of its competitors. After the numerous changes the company made last year, it is now focused on increasing production in the U.S., as well as increasing its operations in Libya. The company is achieving this through a number of big changes. One of those changes already took place and involved Marathon spinning off its midstream refining, transport and retail assets into a new company, Marathon Petroleum (MPC). This allows the larger Marathon Oil to focus exclusively on exploration and production. The move to become an E & P is part of a growing trend that is becoming more popular throughout the oil and gas industry.
Marathon oil has an enormous global portfolio, and the company operates in the U.S., Canada, Norway, the United Kingdom, Poland, Libya, West Africa, Kurdistan Iraq and Indonesia. Many of these projects have great potential to improve the company's revenue and growth in the future.
The spin off has caused share prices to decrease significantly. As compared to a year ago the company's earnings have fallen by no less than 58%. The question that stockholders have to ask themselves is whether or not the company's unconventional route forward is one that will meet with success in the future.
The reasons to back Marathon Oil at this stage are as follows: Marathon Oil has managed to achieve a very good balance between international and local production. The company's percentage of liquids vs. gas is one of the highest in the industry. Marathon Oil has the lowest cost per barrel of production in the industry. Lastly, the company plans to manage its capital expenditure plans to produce compounded 20% or better production growth. On the downside, the company does have to pay extremely high levels of tax.
Marathon Oil competitor BP (BP) is still facing huge backlash regarding its involvement in the Gulf of Mexico oil spill last year. Anger against the company has been refueled by pictures of suffering marine animals that have come to light and that were previously not released to the media. It appears that the spill may have caused more damage than was originally made public. In an effort to redeem itself, BP has created a unit that has more effective systems for capping the oil flow from damaged deep-water wells and that can be flown to any oil spill in the world when the need arises. Whether this will be enough for stockholders is yet to be determined.
Chevron (CVX), another competitor, seems surprisingly able to cancel out its negative news, such as the lawsuit it's currently involved in, with positive news about such things as the new oil drill that will make oil drilling in the Gulf of Mexico a lot safer. This makes it an interesting stock to keep your eye on, as it is uncertain what the company will achieve going forward. Stockholders can only hope that the positive innovations that the company often reveals will outweigh the civil and criminal cases against it.
One of Marathon Oil's main competitors, Anadarko Petroleum (APC), is about to be granted the go ahead to continue with its plans for oil drilling in thus far unexplored areas of the Greater Natural Buttes area found in Utah. This is great news for the company, which, as a result of the project, should be able to boost its revenue significantly. This is because the area promises to yield a huge source of liquid petroleum. As things stand, liquid petroleum is far more valuable than gas, which means that the company could have a significant advantage in the market. The project was proposed as early as 2006, but has met several setbacks, mostly in the form of environmental concerns for the area. However, as Anadarko is willing to comply with the necessary standards, and as the company wishes to move forward in a way that will not harm the natural wilderness area in Utah, it seems that an agreement between the company and the government is forthcoming. At this point, Anadarko may just be the stock to hold onto for most investors who believe that its future holds significant promise.
An oil company that seems to be well ahead of the game is Exxon Mobil (XOM) which recently made it to the top of the Fortune 500 list making it the biggest revenue producer in the country at the moment. This is mainly due to the huge increase in oil prices of late. Two other oil companies are also near the top of the list, namely Chevron and ConocoPhillips (COP), so it seems as though Marathon is not yet one of the top competitors.
Statoil ASA (STO) may have the right idea for moving its business forward. Recently, the company agreed to work alongside Rosneft (ROSN) to "explore offshore frontier areas of Russia and Norway and to conduct joint technical studies on two onshore Russian assets." The joint expertise that both companies bring to the table will allow the area to be properly explored and used to its greatest potential. Statoil will hold 33.33% in all of the joint ventures that the two companies plan to collaborate on in the near future.
The hope is that Marathon already suffered its losses and can move forward. The dip in its value was expected, and the company hopes the worst is behind it. Investors should be cautious, but the stock remains a cheaper buy than most companies, and Marathon has just as ambitious of plans as its oil competitors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.