Please ensure Javascript is enabled for purposes of website accessibility

Why Marathon Oil Stock Plunged Nearly 55% in the First Half of 2020

By Matthew DiLallo – Jul 7, 2020 at 11:39AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It has been a rough year so far for oil producers.

What happened

Shares of Marathon Oil (MRO 0.57%) plummeted 54.9% during the first half of this year, according to data provided by S&P Global Market Intelligence. The main factor was the massive crash in crude oil prices as the COVID-19 pandemic crushed demand in an already oversupplied market. 

So what

Oil prices began 2020 at around $60 a barrel, but cratered as demand plummeted after governments imposed restrictions on travel and nonessential businesses to slow the spread of COVID-19. At one point in April, May futures for West Texas Intermediate (WTI), a key U.S. oil benchmark, crashed into negative territory because the country was running out of space to store excess oil. While WTI crude would go on to stage an epic comeback -- it rallied by more than 90% during the second quarter -- it still ended the first half of the year down 36% at just over $39 a barrel. That slump weighed on most oil stocks, including shares of Marathon Oil

An oil pumping unit at sunset.

Image source: Getty Images.

The oil and natural gas producer lost money during the first quarter. To offset some of its losses, Marathon slashed its capital budget by 50% and suspended both its dividend and share repurchase plan to preserve cash. Management says those moves will enable the company to emerge from this downturn in an even stronger position

Now what

The steep share price decline made Marathon a battleground stock. It's now one of the most widely held oil stocks on the popular Robinhood trading platform, where retail investors' enthusiasm for it is fueled by speculation that shares could bounce back in a major way if the oil market recovers further. While that's certainly possible, Wall Street doesn't agree: Most analysts view Marathon as less attractive than its oil industry peers due to its higher valuation and leverage ratio. Those contrasting views will make it an interesting oil stock to watch in the second half of the year.  

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Marathon Oil Corporation Stock Quote
Marathon Oil Corporation
MRO
$22.80 (0.57%) $0.13

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
342%
 
S&P 500 Returns
107%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.