It has been a rough couple of weeks for integrated oil companies. With crude prices having been cut in half from a year ago, all the large oil companies have taken it on the chin, based on quarterly earnings. We started with BP (NYSE:BP) and now travel outside the Big Oil group to the relatively smaller Marathon (NYSE:MRO).
Let's take a quick look at how Marathon and the major companies fared relative to their results from a year ago:
|
Company |
Q2 2008 Earnings* |
Y-o-Y Earnings Change |
|---|---|---|
|
BP |
$9.36 |
(53%) |
|
Chevron (NYSE:CVX) |
$5.98 |
(71%) |
|
ConocoPhillips (NYSE:COP) |
$5.44 |
(76%) |
|
ExxonMobil (NYSE:XOM) |
$11.97 |
(66%) |
|
Marathon |
$0.77 |
(47%) |
|
Shell (NYSE:RDS-A) |
$7.90 |
(70%) |
|
Total (NYSE:TOT) |
$7.39 |
(60%) |
*In billions.
The loser in this group was Conoco, which managed to shed 76% in earnings from a year ago, while at the opposite end, Marathon kept its second-quarter decline down to 47%. The average for the group was a decline of 63%.
Marathon earned $413 million in the quarter, compared with $774 million in the same quarter a year ago. Its per-share performance was $0.58, versus $1.08 in the second quarter of 2008. On an earnings basis, Marathon was the only company with a drop of less than 50% during the quarter.
In the exploration and production segment, Marathon managed to chalk up income of $220 million, a substantial slide from its $822 million a year ago. Somewhat surprisingly, sales volumes for the quarter were 26% higher than the previous year, and production was an impressive 12% higher than in 2008. The segment would have performed better if the U.S. portion hadn't suffered a loss of $41 million, compared with $359 million in earnings last year.
Internationally, the company made a discovery offshore Angola, where BP has had remarkable success. And the Canadian oil sands earnings came in at just $2 million; last year, there was a loss of $157 million after a $250 million loss on derivative instruments.
Remarkably, the downstream unit (refining and marketing) actually increased its contribution slightly year over year. In the most recent quarter, it earned $165 million, versus $158 million, benefiting from a slight strengthening in the wholesale marketing gross margin.
All in all, I'd urge my Foolish friends to exercise caution in buying oil and gas producers -- either the integrated companies or the independents. But if you have lots of time to let your investments stew and simmer, there could be some real profits to be made in this sector.
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