Marathon Oil 3Q Net Falls 42%; Marathon Petroleum 3Q Net Soars

(Dow Jones Newswires), Nov. 1, 2011

Marathon Oil's third-quarter earnings fell 42% as lower sales volume hurt its exploration and production income, while Marathon Petroleum saw its third-quarter profit soar as favorable crude oil acquisition costs contributed to better-than-expected revenue.

Marathon Oil spun off its downstream and petroleum assets in July--creating Marathon Petroleum Corp. (MPC)--to focus its drilling efforts on unconventional U.S. oil shales, like the Bakken in North Dakota, Anadarko Woodford in Oklahoma and Eagle Ford in Texas. Moody's Investors Service downgraded Marathon Oil and Marathon Petroleum in August to Baa2, which is two steps above junk territory, citing increased exposure to volatile commodity prices. But the credit-ratings firm said both companies were well positioned and solidly capitalized to move forward as separate entities.

Marathon Oil reported a profit of $405 million, or 57 cents a share, down from $696 million, or 98 cents, a year earlier. Excluding gains on asset sales and other items, earnings from continuing operations fell to 59 cents from 66 cents. Total revenue jumped 29% to $3.8 billion. Analysts polled by Thomson Reuters had most recently forecast earnings of 84 cents on revenue of $2.56 billion.

Operating margin slipped to 35.1% from 35.5%.

Exploration and production earnings declined 35%, reflecting lower sales volumes, primarily in Libya. Oil sands mining income soared to $92 million from $18 million a year earlier.

Meanwhile, Marathon Petroleum--which operates six refineries--reported a profit of $1.13 billion, or $3.16 a share, up from $277 million, or 77 cents, a year earlier. Revenue rose 30% to $20.65 billion. Analysts polled by Thomson Reuters had most recently forecast earnings of $2.58 a share on revenue of $19.92 billion.

Gross margin fell to 18.2% from 19%, but operating margin jumped to 8.5% from 2.8%

Refining and marketing segment income soared to $1.71 billion from just $352 million a year earlier, reflecting favorable crude oil acquisition costs and higher crack spreads. Refining and marketing gross margin increased to $13.18 a barrel from $3.75 a barrel a year ago.

Fuel sales at Speedway stations fell 11%, while the segment's profit dropped 19%.

Marathon Oil shares were trading 4% lower at $25 premarket, while Marathon Petroleum was inactive.

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