Marathon Oil Beats Estimates

The company's profits and revenue rise, despite weakness in exploration and production.
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Marathon Oil

(MRO) - Get Report

beat Wall Street's second-quarter earnings estimates on 2% growth in profit and revenue.

The company announced that its second-quarter earnings, before extraordinary items, rose to $1.55 billion, from $1.52 billion a year ago.

On a per share basis, the company's earnings grew to $2.25, up from $2.08 in the second quarter of 2006 and higher than the $2.12 a share estimated in an analyst survey by Thomson Financial.

Marathon generated $16.26 billion in revenues during the quarter, compared with $15.96 billion during the same period last year.

Growth in its refining, marketing and transportation segment offset losses in its exploration and production and integrated gas businesses. The company made $1.25 billion from refining, marketing and transportation in the second quarter, up from $917 million last year. However, the $400 million earned from its E&P business was 39% less than it earned a year ago, and the $12 million in earnings generated by its integrated gas division last quarter was down from $17 million earned in the second quarter of 2006.

"Marathon's second quarter was marked by exceptional operating performance in our refineries, allowing the company to achieve a record refinery utilization rate of 110% and to realize record crude oil and total refinery throughputs during the quarter," CEO Clarence P. Cazalot Jr. said in a press release.

The firm continued to pursue a $3.2 billion expansion of its Garyville, La., refinery, which will ultimately increase its capacity to 425,000 barrels per day, from 245,000. The project is expected to be completed in late 2009.

Marathon's decline in E&P earnings was caused mostly by "lower liquid hydrocarbon sales volumes, lower liquid hydrocarbon and natural gas realized prices, increased exploration expenses and a higher effective tax rate," according to the press release.

Marathon produced 338,000 barrels of oil equivalent per day in the second quarter, down from 392,000 a year ago. The company said it predicts second-half sales of between 350,000 and 375,000 barrels of oil equivalent per day.

However, the company did realize some successes on the E&P front during the quarter, including three offshore exploration discoveries in Angola.

Although earnings from its integrated gas segment declined in the quarter, Marathon completed a liquefied natural gas facility in Equatorial Guinea during the quarter, six months ahead of schedule.

Marathon Oil was recently trading 3.3% lower at $55.15 a share at the

New York Stock Exchange

.