Marathon Oil Corp. was weighed down by higher exploration expenses as it reported Wednesday a 41 percent drop in fourth-quarter profit despite an increase in revenue. Executives insisted the company is well-positioned for future growth, especially in key resource plays in the U.S. and overseas.
The Houston-based company said for the three months ended Dec. 31 it earned $322 million, or 45 cents a share, compared to a profit of $549 million, or 78 cents a share, in the same period a year earlier.
Adjusted net income in the fourth quarter was 55 cents a share.
Revenue in the quarter totaled $4.24 billion, compared to $3.81 billion a year earlier.
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Exploration expenses spiked 83 percent to $238 million, compared to $140 million a year earlier. Overall costs and expenses were up only slightly at $2.56 billion, compared to $2.55 billion a year earlier.
During a conference call with analysts and investors, CEO Clarence Cazalot said the company expects to see higher costs this year in its international operations, but he suggested the overall costs are still relatively low.
Cazalot also addressed his future, saying Marathon’s board has made CEO succession one of its priorities. Cazalot is 62, and under company policy the CEO must retire at 65.
“I’m 62, but I feel 52 on some days,” Cazalot said.
But, he added, “I will assure you when it’s time for me to step aside, the company will be in very good hands.”
Company shares fell 51 cents, or 1.5 percent, to $34.21 in afternoon trading.
Full-year profit totaled $1.58 billion, or $2.23 a share, compared to a profit of $2.95 billion, or $4.13 a share, in 2011. Net income for 2011 included $1.24 billion from the company’s former refining, marketing and transportation business, which was spun off on June 30, 2011 and reported as discontinued operations in 2011.
Twelve-month revenue totaled $16.22 billion, compared to $15.28 billion in 2011.
Marathon Oil’s total net proved reserves were 2.0 billion barrels of oil equivalent at the end of 2012, up 12 percent from the prior year.
For all of last year, exploration and production available for sale, excluding Libya, increased 8 percent over 2011 volumes, with 2012 available for sale volumes averaging 386,000 net barrels of oil equivalent a day, compared to 357,000 net barrels of oil equivalent per day for 2011.
The company projects 2013 production available for sale from its upstream businesses will be 6 to 8 percent higher than 2012, excluding Libya because of the uncertainty in production levels and Alaska, as it sold that asset at the end of January.
Marathon plans to continue to be aggressive this year in its exploration and production strategy.
It is budgeting $5.2 billion in capital expenditures. It plans to spud, or start up, 350-400 wells in key U.S. resource plays. The Eagle Ford is a key area of growth for the company. Marathon also expects to participate in 10 to 13 exploration wells across the deepwater Gulf of Mexico, Ethiopia, Kenya, Gabon, the Kurdistan region of Iraq and Norway.