We expect lower-than-expected earnings and lower our rating on Marathon Oil (MRO.US) to "Neutral".

J.P. Morgan downgraded Marathon Oil (MRO.US) from Overweight to Neutral with a price target of $33.00.

The analyst at J.P. Morgan expects Marathon Oil to report lower than consensus second-quarter 2024 earnings per share (EPS) and cash flow per share (CFPS) of $0.69 and $1.84, respectively. These numbers are slightly below the consensus EPS of $0.71 and CFPS of $1.89.

The analyst's estimates include a higher second-quarter cash flow due to the company not receiving a cash dividend in the first quarter and the receipt of a dividend from Equatorial Guinea. The cash flow is expected to be about $39 million. In addition, the company's expected capital expenditure is estimated to be $654 million, up about 7% from the market's estimate of $612 million.

Marathon Oil is expected to produce 1.9 million barrels of oil equivalent per day in the second quarter, in line with the consensus. This production level is supported by the company's investment plans. Production at Eagle Ford is expected to increase significantly.

In contrast, although 20 wells were completed in the second quarter in the Delaware Basin, production is expected to decline, compared to 4 wells completed in the first quarter. The expected decrease is due to a higher proportion of activities in areas of lower interest to Marathon Oil and some production efficiencies in the first quarter that are expected to extend into the second quarter.

J.P. Morgan expects Marathon Oil's second-quarter operating cash flow (OCF) to be about $10.57 billion. Total cash return is estimated to be $138 million, or about 13% of OCF, split between $63 million in basic dividends and $75 million in buybacks.