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Marathon Profit Rises, Tops Estimates, as Oil Surges

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May 4 (Bloomberg) -- Marathon Oil Corp., the fourth-largest U.S. energy company, said first-quarter net income rose 62 percent as a divestiture gain and a jump in crude prices made up for a drop in production.

Profit climbed to $457 million, or 64 cents a share, from $282 million, or 40 cents, a year earlier, Houston-based Marathon said today in a statement. Per-share profit excluding such items as an asset sale was 44 cents, 27 cents higher than the average of 16 analyst estimates compiled by Bloomberg.

Earnings from oil and natural-gas wells surged sixfold to $502 million as Marathon’s average crude price jumped 85 percent to $74.35 a barrel. Recovering economies around the world lifted global crude demand by 1.84 million barrels a day during the quarter, according to the International Energy Agency. Marathon’s revenue climbed 64 percent to $16.8 billion.

“It was a big surprise,” Jim Byrne, an analyst at BMO Capital Markets in Calgary, said of the report. “It looks like mainly just kind of little bit higher realized prices.”

Marathon fell 12 cents to $32.15 as of the 4 p.m. close of New York Stock Exchange composite trading. The stock rose as much as 35 cents after the earnings report was released, before falling along with oil prices. Marathon had the smallest decline among major U.S. oil producers.

Marathon followed the largest U.S. oil companies in posting profit gains. Exxon Mobil Corp. said last week that its earnings rose 38 percent from a year earlier to $6.3 billion. Net income more than doubled at Chevron Corp., which reported record production, and Houston-based ConocoPhillips.

Production Falls

Marathon’s production dropped 13 percent to the equivalent of about 364,000 barrels of crude a day as operations in Equatorial Guinea were disrupted by maintenance, according to the earnings statement.

Daily production in the current quarter will average between 365,000 and 380,000 barrels of oil equivalent a day, Marathon said. The company left unchanged its full-year output forecast at 390,000 to 410,000 barrels a day.

Marathon’s refining business lost more than $2.6 million a day in the quarter as prices for gasoline and diesel failed to keep pace with the jump in costs for crude used to make the fuels. The loss was 5.7 cents per gallon of fuel produced.

Amid narrowed profit margins, Marathon idled plants for the most maintenance work in its history, increasing operating expenses by about $150 million and reducing the amount of crude processed by 152,000 barrels a day.

(Marathon was scheduled to begin an earnings conference call for investors and analysts at 4 p.m. New York time. To listen, access a broadcast at {EVTS <GO>}.)

To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net.

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net.

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