Marathon Oil Corp. (NYSE:MRO)

Current Ratio Analysis

The current ratio exhibits fluctuations over the examined periods, beginning around 1.52 in early 2018 and reaching a low near 0.99 by late 2021. There is a period of decline from early 2019 through late 2019, where the ratio drops from approximately 1.49 to 1.06, suggesting a weakening in short-term liquidity. Following this, a mild recovery is noted in 2020, with ratios rising to around 1.33 by year-end. The trend during 2021 shows a decline again, with the current ratio dropping below 1.0 at one point, indicating potential liquidity stress. However, in the most recent quarters of mid-2022, the current ratio improves marginally to about 1.18, which still suggests modest liquidity position.

Quick Ratio Analysis

The quick ratio mirrors the pattern observed in the current ratio but remains consistently slightly lower, reflecting the exclusion of less liquid current assets from the measure. In early 2018, the quick ratio is around 1.42, decreasing steadily through 2019 to a low point near 0.85 by mid-2019. This dip points toward a reduction in highly liquid assets relative to current liabilities during that time frame. A recovery trend unfolds during 2020 and early 2021, with the ratio improving to approximately 1.26 by mid-2021. Subsequently, the quick ratio declines below 1.0 toward the end of 2021 but rebounds in 2022 to levels above 1.1, indicating an enhancement in immediate liquidity.

Cash Ratio Analysis

The cash ratio shows the most volatility and remains substantially lower than both the current and quick ratios, highlighting a more conservative liquidity position when considering only cash and cash equivalents against current liabilities. Starting near 0.84 in early 2018, it declines to lows of about 0.39 in mid-2019 and further to approximately 0.29 by early 2022, indicating a significant reduction in the most liquid assets relative to current liabilities. Partial recoveries are observed during late 2019 and again toward the end of 2020, with minor increases approaching 0.71 during these periods. The first half of 2022 shows a slight improvement to about 0.49, suggesting marginal strengthening of the company's ability to cover short-term obligations purely with cash.

General Liquidity Insights

Across the observed periods, the liquidity ratios demonstrate sensitivity to potential operational and market conditions. The downward trends noted in both current and quick ratios through 2019 and 2021 could indicate periods of increased short-term liabilities or constrained current asset availability. The partial recoveries in 2020 and 2022 suggest efforts to improve liquidity or favorable market conditions. The consistently lower cash ratio underscores a reliance on receivables and inventories alongside cash, rather than cash alone, to meet short-term obligations. Overall, liquidity management appears to fluctuate, with occasional pressures but some signs of recovery in recent quarters.

Current Assets

The current assets display fluctuating values over the analyzed periods. Initially, they maintained a generally stable level between 2,900 and 3,100 million US dollars from early 2018 to early 2019. Following this, there was a downward trend reaching a low point in mid-2020 around 1,400 million US dollars. Subsequently, current assets began to recover and show an upward trend, culminating in approximately 2,800 million US dollars by mid-2022.

Current Liabilities

Current liabilities exhibited variability, starting around 1,900 million US dollars in early 2018 and increasing to peaks above 2,400 million in mid-2019. A notable decline occurred toward mid-2020, with liabilities dropping to roughly 1,000 million. Like current assets, liabilities rebounded thereafter, reaching levels over 2,300 million by mid-2022.

Current Ratio

The current ratio demonstrates some volatility but generally remained above 1, indicating that current assets were sufficient to cover current liabilities during most periods. Early ratios hovered between 1.4 and 1.6, indicating comfortable liquidity. A decline to near 1.0 was observed around late 2021, signaling a reduction in short-term liquidity. However, in 2022, the ratio experienced a modest increase, improving short-term financial stability.

Summary of Trends

The analyzed data reveals a period of liquidity challenges around mid-2020, characterized by both reduced current assets and liabilities, and a narrowing current ratio. This phase was followed by a recovery, with rising current assets and liabilities and a gradual improvement in the current ratio. The current ratio's dip below 1.0 suggests short-term liquidity concerns during late 2021, but the subsequent rebound indicates corrective measures or improved working capital management. Overall, liquidity metrics imply a responsive adjustment to fluctuating operational and market conditions over the observed timeframe.

Total Quick Assets

The total quick assets exhibited fluctuations throughout the analyzed period. Initially, the values increased slightly from approximately 2,700 million USD to nearly 2,900 million USD during 2018, followed by a decline to just above 1,980 million USD by the end of 2019. A pronounced dip was noted in 2020, reaching a low near 1,140 million USD mid-year. From late 2020 onwards, the total quick assets demonstrated a recovery trend, increasing steadily and reaching over 2,600 million USD by mid-2022.

Current Liabilities

Current liabilities also showed variability over the quarters. They generally increased from 1,900 million USD in early 2018 to around 2,400 million USD by the middle of 2019, followed by a reduction down to approximately 1,745 million USD by the end of 2019. In 2020, liabilities decreased further to just above 1,000 million USD but then rose again in 2021 and 2022, fluctuating between roughly 1,600 million USD and 2,400 million USD, with a marked increase toward the later quarters.

Quick Ratio

The quick ratio started at a strong position above 1.4 in early 2018 but experienced gradual compression through 2019, dropping below 1.0 in mid-2019. Throughout 2020, the quick ratio remained around or slightly above 1.0, with a minor improving trend toward the end of the year and into 2021. The ratio demonstrated intermittent weakness in 2021, dipping below 1.0 in certain quarters, but improved marginally in 2022, ending slightly above 1.1, suggesting a moderate strengthening of short-term liquidity relative to current liabilities.

Overall Analysis

The data reveals that short-term liquidity experienced volatility over the five-year span. Total quick assets and current liabilities both fluctuated significantly, reflecting possible operational or market-driven impacts. The quick ratio's movement from a solid liquidity position in 2018 to a near or below parity level in 2019, followed by gradual recovery, indicates a period of tightening liquidity which has since somewhat stabilized. While recovery has been evident, the liquidity metrics underscore the importance of ongoing monitoring to ensure current assets sufficiently cover current obligations.

The financial data reveals several notable trends concerning liquidity and short-term financial positioning over the reported periods.

Total Cash Assets

Total cash assets exhibit fluctuations across the quarters. Initially, there is a decline from $1,613 million at the end of March 2018 to $858 million by December 2018. This is followed by further variation throughout 2019 and 2020, including a notable increase to $1,119 million by September 2020, contrasting a lower figure of $522 million in June 2020. From March 2021 onwards, total cash assets show volatility with a peak of $1,162 million in June 2022 after a trough of $485 million in September 2021. Overall, cash reserves display cyclical changes without a consistent upward or downward long-term trend.

Current Liabilities

Current liabilities present a generally rising trend with some fluctuations. Starting at $1,909 million in March 2018, liabilities peak at $2,471 million in June 2019. Subsequently, a decrease occurs, reaching $1,213 million by December 2020, implying a reduction in short-term obligations. However, liabilities increase again thereafter, hitting $2,377 million in June 2022. The pattern indicates periods of increased short-term borrowing or obligations interspersed with phases of reduction.

Cash Ratio

The cash ratio, which measures liquidity by comparing cash assets to current liabilities, demonstrates considerable variability and generally low values. It starts relatively high at 0.84 in March 2018 but shows a declining tendency through the middle of 2019, reaching a low of 0.39 by June 2019. Some recovery is observed towards the end of 2020, with the ratio climbing to around 0.71 in September 2020, followed by another decline, reaching a low of 0.29 in March 2021. The ratio exhibits a modest improvement to 0.49 in June 2022. Despite fluctuations, the ratio mostly remains below 1, indicating that cash assets consistently cover less than the total current liabilities, which points to moderate liquidity risk during the periods analyzed.

In summary, the company’s liquidity position as assessed by cash assets and current liabilities is characterized by frequent shifts without a clear long-term improvement or deterioration. The cash ratio highlights sustained challenges in maintaining a liquid asset base sufficient to cover current obligations by cash alone, necessitating reliance on other current assets or financing methods to meet short-term liabilities.