This story was updated at 9:15 AM ET on Mar. 1, 2016, to add commentary and to include the value of the increased offering.
Marathon Oil (MRO) is the latest energy company this year to issue equity in an effort to strengthen its balance sheet.
On Monday, the Houston-based company announced a public offering of 135 million shares of common stock alongside an offering of 20.25 million additional shares for its underwriters. Taken together, the total offering is $1.3 billion. Shares of Marathon Oil have rebounded after falling nearly 8% in after-hours trading on the news.
Soon after announcing the initial offering on Monday, Marathon Oil increased the offering to 145 million shares priced at $7.65 a share, representing a slight discount as Marathon's shares closed at $8.21 on Monday.
"Marathon Oil intends to use the net proceeds of the proposed offering to strengthen its balance sheet and for general corporate purposes, including funding a portion of its capital program," the company said in a statement released on Monday. Earlier this month, Marathon Oil announced its $1.4 billion capital program for 2016, down 50% from 2015,
It isn't the only energy company to issue equity for the same purpose this month -- or even within the last two weeks.
So far this year, energy companies have issued $10.99 billion in equity, according to data compiled by Bloomberg. Earlier this month, Devon Energy (DVN) announced plans to issue $1.3 billion hours after saying on a call with analysts that it was focusing on asset sales and dividend reduction to meet its financial needs. Last week, Canada-based Enbridge (ENB) announced plans to issue $1.45 billion in equity and Houston-based Newfield Exploration (NFX) announced plans to issue $700 million to possibly pay outstanding borrowings under its credit facility.
Marathon Oil didn't shy away from the possibility that it may need to issue more shares this year.
"Although our business plan assumes the successful execution of our non-core assets program to really contribute to our goal of free cash flow neutrality, we have to continue to keep all options on the table and available to us that give us that financial flexibility going forward," CEO Lee Tillman said in a call with analysts.
Real Money contributor Jim Collins called the move a "wise choice" in a post on Tuesday. While the offering represents a 20% dilution to Marathon Oil's shareholders, it is a far better choice than adding to its $7.3 billion long term debt load, Collins wrote.
For a technical look at Marathon Oil, Real Money's resident chartist, Bruce Kamich, noted that the on-balance-volume line in Marathon Oil's chart may be bottoming, but it is too early to make strong statements about its direction.
