Moreover, a correlation of present value with adjusted reserve life and subsequent twelve month cash flow, taking into account first quarter 2006 results reported on April 27, points to potentially higher value, particularly in the downstream. Valuation is also a challenge as management mentioned on the quarterly call that it is giving much attention to a possible transaction that combines Marathon’s processing capability with a partner’s oil sands heavy crude production. Considering our vision of an oil price of $150 in 2010, there should be a common basis for a mutually beneficial accord.
A McDep Ratio of 1.07 for buy-recommended Marathon Oil (MRO) indicates that the stock price exceeds estimated net present value of $75 a share. That estimate presumes a long-term oil price of $50 a barrel compared to a futures price of $71 for oil delivered over the next six years.