Citigroup: Market Significantly Underestimating Marathon Oil

Citigroup is out very positive on Marathon Oil Corp (MRO) saying they believe the equity market is significantly underestimating the earnings impact of imminent growth in oil and gas production - and in particular, the nuances of MRO's tax position in Norway that should become evident in 2H08.

The kicker is the pending start-up of the Alvheim project in Norway, scheduled for 2Q08 that is the key driver expected to lift oil and gas production by around 16% in 2008 alone (17% including oil sands), and skew the production mix towards a greater mix of oil.

MRO retains over $1.5bn of legacy tax losses that will be fully recovered when production commences. Put simply, early years production from Alvheim – onstream 2Q08 - will have no regional tax and reasonably adds >$1bn to earnings in 2009.

Firm is raising their earnings estimates by 5% and 10% respectively in 2008/9 to reflect this impact – but with a conservative oil price deck and higher oil leverage the risks to ‘street’ expectations lies on the upside.

Reiterates Buy and $82 target saying they view MRO as one of the most attractive of the U.S. oil majors for 2008.

Notablecalls: Is this enough to run the stock today? Yeah, why not.

Comments

[JRL:]

The FPSO left Haugesund on the 16th of February. It will stop for 2-3 weeks in Åmøyfjorden to perform some final tests before it will head out to the Alvheim field and start up production. Production is expected before the end of Q1.

2008 Feb 28 02:15 AM

[dkhkch:]

Did not "...run up today." on Thursday. MRO closed down, and even more so on Friday, so much for your projection...

2008 Mar 01 01:03 PM

[dkhkch:]

ABH Closed at $10.35 on Friday. NC cannot call stocks correctly (See Previous Post)
NTRI closed Friday at $14.31, so hardly a "Bounce Play" as NC called it at $17. NC's calls are worthless. (See Previous Post)

2008 Mar 01 01:05 PM

[Diegojames:]

HAVE SMALL MRO POSITION.THANK YOU-WILL BUY MORE.HAVE LARGER STO POSITION. STATOIL IS VERY UNDER VALUED. THIS FPSO OF MARATHON IS NEW(?) THEY USUALLY ONLY OPEREATE BARGES(?).
FPSO ARE FLEXIBLE AND MOBILE IN CHANGING WEATHER AND WITHIN NEW OPERATIONAL PARAMETERS.
DIEGOJAMES
PORTER RANCH,
SUNNY AND WARM IN CALIFORNIA

2008 Apr 14 07:00 PM