Marathon Oil: Reducing Fair Value Estimate by $3 Per Share to $27
We’re reducing our fair value estimate for Marathon MRO to $27 per share from $30 after marking our model to market for near-term oil, gas, and liquefied natural gas forward curves, and correcting a modeling error (we were previously overstating the benefit of the firm’s contractual linkage to global LNG pricing from 2024 for its gas processing assets in Equatorial Guinea). This reduces our star rating to 3 stars from 4. However, our earlier conclusion—that the market is underestimating the upside from Equatorial Guinea—still looks valid, given that the stock trades at a discount to our updated valuation. That makes Marathon one of only three exploration and production firms with a favorable price/fair value ratio, albeit one that no longer implies sufficient margin of safety for the 4-star rating.
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