Goldman Sachs Remains Bullish On Mid-Continent Refining (CVR, MRO)

Goldman Sachs has a favorable fundamental view of CVR Energy's CVI Coffeyville, Kansas, refinery and shareholder-friendly management. Goldman's updated six month sum-of-the-parts target price of $23 suggests 11% upside when incorporating our new target multiples for refining peers Frontier, Holly, and Western Refining. Goldman notes CVI has 45% upside to a $30 “high-end” trading value. Greater confidence that Middle East turmoil will not lead to “demand rationing” prices returning in 2011 is the key to gaining confidence in CVI and the sector broadly moving more meaningfully toward “high-end” trading values.

Marathon Oil MRO remains Buy-rated and very inexpensive versus pure-plays. Marathon Oil also remains Buy-rated and is a particularly inexpensive way to gain exposure to the Mid- Continent regions' attractive longer-term fundamentals. While Marathon has outperformed other integrated oils in 2011, it has meaningfully lagged the pure-play Mid-Continent refiners, making its risk/reward more compelling. Using a 5.4X target 2011E EV/DACF valuation for its E&P business, Goldman estimates Marathon's downstream business is trading at an implied 2011E EV/EBITDA valuation of just 3.6X.

Goldman Sachs has a CL-Buy on CVI

CVI is trading higher at $20.17

MRO is trading higher at $50.36