Why Marathon Oil Stands Out: Analyst Points To Untapped Potential In Equatorial Guinea And Robust FCF Estimates

Raymond James analyst John Freeman reiterated a Strong Buy rating on the shares of Marathon Oil Corp MRO and raised the price target from $40 to $45.

MRO easily exceeded 2Q estimates due to stronger liquids production and indicated that 3Q production should be above the midpoint of guidance.

According to the analyst, MRO maintains the most aggressive buyback program within the coverage and, as a result, sees very strong per share growth despite targeting a flat production profile. 

Equatorial Guinea still provides huge upside for next year, which the analyst is modeling quite conservatively given the volatility in natural gas prices, even modeling an impact to net income of ~$480 million thanks to the change in 2024.

MRO’s 2024 FCF estimate of 18% versus 8% average in the analyst’s coverage universe and multiple of 3.4x versus 5.5x coverage average puts them among the most undervalued names in the coverage. 

The analyst has updated estimates due to the much higher commodity strip. The 2023E EBITDA has been hiked to $4.9 billion from $4.1 billion, and 2024E increased to $5.7 billion from $4.6 billion prior.

Price Action: MRO shares are trading higher by 1.84% at $27.06 on the last check Thursday.

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