Wednesday, February 27, 2008

Marathon Oil Corp (NYSE:MRO): Market is significantly underestimating MRO - Citigroup

- Citigroup is out very positive on Marathon Oil Corp (NYSE: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% inc oil sands), and skew the production mix towards a greater mix of oil.

MRO retains over $1.5bn of legacy tax losses that will fully 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.

Reits Buy and $82 tgt saying they view MRO as one of the most attractive of the US oil majors for 2008.

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

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