Will Soaring Energy Prices Help Marathon Oil?

Marathon Oil shares, which more than doubled last year, is expected to remain well supported, thanks to surging energy prices and a recovery in demand, but it is yet to reach the highs recorded in 2018.

In the fourth-quarter results, Marathon Oil reported quarterly adjusted earnings of $0.77 per share, beating the Wall Street consensus estimates of $0.55 cents per share. The U.S. shale producer said its revenue more than doubled to $1.80 billion from a year earlier. That too beat the market expectations of $1.55 billion.

In a $60/bbl WTI or higher price environment, the company targets returning a minimum of 40% of CFO to equity investors. During the fourth quarter, Marathon Oil returned over 70% of CFO to shareholders through a combination of share repurchases and base dividends, significantly exceeding its minimum 40% commitment, the company said.

“Reasons To Buy: The wells drilled by Marathon have extremely low oil price break-even costs and need oil prices of just $35 a barrel to be profitable,” noted ZACKS Research.

Marathon Oil stock traded 1.70% higher at $22.24. The stock rose over 35% so far this year after surging more than 146% in 2021.

Analyst Comments

Marathon’s stock has more than doubled year-over-year and was the second-best performer in the S&P 500 (behind shale peer Devon). The durability of the free cash windfall from higher pricing is partially dependent on macro-economic factors that lie beyond the reach of the individual U.S. E&Ps, but we think firms that keep spending to a minimum are making the right choice, as oil prices will likely subside to a more midcycle level in 2023,” noted Dave Meats, Director at Morningstar.

Marathon Oil Stock Price Forecast

Fourteen analysts who offered stock ratings for Marathon Oil in the last three months forecast the average price in 12 months of $25.00 with a high forecast of $31.00 and a low forecast of $20.00.

The average price target represents a 12.51% change from the last price of $22.22. Of those 14 analysts, 11 rated “Buy”, two rated “Hold”, while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $20 with a high of $25 under a bull scenario and $10 under the worst-case scenario. The investment bank gave an “Equal-weight” rating on the oil company’s stock.

Several analysts have also updated their stock outlook. Piper Sandler raised the target price to $27 from $22. Raymond James lifted the price objective to $31 from $27. JPMorgan upped the target price to $24 from $23.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator gives a strong buying opportunity.

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