UPDATE: Canaccord Genuity Starts Marathon Oil (MRO) at Hold
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(Updated - September 30, 2016 9:22 AM EDT)
Canaccord Genuity initiated coverage on Marathon Oil (NYSE: MRO) with a Hold rating and a price target of $16. Analyst Stephen Berman said is cautious on the fact that the company is unhedged.
Berman summarized his view, writing, "MRO's main focus is on unconventional resource basins onshore in the U.S., where it has solid positions in the STACK/SCOOP in Oklahoma, Eagle Ford (EF) in South Texas, and Williston Basin (WB) in North Dakota. The company is one of the most levered to oil among U.S. large-caps. MRO has an improved balance sheet helped by noncore divestitures above the targeted range, which it can use to exploit an asset base enhanced by the recent PayRock STACK acquisition. MRO trades at a 2017E EV/EBITDA of 8.2x versus the 7.9x median for our Oklahoma/EF/WB coverage group. The company is basically unhedged in 2017 and beyond however, and at the strip the multiple is 9.4x. Given the operational leverage to oil and gas prices, being unhedged makes us cautious, and we therefore initiate coverage of MRO with a HOLD rating and $16 price target, which represents an implied 8.3x EV/EBITDA multiple on our 2017E EBITDA of ~$2.3B."
Shares of Marathon Oil closed at $15.90 yesterday.
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