Tuesday, September 11, 2012

Marathon Oil (MRO) 2012 Review

Marathon Oil , MRO,  is an oil and natural gas production company, having recently spun off its refining operations. 

As a newly separated entity, it has no available historical data. However, future profit and dividend increases are expected in the 8-13% range and ROE is estimated in the 12-15% area. Looking ahead both earnings and dividends will be driven by:

(1) expanding activity in Texas’ Eagle Ford shale,

(2) acquisitions,

(3) strong inventory of development projects [Indonesia, Iraq, Poland].


(1) potential fluctuations in oil and gas prices,

(2) political risks associated with doing business in foreign countries,

(3) operational problems in Libya.

MRO is rated A by Value Line, has a 21% debt to equity ratio and its stock yields 2.4%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
MRO 2.4% 8% 20% 8
IND .6 6 13 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
MRO 21% 13% 0 46% A
IND 10 8 NA 12 NA


Note: MRO stock made good progress off its March 2009 low, surpassing the downtrend off its June 2007 high (straight red line) and its November 2008 trading high (green line). Long term, MRO is in a trading range; the blue line is the lower boundary. Intermediate term, it is in an uptrend (purple lines). The wiggly red line is the 50 day moving average. The Dividend Growth Portfolio owns a 50% position in MRO, primarily as a result of the recent breakup of the company and the spin off of its refining operations (which was Sold). The upper boundary of its Buy Value Range is $12; the lower boundary of its Sell Half Range is $34.


Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.