Adjusting 1Q08 Estimate for Interim Update
Summary and Recommendation from Friedman Billings Ramsey
"Following the company's April 8 interim update, we are lowering our 1Q08 EPS estimate
from $1.25 to $0.75 to reflect weaker-than-expected downstream margins, higher exploration
expense, and lower-than-guided oil sands production. This reduces our 2008 EPS estimate
from $5.40 to $4.90. We maintain our $60/share NAV-based price target and Market Perform
rating. The stock remains the cheapest of the group on a multiple metrics; however, following
the company's recent analyst meeting, we do not see material near-term positive catalysts.
Key Points
• Weaker-than-expected downstream margins. Marathon stated that it expects its 1Q08
refining and marketing margins to be slightly negative due to the weak margin
environment and $120 million in derivative losses.
• Higher exploration expense. Total exploration expense is now estimated to be between
$135 million and $145 million, at the upper end of the $120 million to $145 million prior
guidance. This suggests a significant number of dry holes, in our view.
• Lower-than-guided oil sands production. Production is estimated at 24,000 bpd, below
the 30,000 bpd guidance, due to weather-related issues and unplanned maintenance.
• In-line production sales. Volumes are projected to be approximately 372,000 Boe/d, in
the middle of the company's 360,000 Boe/d to 380,000 Boe/d prior guidance.
• Earnings release May 1. The company plans to release 1Q08 earnings May 1, 2008." |
