Marathon Oil Upped To Buy On Positive Estimate Revisions

On Jul 5, Zacks Investment Research upgraded Marathon Oil Corporation (NYSE:MRO) to a Zacks Rank #2 (Buy).

Crude Improvement Means Good News for Marathon Oil

Over the last 60 days, the Zacks Consensus Estimate of Marathon Oil for the third-quarter of this year saw an improvement from a loss of 34 cents to a loss of 28 cents. Moreover, for the year 2016, the company’s Zacks Consensus Estimate narrowed to a loss of $1.05 from a loss of $1.25.

These estimate revisions have come when oil prices are walking on the bullish path after a length of time. In details, from the 12-year low mark of $26.05 per barrel in February, West Texas Intermediate (WTI) crude closed at $48.99 per barrel yesterday. The commodity also crossed the $50 per barrel mark last month for the first time since Jul 21, 2015. We can say that this will lead to improvement on the crude front.

Crude improvement is definitely good news for Marathon Oil, which is a leading upstream energy player. In other words, oil price has a positive correlation with the business of the upstream players since the companies generate earnings after selling the commodities.

It is also to be considered that Marathon Oil has a large and geographically diverse reserve base and solid project pipeline. The company’s recent plan to buy PayRock Energy Holdings is a huge positive as the latter possesses 61,000 net surface acres of land in Oklahoma. In fact, the company is anticipating handsome returns from the newly drilled wells of the locality, even if oil remains at $50 per barrel. It is to be noted that the to-be purchased resources will raise the company’s total ownership to 200,000 acres in the Stack region.

Moreover, Marathon Oil surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average earnings beat of 19.93%.

Other Stocks to Consider

Other stocks in the energy sector that are worth considering include McDermott International Inc. (NYSE:MDR) , North Atlantic Drilling Limited (NYSE:NADL) and Denbury Resources Inc. (NYSE:DNR) . All the stocks sport a Zacks Rank #1 (Strong Buy).