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Citi downgrades Marathon Oil stock amid ConocoPhillips acquisition terms

EditorEmilio Ghigini
Published 03/06/2024, 10:38
MRO
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On Monday, Citi revised its stance on Marathon Oil Corporation (NYSE:MRO) stock, moving its recommendation from a Buy to a Neutral position. In conjunction with this adjustment, the firm also reduced the price target for Marathon Oil from $32.00 to $29.00.

The downgrade follows the recent announcement that Marathon Oil will be acquired by ConocoPhillips (NYSE:NYSE:COP), a deal that Citi believes will close at the agreed upon conversion ratio due to the premium offered and the support from management for the ConocoPhillips bid.

The new price target reflects a conversion ratio of 0.255 applied to ConocoPhillips' most recent closing price, and it is based on approximately 5.5 times the estimated Direct Acquisition Cash Flow (DACF) for the fiscal year 2024.

Citi's revised target price represents a modest adjustment to account for the acquisition terms, which the firm sees as favorable given the premium paid.

The support for the offer by Marathon's management also strengthens the likelihood that the transaction will proceed without significant hurdles.

The analyst from Citi notes that the potential for another entity to present a competing bid is low. According to the firm, any competing offer would likely focus on capturing cost synergies rather than enhancing asset quality or extending inventory, which may not present a more compelling proposition than the current agreement with ConocoPhillips.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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