Energy
Despite Dilutive Offering, Could Marathon Shares Really Still Double?
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Marathon Oil Corp. (NYSE: MRO) has placed old investors and newer investors in an interesting spot. By announcing the pricing of an upsized stock offering, the company is raising more cash than many might have expected. Is it possible that Marathon could have become the cheapest stock in the energy patch today?
A fresh research report from Credit Suisse is effectively signaling that Marathon shares could still double. The first thing to consider with this maintained Outperform rating is that Credit Suisse did trim the price target to $16 from $18 in this call. That still implies just over 100% upside from the $7.96 prior close.
Marathon recently priced the sale of 145 million shares of common stock at a price of $7.65 per share. All in all, this came to about $1.11 billion in fresh capital, versus a $5.6 billion market cap — and then consider that Marathon shares were down a sharp 75% from their 52-week high.
Marathon Oil also granted the underwriters a 30-day option to purchase up to 21,750,000 additional shares of its common stock. If the deal priced at $7.65 and shares are now over $8.00, there is a better than great chance that the overallotment option has been exercised.
Marathon Oil’s use of proceeds is to bolster the company’s balance sheet. The company also said that it will use the funds for general corporate purposes, including funding a portion of its capital program.
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