Although Marathon Oil Corp. (NYSE: MRO) may still be down massively from its prior highs, but its shares have doubled off the lows seen as recently as February 11. Now Wells Fargo has decided to downgrade Marathon Oil to Market Perform from Outperform after a large run-up after the news of a dilutive capital raise and asset sales.

Wells Fargo reduces its rating on Marathon to Market Perform based on limited upside potential to its updated valuation range and net asset value (NAV). Marathon is implementing its stated goals of achieving cash flow neutrality and protecting the balance sheet per the asset sale this week and the equity issuance on February 29. While the brokerage firm views the announcement of the asset sale as a positive, it believes Marathon’s shares are fully valued, especially so given the 25% dilution from the issuance of 166 million shares in the first quarter.

The firm’s updated NAV estimate of $14 assumes a long-term West Texas Intermediate (WTI) crude price of $60 per barrel and assumes the company will use excess cash from the pending asset sales to strengthen the balance sheet. For those who believe Wells Fargo’s long-term oil price is too low, a $65 per barrel long-term oil price would only raise the NAV by $1 per share.

Wells Fargo revised its 2016 and 2017 estimates to a net loss per share of $1.38 and $0.72, up from the previous net loss per share of $1.80 and $0.87, respectively. The adjustments reflect recently revised crude and natural gas decks and the sale of Wyoming upstream assets.

While the NAV estimate is $14 per share, Wells Fargo gave its valuation range for the stock as $11 to $12.

The firm gave its investment thesis as:

Marathon is a shale play oriented oil & gas producer focused on maintaining financial flexibility and balance sheet strength to withstand today’s challenging environment and position the company for a resumption of growth across a lower range of oil and gas prices. In our view, Marathon’s ability to achieve cash flow neutrality in 2016 and potentially resume growth in 2017/2018 in spite of lower oil prices creates an attractive opportunity for investors.

Shares of Marathon were trading down 2.9% to $12.74 on Wednesday, with a consensus analyst price target of $14.00 and a 52-week trading range of $6.52 to $31.53.

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