This cannot be reiterated enough- MRO's explosive oil growth
By the end of 2007 Marathon had oil/gas production capacity of approximately 380,000 bpd. By the end of this year, MRO will end up with capacity of approximately 500,000 bpd (400Kbpd 1Q08 guidance +75K norway, +17.4K gom, +7.6K resource plays). A jump of 32%. Not a single integrated comes close to this. This is an growth oil company with refining as a side show, when oil is at $100 and climbing.
If only that were true. MRO is mostly a refining company whose plants need the most expensive crude oils to work right. Fortunately, some of this high cost is offset by the upstream production. But not enough. More upstream investment and more cokers please.
By sometime in the third quarter MRO will be making $1.50 earnings per share per quarter in the upstream alone, after Norway/GOM have ramped up to peak production, based on $100 oil. That's $6 annualized with downstream profits at zero. Those claiming MRO is mostly a refiner are just wrong.
And what's this about MRO's refineries needing the most expensive crude? Over 50% of the company's capacity can handle sour, and MRO has as much upgrading capacity as Valero proportional to capacity (one third of Valero), which is the most in the entire industry. Even with that, MRO's refineries are more profitable than VLO's due to the midwest concentration. In other words, MRO has the best collection of refining assets in the industry. I don't see this trading under $80 by year end if oil holds above $100 given any reasonable stock valuation.