Intrinsic value of Marathon Oil - MRO

Previous Close

$13.93

  Intrinsic Value

$5.13

stock screener

  Rating & Target

str. sell

-63%

Previous close

$13.93

 
Intrinsic value

$5.13

 
Up/down potential

-63%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of MRO stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 11.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -25.78
  30.20
  27.68
  25.41
  23.37
  21.53
  19.88
  18.39
  17.05
  15.85
  14.76
  13.79
  12.91
  12.12
  11.41
  10.76
  10.19
  9.67
  9.20
  8.78
  8.40
  8.06
  7.76
  7.48
  7.23
  7.01
  6.81
  6.63
  6.47
  6.32
  6.19
Revenue, $m
  4,261
  5,548
  7,083
  8,884
  10,960
  13,320
  15,968
  18,904
  22,128
  25,635
  29,420
  33,476
  37,797
  42,377
  47,210
  52,292
  57,620
  63,191
  69,007
  75,067
  81,376
  87,938
  94,759
  101,849
  109,216
  116,872
  124,830
  133,104
  141,710
  150,664
  159,986
Variable operating expenses, $m
 
  8,146
  10,398
  13,037
  16,082
  19,542
  23,425
  27,731
  32,458
  37,600
  43,150
  49,085
  55,421
  62,137
  69,224
  76,676
  84,488
  92,658
  101,184
  110,071
  119,321
  128,943
  138,946
  149,341
  160,144
  171,370
  183,039
  195,171
  207,789
  220,919
  234,587
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  5,161
  8,146
  10,398
  13,037
  16,082
  19,542
  23,425
  27,731
  32,458
  37,600
  43,150
  49,085
  55,421
  62,137
  69,224
  76,676
  84,488
  92,658
  101,184
  110,071
  119,321
  128,943
  138,946
  149,341
  160,144
  171,370
  183,039
  195,171
  207,789
  220,919
  234,587
Operating income, $m
  -900
  -2,598
  -3,315
  -4,154
  -5,122
  -6,222
  -7,457
  -8,827
  -10,330
  -11,965
  -13,730
  -15,610
  -17,625
  -19,760
  -22,014
  -24,384
  -26,868
  -29,466
  -32,178
  -35,004
  -37,946
  -41,005
  -44,186
  -47,492
  -50,928
  -54,498
  -58,208
  -62,067
  -66,079
  -70,255
  -74,602
EBITDA, $m
  1,495
  -2,587
  -3,303
  -4,142
  -5,110
  -6,211
  -7,446
  -8,815
  -10,318
  -11,954
  -13,718
  -15,610
  -17,625
  -19,760
  -22,014
  -24,384
  -26,868
  -29,466
  -32,178
  -35,004
  -37,946
  -41,005
  -44,186
  -47,492
  -50,928
  -54,498
  -58,208
  -62,067
  -66,079
  -70,255
  -74,602
Interest expense (income), $m
  375
  342
  544
  786
  1,068
  1,394
  1,765
  2,181
  2,642
  3,148
  3,699
  4,293
  4,930
  5,609
  6,328
  7,087
  7,885
  8,722
  9,597
  10,510
  11,462
  12,453
  13,483
  14,555
  15,668
  16,825
  18,028
  19,277
  20,577
  21,928
  23,335
Earnings before tax, $m
  -1,235
  -2,941
  -3,859
  -4,939
  -6,190
  -7,617
  -9,222
  -11,007
  -12,972
  -15,114
  -17,429
  -19,903
  -22,555
  -25,369
  -28,342
  -31,471
  -34,754
  -38,188
  -41,775
  -45,514
  -49,408
  -53,458
  -57,670
  -62,047
  -66,596
  -71,323
  -76,236
  -81,344
  -86,656
  -92,183
  -97,936
Tax expense, $m
  905
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -2,140
  -2,941
  -3,859
  -4,939
  -6,190
  -7,617
  -9,222
  -11,007
  -12,972
  -15,114
  -17,429
  -19,903
  -22,555
  -25,369
  -28,342
  -31,471
  -34,754
  -38,188
  -41,775
  -45,514
  -49,408
  -53,458
  -57,670
  -62,047
  -66,596
  -71,323
  -76,236
  -81,344
  -86,656
  -92,183
  -97,936

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,488
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  31,094
  37,234
  47,540
  59,621
  73,555
  89,394
  107,166
  126,876
  148,512
  172,048
  197,447
  224,669
  253,669
  284,407
  316,845
  350,953
  386,710
  424,103
  463,132
  503,806
  546,146
  590,186
  635,969
  683,550
  732,994
  784,378
  837,787
  893,317
  951,073
  1,011,170
  1,073,731
Adjusted assets (=assets-cash), $m
  28,606
  37,234
  47,540
  59,621
  73,555
  89,394
  107,166
  126,876
  148,512
  172,048
  197,447
  224,669
  253,669
  284,407
  316,845
  350,953
  386,710
  424,103
  463,132
  503,806
  546,146
  590,186
  635,969
  683,550
  732,994
  784,378
  837,787
  893,317
  951,073
  1,011,170
  1,073,731
Revenue / Adjusted assets
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
  0.149
Average production assets, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Working capital, $m
  1,425
  -488
  -623
  -782
  -964
  -1,172
  -1,405
  -1,664
  -1,947
  -2,256
  -2,589
  -2,946
  -3,326
  -3,729
  -4,154
  -4,602
  -5,071
  -5,561
  -6,073
  -6,606
  -7,161
  -7,739
  -8,339
  -8,963
  -9,611
  -10,285
  -10,985
  -11,713
  -12,470
  -13,258
  -14,079
Total debt, $m
  7,267
  10,469
  15,107
  20,543
  26,814
  33,941
  41,939
  50,808
  60,544
  71,136
  82,565
  94,815
  107,865
  121,697
  136,294
  151,643
  167,733
  184,560
  202,123
  220,427
  239,480
  259,298
  279,900
  301,311
  323,561
  346,684
  370,718
  395,707
  421,697
  448,741
  476,893
Total liabilities, $m
  13,553
  16,755
  21,393
  26,829
  33,100
  40,227
  48,225
  57,094
  66,830
  77,422
  88,851
  101,101
  114,151
  127,983
  142,580
  157,929
  174,019
  190,846
  208,409
  226,713
  245,766
  265,584
  286,186
  307,597
  329,847
  352,970
  377,004
  401,993
  427,983
  455,027
  483,179
Total equity, $m
  17,541
  20,479
  26,147
  32,791
  40,455
  49,167
  58,941
  69,782
  81,682
  94,626
  108,596
  123,568
  139,518
  156,424
  174,265
  193,024
  212,690
  233,257
  254,722
  277,093
  300,380
  324,602
  349,783
  375,952
  403,147
  431,408
  460,783
  491,324
  523,090
  556,144
  590,552
Total liabilities and equity, $m
  31,094
  37,234
  47,540
  59,620
  73,555
  89,394
  107,166
  126,876
  148,512
  172,048
  197,447
  224,669
  253,669
  284,407
  316,845
  350,953
  386,709
  424,103
  463,131
  503,806
  546,146
  590,186
  635,969
  683,549
  732,994
  784,378
  837,787
  893,317
  951,073
  1,011,171
  1,073,731
Debt-to-equity ratio
  0.414
  0.510
  0.580
  0.630
  0.660
  0.690
  0.710
  0.730
  0.740
  0.750
  0.760
  0.770
  0.770
  0.780
  0.780
  0.790
  0.790
  0.790
  0.790
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.800
  0.810
  0.810
  0.810
  0.810
Adjusted equity ratio
  0.526
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550
  0.550

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -2,140
  -2,941
  -3,859
  -4,939
  -6,190
  -7,617
  -9,222
  -11,007
  -12,972
  -15,114
  -17,429
  -19,903
  -22,555
  -25,369
  -28,342
  -31,471
  -34,754
  -38,188
  -41,775
  -45,514
  -49,408
  -53,458
  -57,670
  -62,047
  -66,596
  -71,323
  -76,236
  -81,344
  -86,656
  -92,183
  -97,936
Depreciation, amort., depletion, $m
  2,395
  12
  12
  12
  12
  12
  12
  12
  12
  12
  12
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Funds from operations, $m
  989
  -2,929
  -3,847
  -4,928
  -6,179
  -7,605
  -9,211
  -10,996
  -12,960
  -15,102
  -17,417
  -19,903
  -22,555
  -25,369
  -28,342
  -31,471
  -34,754
  -38,188
  -41,775
  -45,514
  -49,408
  -53,458
  -57,670
  -62,047
  -66,596
  -71,323
  -76,236
  -81,344
  -86,656
  -92,183
  -97,936
Change in working capital, $m
  -84
  -113
  -135
  -158
  -183
  -208
  -233
  -258
  -284
  -309
  -333
  -357
  -380
  -403
  -425
  -447
  -469
  -490
  -512
  -533
  -555
  -577
  -600
  -624
  -648
  -674
  -700
  -728
  -757
  -788
  -820
Cash from operations, $m
  1,073
  -2,816
  -3,712
  -4,770
  -5,996
  -7,398
  -8,978
  -10,738
  -12,677
  -14,793
  -17,084
  -19,546
  -22,175
  -24,966
  -27,917
  -31,024
  -34,285
  -37,698
  -41,263
  -44,981
  -48,853
  -52,881
  -57,070
  -61,423
  -65,947
  -70,649
  -75,536
  -80,616
  -85,899
  -91,395
  -97,116
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
New CAPEX, $m
  -1,245
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from investing activities, $m
  -874
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Free cash flow, $m
  199
  -2,816
  -3,712
  -4,770
  -5,996
  -7,398
  -8,978
  -10,738
  -12,677
  -14,793
  -17,084
  -19,546
  -22,175
  -24,966
  -27,917
  -31,024
  -34,285
  -37,698
  -41,263
  -44,981
  -48,853
  -52,881
  -57,070
  -61,423
  -65,947
  -70,649
  -75,536
  -80,616
  -85,899
  -91,395
  -97,116
Issuance/(repayment) of debt, $m
  -1
  3,888
  4,638
  5,436
  6,270
  7,128
  7,997
  8,870
  9,736
  10,591
  11,430
  12,250
  13,050
  13,832
  14,597
  15,349
  16,091
  16,827
  17,563
  18,303
  19,053
  19,818
  20,602
  21,411
  22,250
  23,123
  24,034
  24,989
  25,990
  27,044
  28,152
Issuance/(repurchase) of shares, $m
  1,236
  7,680
  9,527
  11,584
  13,854
  16,328
  18,997
  21,848
  24,872
  28,058
  31,399
  34,875
  38,505
  42,275
  46,183
  50,231
  54,420
  58,755
  63,241
  67,885
  72,695
  77,680
  82,850
  88,216
  93,790
  99,584
  105,611
  111,886
  118,422
  125,236
  132,344
Cash from financing (excl. dividends), $m  
  1,236
  11,568
  14,165
  17,020
  20,124
  23,456
  26,994
  30,718
  34,608
  38,649
  42,829
  47,125
  51,555
  56,107
  60,780
  65,580
  70,511
  75,582
  80,804
  86,188
  91,748
  97,498
  103,452
  109,627
  116,040
  122,707
  129,645
  136,875
  144,412
  152,280
  160,496
Total cash flow (excl. dividends), $m
  1,431
  8,752
  10,453
  12,251
  14,128
  16,058
  18,016
  19,980
  21,931
  23,856
  25,744
  27,578
  29,381
  31,141
  32,863
  34,555
  36,226
  37,884
  39,540
  41,207
  42,896
  44,617
  46,383
  48,205
  50,093
  52,057
  54,109
  56,258
  58,514
  60,885
  63,381
Retained Cash Flow (-), $m
  1,012
  -7,680
  -9,527
  -11,584
  -13,854
  -16,328
  -18,997
  -21,848
  -24,872
  -28,058
  -31,399
  -34,875
  -38,505
  -42,275
  -46,183
  -50,231
  -54,420
  -58,755
  -63,241
  -67,885
  -72,695
  -77,680
  -82,850
  -88,216
  -93,790
  -99,584
  -105,611
  -111,886
  -118,422
  -125,236
  -132,344
Prev. year cash balance distribution, $m
 
  1,802
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  2,874
  926
  667
  274
  -270
  -980
  -1,868
  -2,940
  -4,202
  -5,655
  -7,297
  -9,125
  -11,134
  -13,320
  -15,675
  -18,194
  -20,871
  -23,700
  -26,678
  -29,799
  -33,063
  -36,467
  -40,012
  -43,698
  -47,526
  -51,502
  -55,627
  -59,909
  -64,352
  -68,964
Discount rate, %
 
  5.60
  5.88
  6.17
  6.48
  6.81
  7.15
  7.50
  7.88
  8.27
  8.69
  9.12
  9.58
  10.06
  10.56
  11.09
  11.64
  12.22
  12.84
  13.48
  14.15
  14.86
  15.60
  16.38
  17.20
  18.06
  18.96
  19.91
  20.91
  21.95
  23.05
PV of cash for distribution, $m
 
  2,722
  826
  557
  213
  -194
  -648
  -1,126
  -1,603
  -2,055
  -2,458
  -2,793
  -3,045
  -3,204
  -3,267
  -3,238
  -3,124
  -2,938
  -2,696
  -2,415
  -2,112
  -1,803
  -1,502
  -1,221
  -969
  -749
  -564
  -413
  -294
  -204
  -137
Current shareholders' claim on cash, %
  100
  58.9
  35.4
  21.7
  13.5
  8.6
  5.5
  3.6
  2.4
  1.6
  1.1
  0.7
  0.5
  0.4
  0.3
  0.2
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Marathon Oil Corporation is an exploration and production (E&P) company. The Company operates through three segments: North America E&P, International E&P and Oil Sands Mining. The North America E&P segment explores for, produces and markets crude oil and condensate, natural gas liquids (NGLs) and natural gas in North America. The International E&P segment explores for, produces and markets crude oil and condensate, NGLs and natural gas outside of North America, and produces and markets products manufactured from natural gas, such as liquefied natural gas (LNG) and methanol, in Equatorial Guinea (E.G.). The Oil Sands Mining segment mines, extracts and transports bitumen from oil sands deposits in Alberta, Canada, and upgrades the bitumen to produce and market synthetic crude oil and vacuum gas oil.

FINANCIAL RATIOS  of  Marathon Oil (MRO)

Valuation Ratios
P/E Ratio -5.5
Price to Sales 2.8
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 11
Price to Free Cash Flow -68.6
Growth Rates
Sales Growth Rate -25.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -64.2%
Cap. Spend. - 3 Yr. Gr. Rate -22.5%
Financial Strength
Quick Ratio 4
Current Ratio 0.1
LT Debt to Equity 37.5%
Total Debt to Equity 41.4%
Interest Coverage -2
Management Effectiveness
Return On Assets -4.7%
Ret/ On Assets - 3 Yr. Avg. -0.5%
Return On Total Capital -8.5%
Ret/ On T. Cap. - 3 Yr. Avg. -1.8%
Return On Equity -11.9%
Return On Equity - 3 Yr. Avg. -2.6%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 62.6%
Gross Margin - 3 Yr. Avg. 61.6%
EBITDA Margin 36%
EBITDA Margin - 3 Yr. Avg. 27.1%
Operating Margin -21.1%
Oper. Margin - 3 Yr. Avg. -18%
Pre-Tax Margin -29%
Pre-Tax Margin - 3 Yr. Avg. -22.8%
Net Profit Margin -50.2%
Net Profit Margin - 3 Yr. Avg. -20.6%
Effective Tax Rate -73.3%
Eff/ Tax Rate - 3 Yr. Avg. -6.3%
Payout Ratio -7.6%

MRO stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MRO stock intrinsic value calculation we used $4261 million for the last fiscal year's total revenue generated by Marathon Oil. The default revenue input number comes from 2016 income statement of Marathon Oil. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our MRO stock valuation model: a) initial revenue growth rate of 30.2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 5.6%, whose default value for MRO is calculated based on our internal credit rating of Marathon Oil, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Marathon Oil.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of MRO stock the variable cost ratio is equal to 146.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for MRO stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.2% for Marathon Oil.

Corporate tax rate of 27% is the nominal tax rate for Marathon Oil. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the MRO stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for MRO are equal to 0%.

Life of production assets of 0 years is the average useful life of capital assets used in Marathon Oil operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for MRO is equal to -8.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $17541 million for Marathon Oil - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 849.964 million for Marathon Oil is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Marathon Oil at the current share price and the inputted number of shares is $11.8 billion.

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COMPANY NEWS

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▶ Is Marathon Oils Downtrend about to End?   [07:37AM  Market Realist]
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▶ Why Marathon Oil Stock Rose Last Week   [07:39AM  Market Realist]
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▶ Marathon Oil: Analyzing Wall Streets Ratings   [Sep-05-17 06:05PM  Market Realist]
▶ How Marathon Oil Stock Performed Last Week   [02:38PM  Market Realist]
▶ Cramer's biggest investing mistakes   [Sep-01-17 07:09PM  CNBC Videos]
▶ Colonial pipeline disrupted after Harvey   [Aug-31-17 12:20PM  CNBC Videos]
▶ European Refiners Set To Benefit From Gulf Coast Chaos   [Aug-30-17 06:00PM  Oilprice.com]
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▶ Oil Stocks & Hurricane Harvey: It's Complicated   [Aug-28-17 03:40PM  Barrons.com]
▶ Hurricane Harvey Might Disrupt The Industry   [Aug-25-17 11:08AM  Zacks]
▶ Inside Wall Streets Ratings for Marathon Oil   [Aug-22-17 09:07AM  Market Realist]
▶ Will Fridays Reversal Mark the End of MROs Downtrend?   [Aug-21-17 05:08PM  Market Realist]
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▶ Whats the Short Interest in Marathon Oil Stock?   [Aug-15-17 05:35PM  Market Realist]
▶ How Marathon Oil Stock Performed Last Week   [02:13PM  Market Realist]
Financial statements of MRO
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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