On Jan 8, 2014, we upgraded independent oil refiner and
Marathon Petroleum Corp.
) to Neutral from Underperform.
Why the Upgrade?
Spun out of parent
Marathon Oil Co.
) in 2011, the company's positives include its scale advantage,
impressive asset quality and an extensive midstream/retail
network. We believe management's steady dividend increases, the
ongoing share repurchase program and the recent acquisition of
) Texas City refinery could further boost shareholder value.
Marathon Petroleum is the fourth largest domestic refiner with a
combined crude oil processing capacity of approximately 1.7
million barrels per day through its portfolio of seven
refineries. A major advantage for the company is its proprietary
access to pipelines, which inhibits lower-cost competitors from
supplying Marathon Petroleum's key markets.
Marathon Petroleum's purchase of BP's Texas City refinery - one
of the largest and most complex in the country - will consolidate
the position of the former in the fuel export business, apart
from improving production flexibility.
The Findlay, Ohio-based firm's financial flexibility and strong
balance sheet are real assets in this highly-uncertain period for
the economy. Marathon Petroleum remains in excellent financial
health, with over $2 billion in cash/cash equivalents and an
investment-grade credit rating with a debt-to-capitalization
ratio of 23%. Furthermore, regular dividend increases and the
ongoing share buyback program highlight the company's commitment
to create value for shareholders.
Stocks That Warrant a Look
While we expect Marathon Petroleum Resources to perform in line
with its peers and industry levels in the coming months and
advice investors to wait for a better entry point before
accumulating units, one can look at
CVR Energy Inc.
) as a good buying opportunity. This downstream energy operator -
sporting a Zacks Rank #1 (Strong Buy) - has solid secular
growth with the potential to rise considerably from the
BP PLC (BP): Free Stock Analysis Report
CVR ENERGY INC (CVI): Free Stock Analysis
MARATHON PETROL (MPC): Free Stock Analysis
MARATHON OIL CP (MRO): Free Stock Analysis
To read this article on Zacks.com click here.