The strong run for one oil and gas production stock is not done yet, according to Piper Sandler. Analyst Mark Lear upgraded Marathon Oil to overweight from neutral, saying in a note to clients on Wednesday that the the company is exceeding expectations in returning cash to shareholders. "MRO abruptly shifted from balance sheet repair to shareholder return in 4Q21, and had repurchased ~$1bn of stock through mid-February (since 4Q21)," Lear wrote. "While the company's return framework entailed the company returning more than 40% of [cash flow from operations] to shareholders in a $60/bbl+ environment, the company went above and beyond in 4Q21 returning in excess of 70% of CFO to shareholders." Piper Sandler raised its price target on Marathon Oil to $27 per share from $22. The new target is 25% above where the stock closed Tuesday. Marathon's stock has been a winner for investors already in 2022, rising more than 31% year to date A major theme of the energy industry in recent months is the reluctance of companies to drill new wells and expand production after many companies took on debt to drill during the shale boom. Marathon is one of the companies deciding to simply focus on its existing footprint. "The company remains confident in its ability to maintain current productive capacity through the end of the decade via its organic inventory, which has been our primary pushback on the story as the company anticipates relying on mature basins for the bulk of its capital allocation (~75% in Bakken and Eagle Ford) for the next five years," the analyst said. — CNBC's Michael Bloom contributed to this report.
The sun sets beyond pumpjacks in the Belridge oil field on November 03, 2021 near McKittrick, California.
Mario Tama | Getty Images
The strong run for one oil and gas production stock is not done yet, according to Piper Sandler.