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Monday, December 19, 2011

Top stocks to watch or buy this week

Marathon Oil (MRO 0.00%, news) is moving aggressively to ramp up oil and gas production in the United States. The company this month raised its 2012 capital-projects budget by $1 billion, to $4.8 billion, with more than half of the money dedicated to tapping shale deposits in Texas, North Dakota, Oklahoma, Wyoming and Colorado.
The move reflects confidence in what one analyst this week characterized as the "Goldilocks" scenario, with $100-a-barrel oil making development in unconventional shale plays economically feasible but still $15 to $20 below the price where demand would be destroyed.
The industry also has reason to be optimistic that localized opposition to the shale-gas boom is being successfully countered with arguments that environmental restrictions jeopardize desperately needed jobs and deprive depleted government coffers of new revenues.
Marathon Oil appears on a daily list created using StockScouter, an MSN Money tool that identifies stocks with strong growth prospects in the near term. All stocks with Scouter ratings of 8, 9 or 10 are considered for the list, which is then shortened to exclude those with a trading volume below 50,000 shares a day. The remaining stocks are ranked on the basis of market capitalization, sector membership and whether they are growth or value stocks.
The Houston company this year spun off refining operations to sharpen its focus on shale acreage in the United States, as well as on exploration and development projects in Canada's tar sands, as well as in Poland, Libya, northern Iraq, the deepwater Gulf of Mexico and off the coast of Angola.

Shale drilling to add 870,000 jobs

The increased spending on domestic production should allow Marathon to boost its annual output by 5% to 7% a year, on average, to 2016, the company said. Marathon holds about 1 million acres across its U.S. plays, Investor's Business Daily reported. Daily production is projected to grow from 70,000 barrels of oil equivalent to 175,000 barrels by 2016.
But the technology known as hydraulic fracturing, or fracking, used to extract oil and gas from shale has sparked a backlash in communities from California to New York concerned about the effects on drinking water, noise levels and air quality. So far, at least, economic arguments in favor of drilling have trumped environmental concerns.
In economically distressed California, Gov. Jerry Brown recently dismissed the state's top two oil and gas regulators following industry complaints about the pace of permitting for natural-gas drilling projects. And suburban property owners in the Northeast who have invoked zoning laws and environmental rules to oppose gas drilling have largely been outmaneuvered.
The industry also is confronting air-pollution limits on energy production that were recently issued by the U.S. Environmental Protection Agency. The EPA is working on rules governing water discharge from drilling operations, which are scheduled to take effect in 2014. Fracking injects chemicals and water into rock formations to release the hydrocarbons trapped inside.

Paul Sankey, the Deutsche Bank analyst who described the Goldilocks scenario, raised his rating on Marathon to "buy" from "hold" on Dec. 13 and upped his price target by $4 to $37.
Of the 17 analysts covering the company, eight have a "strong buy" recommendation, one gives the stock a "moderate buy" rating and eight rate it a "hold."
Marathon Oil has a StockScouter rating of 9, meaning the stock is expected to significantly outperform the market over the next six months with average risk.
StockScouter top 10 for Dec. 16
CompanySectorDividend yieldForward P/EScouter score
Medtronic (MDT 0.00%, news)Implantable medical devices2.74%9.510
American Eagle Outfitters (AEO +0.76%, news)Apparel retailer3.01%13.410
American Express (AXP 0.00%, news)Credit and travel services1.55%11.310
Chevron (CVX 0.00%, news)Oil and natural gas3.25%13.510
Philip Morris International (PM 0.00%, news)Cigarettes4.06%14.510
Western Union (WU 0.00%, news)Money transfers1.84%10.410
Caterpillar (CAT 0.00%, news)Earth-moving equipment2.10%9.79
CSX (CSX 0.00%, news)Railroads2.40%10.69
Marathon Oil (MRO 0.00%, news)Oil and natural gas2.22%7.79
Annaly Capital Management (NLY 0.00%, news)Real estate investments14.77%7.19
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