marathon shares plunged after the firm reported its secondquarter results albeit on a rough day for energy stocks in general oil prices dropped more than 2 as the market digested weakerthanexpected us gasoline demand data and the opec decision to slightly increase output in august that sparked a sectorwide selloff but marathon was still one of the weakest performers on the day that’s surprising to us as there were no major disappointments the firm’s financial results were slightly ahead of consensus estimates and management left its prior production and capital expenditure projections in place in contrast to several peers that are struggling with higherthanexpected inflation and nudging up their budgets as a result nevertheless we think inflation will continue to be a headache for exploration and production companies including marathon the industry is a heavy consumer of steel fuel and labor and prices for all three have been soaring while management has yet to outline its 2023 plans in detail we are now assuming further well cost inflation based on the logic that supplier contracts will be rolled over at market prices as several eps have suggested incorporating this pricing pressure along with the rest of marathon’s secondquarter results reduces our fair value to 18 per share from 19