Marathon Oil Corporation Provides Second Quarter 2009 Interim Update

7/14/2009 9:07:00 AM

HOUSTON, July 14 /PRNewswire-FirstCall/ -- Marathon Oil Corporation (NYSE: MRO) today is providing information on market factors and operating conditions that occurred during the second quarter of 2009 that could impact the Company's quarterly financial results. The market indicators and Company estimates noted below and in the attached schedule may differ significantly from actual results. The Company will report second quarter results on Aug. 3, 2009, and will conduct a conference call and webcast that same day. Details of the earnings conference call and webcast are noted at the end of this release.

Exploration and Production

Liquid hydrocarbon and natural gas production sold from continuing operations during the second quarter is estimated to be approximately 436,000 barrels of oil equivalent per day (boepd). Revenues are reported based on production sold during the period which can vary from production available for sale primarily as a result of the timing of crude oil liftings and natural gas sales. Liquid hydrocarbon and natural gas production available for sale from continuing operations during the second quarter is expected to be approximately 411,000 boepd, which is above the 385,000 to 405,000 boepd second quarter guidance.

As shown in the attached table, Marathon's average liquid hydrocarbon realization for the first two months of the second quarter, as compared to the first quarter of 2009, increased $12.12 per barrel domestically and $6.63 per barrel internationally, reflecting the general market price movements during the first two months of the quarter. For the entire second quarter of 2009, the average West Texas Intermediate (WTI) crude oil market price indicator was $16.48 per barrel higher than the first quarter of 2009 while the average Dated Brent indicator increased $14.67 per barrel.

Marathon's domestic average natural gas price realization for April and May of 2009 decreased $0.69 per thousand cubic feet (mcf) from the Company's average realized price in the first quarter of 2009. The average Henry Hub (HH) prompt natural gas price for the second quarter decreased $0.89 per million British Thermal Units (BTUs) compared to the first quarter of 2009, while the average HH bid week natural gas price decreased $1.40 per million BTUs during the same period. International average natural gas realizations for continuing operations decreased $0.34 per mcf in the first two months of the second quarter compared to the first quarter of 2009.

Marathon's actual crude oil and natural gas price realizations vary from market indicators primarily due to product quality and location differentials.

Second quarter 2009 exploration expense is expected to be approximately $65 million, which is within previous guidance.

Oil Sands Mining

For the second quarter 2009, the Company estimates that its share of bitumen production from the Athabasca Oil Sands Project (AOSP) mining operation will be approximately 26,000 barrels per day (bpd), which is within the previous guidance of 23,000 to 28,000 bpd for the second quarter. Marathon's synthetic crude oil sales from AOSP for the second quarter 2009 are estimated to be approximately 30,000 bpd. Marathon's average synthetic crude oil realization for the first two months of the second quarter was $49.08 per barrel, as compared to $38.49 per barrel for the first quarter of 2009, reflecting the general market price movements during the first two months of the second quarter.

For the second quarter 2009, the Company expects the income effect of crude oil derivative instruments will not be significant. All derivative instruments related to the Oil Sands Mining segment expire at year end 2009.

Refining, Marketing and Transportation

The Company estimates its second quarter 2009 refined products sales volume and refining and wholesale marketing gross margin will approximate the sales volume and per gallon gross margin recorded in the second quarter of 2008.

Crude oil refined is expected to average approximately 960,000 bpd for the second quarter 2009, compared to 1,023,000 bpd in the second quarter 2008. Total refinery throughputs for the second quarter 2009 are expected to be about 1,160,000 bpd compared to 1,203,000 bpd in the second quarter of 2008.

Speedway SuperAmerica LLC's (SSA) gasoline and distillate gross margin averaged $0.0845 per gallon during April and May 2009 and is expected to average approximately $0.10 per gallon for the second quarter of 2009. The Company projects that SSA's second quarter same store gasoline sales volume will increase about 2 percent compared to the same quarter last year.

Integrated Gas

Marathon's liquefied natural gas (LNG) operations in Equatorial Guinea and Alaska are estimated to have sold approximately 6,600 net metric tonnes per day (mtpd) of LNG in the second quarter of 2009, above the previous guidance of 5,500 to 6,550 mtpd due to better than expected reliability at the EG LNG facility.

Other Information

The overall corporate effective income tax rate for 2009, excluding special items and foreign currency remeasurement effects, is now expected to be between 54 and 59 percent. The company anticipates recording a second quarter charge of approximately $100 million related to foreign currency remeasurement on deferred taxes. The effective tax rate is influenced by a variety of factors including the geographic and functional sources of income and the relative magnitude of these sources of income.

Consistent with past Company practice, gains and losses on asset sales recognized in the second quarter will be treated as special items excluded from adjusted net income.

Earnings Release Date and Conference Call Information

Marathon will report its second quarter 2009 results on Aug. 3, 2009. The Company will also conduct a conference call and webcast that same day at 2 p.m. EDT. The call will cover second quarter 2009 financial results and may include forward-looking information. Interested parties can listen to this call and view associated slides by accessing the Marathon Oil Corporation Web site at www.marathon.com and clicking on the Second Quarter 2009 Financial Results Conference Call link. Replays of the conference call will be available on the Web site through Aug. 17, 2009. Financial information, including earnings releases and other investor-related material, is also available online.

This release contains forward-looking statements with respect to estimates of the Company's worldwide liquid hydrocarbon and natural gas production, exploration expenses, mined bitumen production, synthetic crude oil sales, oil sands mining derivative gains and losses, refined products sales volume, refining and wholesale marketing gross margin per gallon, crude oil and total refinery throughputs, Speedway SuperAmerica LLC gasoline and distillate gross margins and gasoline sales volumes, LNG sales volumes, and the corporate effective income tax rate for 2009. These are preliminary estimates and are therefore subject to change. Actual results may differ materially from the estimates given in this update. In accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Marathon Oil Corporation has included in its Annual Report on Form 10-K for the year ended December 31, 2008, and subsequent Forms 10-Q and 8-K, cautionary language identifying important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements.

            Select Operating and Financial Data (unaudited)

                                     2Q     1Q   Apr. - May    2Q
                                    2008   2009     2009      2009
                                   Actual Actual   Actual   Estimates
    Exploration and Production
        Net Sales
          Domestic - Liquid
           Hydrocarbons (MBPD)        63     66        65       --
          Domestic - Natural Gas
           (MMCFD)                   431    425       378       --
          International - Liquid
           Hydrocarbons (MBPD)       119    158       173       --
          International - Natural
           Gas (MMCFD) (1)           558    592       588       --
             Worldwide Continuing
              Operations (MBOEPD)    347    393       399      436
          Discontinued Operations
           (MBOEPD) (2)                3     11         1        1
             Worldwide (MBOEPD)      350    404       400      437

        Market Prices
          NYMEX prompt WTI oil
           price ($/BBL)          123.80  43.31     54.47    59.79
          Dated Brent oil price
           ($/BBL)                121.18  44.46     53.82    59.13
          HH prompt natural gas price
           ($/MMBTU)               11.32   4.58      3.64     3.69
          HH bid week natural gas
           price ($/MMBTU)         10.94   4.91      3.49     3.51

       Average Realizations (3)
          Liquid Hydrocarbons:
             Domestic ($/BBL)     109.85  36.60     48.72       --
             International
              ($/BBL)             112.99  41.71     48.34       --
          Natural Gas:
             Domestic ($/MCF)       8.66   4.49      3.80       --
             International ($/MCF)  2.31   1.62      1.28       --
             Discontinued
              Operations
              ($/MCF) (2)          12.37   8.60      7.49       --

    Oil Sands Mining
       Net bitumen production
        (MBPD)                        24     25        25       26
       Net synthetic crude sales
        (MBPD)                        31     32        28       30
       Synthetic crude average
        realization ($/BBL) (3)   116.40  38.49     49.08       --

    Refining, Marketing and
     Transportation
       Chicago LLS 6-3-2-1 crack
        spread ($/BBL)              2.71   2.91      4.61     5.73
       Gulf Coast LLS 6-3-2-1 crack
        spread ($/BBL)              1.99   2.89      3.46     3.59
       Chicago LLS 3-2-1 crack
        spread ($/BBL)             10.32   5.06      7.68     9.26
       Gulf Coast LLS 3-2-1 crack
        spread ($/BBL)              9.33   4.93      6.07     6.42

       Sweet/sour differential
        ($/BBL) (4)                13.74   7.07      3.47     3.98
       Refinery Runs:
          Crude oil refined
           (MBPD)                  1,023    851       920      960
          Other charge & blend
           stocks (MBPD)             180    220       210      200
             Total (MBPD)          1,203  1,071     1,130    1,160
       Crude oil capacity
        utilization (%)              101     84        91       94
       Refined product sales
        volumes (MBPD) (5)         1,369  1,286     1,302       --
       Refining & wholesale
        marketing gross margin
        ($/gal) (6)               0.0835 0.0792        --       --
       SSA gasoline and distillate
        sales (MMGal)                788    784       535       --
       SSA gasoline and distillate
        gross margin ($/gal)      0.0862 0.1068    0.0845     0.10
       SSA merchandise gross margin
        ($million)                   181    178       127       --

    Integrated Gas
       Net Sales (MTPD) (7)
          LNG                      6,402  6,769     6,639    6,600
          Methanol                 1,188  1,153     1,429       --


    BBL - barrel
    gal - gallons
    MBOEPD - thousand barrels of oil equivalent per day
    MBPD - thousand barrels per day
    MCF - thousand cubic feet
    MMBTU - million British Thermal Units
    MMCFD - million cubic feet per day
    MMGal - million gallons
    MTPD - metric tonnes per day


    (1) Includes natural gas acquired for injection and subsequent resale.
    (2) Exploration and production operations in Ireland are reported as
    discontinued operations in all periods presented. Daily volume for April-
    May 2009 represents activity through the April 17 production operations
    closing date divided by the total number of days in the period.
    (3) Excludes gains and losses on derivative instruments and the
    unrealized effects of U.K. natural gas contracts that are accounted for
    as derivatives.
    (4) 15% Arab Light, 20% Kuwait, 10% Maya, 15% Western Canadian Select,
    40% Mars.
    (5) Total average daily volumes of all refined product sales to
    wholesale, branded and retail (SSA) customers.
    (6) Sales revenue less cost of refinery inputs, purchased products and
    manufacturing expenses, including depreciation.
    (7) LNG sales volumes include both consolidated sales and Marathon's
    share of the sales volumes of an equity method investee.

Media Relations Contacts:
Lee Warren 713-296-4103
Leslie Hiltabrand 713-296-4102

Investor Relations Contacts:
Howard Thill 713-296-4140
Chris Phillips 713-296-3213

SOURCE Marathon Oil Corporation