Marathon Oil Corporation Reports Second Quarter 2009 Results

HOUSTON, Aug. 3, 2009 – Marathon Oil Corporation (NYSE:MRO) today reported second quarter 2009 net
income of $413 million, or $0.58 per diluted share. Net income in the second quarter 2008 was $774 million,
or $1.08 per diluted share. For the second quarter 2009, adjusted net income was $251 million, or $0.35 per
diluted share, compared to adjusted net income of $858 million, or $1.20 per diluted share, for the second
quarter of 2008.
(In millions, except per diluted share data) 2009 2008 (b)
Adjusted net income (a) $ 2 51 $ 8 58
Adjustments for special items (net of taxes):
Gain (loss) on U.K. natural gas contracts 2 (84)
Gain on disposal of assets 1 60 -
Net income $ 4 13 $ 7 74
Adjusted net income (a) – per diluted share $ 0 .35 $ 1 .20
Net Income – per diluted share $ 0.58 $ 1.08
Revenues and other income $ 13,358 $ 22,202
Weighted average shares – diluted 7 11 714
Three Months Ended
June 30
(a) Adjusted net income is a non-GAAP financial measure and should not be considered a substitute for net income as determined in
accordance with accounting principles generally accepted in the United States. See below for further discussion of adjusted net
income.
(b) Previously reported revenues and other income have been revised to reflect the presentation of Marathon’s Irish businesses as
discontinued operations.
“Marathon’s businesses performed very well in the second quarter. Our Exploration and Production segment
achieved a 12 percent year-over-year increase in production available for sale from continuing operations
while our Refining, Marketing and Transportation segment out-performed its competitors in the domestic
market posting positive financial results, up slightly from both first quarter and prior year,” said Clarence P.
Cazalot, Jr., president and CEO of Marathon. “A continued focus on high mechanical reliability and cost control
contributed to our overall solid operating performance. And, in spite of challenging global economic conditions,
Marathon continues to maintain a very solid financial position, aided by the value captured from selective
asset sales.”
Segment Results
Total segment income was $400 million in the second quarter of 2009, compared to $925 million in the
second quarter of 2008.
Marathon Oil Corporation Reports Second Quarter 2009 Financial Results page 2
(In millions) 2009 2008(b)
Segment Income (Loss)
Exploration and Production
United States $ (41) $ 359
International 261 463
Total E&P 220 822
Oil Sands Mining 2 (157)
Refining, Marketing and Transportation 165 158
Integrated Gas 13 102
Segment Income (a) $ 400 $ 925
Three Months Ended
June 30
(a) See Preliminary Supplemental Statistics below for a reconciliation of segment income to net income as reported under generally
accepted accounting principles.
(b) Previously reported Exploration and Production segment income has been revised to reflect the presentation of Marathon’s Irish
businesses as discontinued operations.
Exploration and Production
Exploration and Production (E&P) segment income totaled $220 million in the second quarter of 2009,
compared to $822 million in the second quarter of 2008. The decrease was primarily a result of lower liquid
hydrocarbon and natural gas price realizations.
Sales volumes from continuing operations increased 26 percent year on year, averaging 436,000 barrels of oil
equivalent per day (boepd), compared to 347,000 boepd for the same period last year. While the increase in
sales volumes is primarily due to the timing of international liftings, production available for sale from
continuing operations in the quarter was up 12 percent to 411,000 boepd from the same quarter in 2008.
Production increased with the addition of the Alvheim/Vilje development offshore Norway, which started
operation in June 2008, and with increased natural gas sales volumes in Equatorial Guinea due to exceptional
reliability at the LNG and methanol facilities on Bioko Island which purchase natural gas from the Company’s
Alba field, partially offset by lower United States natural gas production as investment activities have been
curtailed due to lower natural gas prices.
International E&P income was $261 million in the second quarter of 2009, compared to $463 million in the
second quarter of 2008. The decrease was primarily a result of lower liquid hydrocarbon price realizations in
the second quarter 2009, partially offset by increased income from the Alvheim/Vilje development and
improved operating reliability across the business, highlighted by operations at the Equatorial Guinea natural
gas producing and processing facilities where reliability was 97.5 percent for the quarter. Additionally for the
quarter, international E&P saw a 17 percent decline in per barrel operating costs [excluding depreciation,
depletion and amortization (DD&A) and exploration expense], as costs fell to $6.22 per boe in the second
quarter 2009 from $7.46 per boe in the comparable quarter of 2008 through stronger volume performance
and increased focus on cost reduction initiatives. Lower exploration expenses also had a positive impact on
results. The change in mix of product sales year-over-year included higher sales in jurisdictions with high tax
rates. This change contributed to the higher segment effective tax rate for the quarter.
U.S. E&P reported a loss of $41 million in the second quarter of 2009, compared to income of $359 million in
the second quarter of 2008, as revenues decreased by 60 percent, primarily the result of 52 percent lower
liquid hydrocarbon and 58 percent lower natural gas price realizations. DD&A increased to $271 million during
the second quarter 2009, up $100 million from the same period last year. The Neptune development, which
started operation in July 2008, added $90 million of DD&A over the second quarter of 2008. Also contributing
to the loss were pretax expenses totaling $28 million ($17 million after tax) recognized in the second quarter
Marathon Oil Corporation Reports Second Quarter 2009 Financial Results page 3
of 2009, primarily for partial impairment of a natural gas field in east Texas, as well as a rig cancellation in the
Bakken and a loss on a sale. Pretax expenses during the first six months of 2009 from rig cancellations totaled
$24 million, and the Company does not anticipate any additional cancellations for the remainder of the year.
As a result of a capital expenditure program with more emphasis on oil projects, U.S. E&P reported a yearover-
year increase in liquid hydrocarbon production volumes of approximately 1,000 barrels per day (bpd) for
the second quarter and over 2,000 bpd for the first half of 2009.