Thursday, January 15, 2009

Marathon Oil Corporation Provides Fourth Quarter 2008 Interim Update

HOUSTON, Jan. 13 /PRNewswire-FirstCall/ -- Marathon Oil Corporation (NYSE: MRO) today is providing information on market factors and operating conditions that occurred during the fourth quarter of 2008 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 fourth quarter results on Feb. 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 during the fourth quarter is estimated to be approximately 415,000 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 international crude oil liftings and natural gas sales. Liquid hydrocarbon and natural gas production available for sale during the fourth quarter is expected to be approximately 401,000 boepd, which is 3 percent higher than the third quarter 2008 result of 389,000 boepd. The available for sale estimate was at the bottom of the 400,000 to 440,000 boepd fourth quarter guidance due primarily to three major factors: longer than expected downtime at the offshore Equatorial Guinea Alba platform due to pipeline issues; lower than expected Gulf of Mexico production from continued impacts related to 2008 hurricanes; and, the Oct. 31, 2008 sale of Marathon's non-core interests in the Heimdal area offshore Norway.

As shown in the attached table, Marathon's average liquid hydrocarbon realization for the first two months of the fourth quarter, as compared to the third quarter of 2008, decreased $51.11 per barrel domestically and $49.80 per barrel internationally, reflecting the general market price movements during the first two months of the quarter. For the entire fourth quarter of 2008, the average West Texas Intermediate (WTI) crude oil market price indicator was $59.14 per barrel lower than the third quarter of 2008 while the average Dated Brent indicator decreased $59.61 per barrel.

Marathon's domestic average natural gas price realization for October and November decreased $3.11 per thousand cubic feet (mcf) from the Company's average realized price in the third quarter of 2008. The average Henry Hub (HH) prompt natural gas price for the fourth quarter decreased $2.75 per million British Thermal Units (BTUs), while the average HH bid week natural gas price decreased $3.30 per million BTUs during this same period. International average gas realizations decreased $0.05 per mcf in the first two months of the fourth quarter compared to the third quarter of 2008.

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

Fourth quarter 2008 exploration expense is now expected to be between $125 to $175 million, which is within previous guidance.

Oil Sands Mining

For the fourth quarter 2008, the Company estimates that its net share of bitumen production before royalties from the Athabasca Oil Sands Project (AOSP) mining operation will be approximately 25,000 barrels per day (bpd), which is within the previous guidance of 23,000 to 28,000 bpd for the fourth quarter. Marathon's synthetic crude oil sales from AOSP for fourth quarter 2008 are estimated to be approximately 32,000 bpd. Marathon's average synthetic crude oil realization (excluding derivative impacts) for the first two months of the fourth quarter, as compared to third quarter 2008, decreased $54.43 per barrel, reflecting the general market price movements during the first two months of the fourth quarter.

For the fourth quarter 2008, the Company expects a net after-tax gain of approximately $134 million on crude oil derivative instruments intended to mitigate price risk related to sales of synthetic crude oil, of which approximately $6 million is realized and approximately $128 million is unrealized mark-to-market. The last of these derivative instruments expire at year end 2009.

Refining, Marketing and Transportation

The Company estimates its refined products sales volume will average approximately 1,400,000 bpd in the fourth quarter of 2008 compared to 1,432,000 bpd in the fourth quarter of 2007.

The Company estimates its fourth quarter 2008 refining and wholesale marketing gross margin will be approximately $0.12 per gallon as compared to $0.048 per gallon earned in the fourth quarter 2007, with the falling crude oil prices during the fourth quarter 2008, compared to rising prices in the fourth quarter 2007, being the primary reason for this projected increase. Additionally, the gross margin includes an estimated gain on derivative instruments of approximately $64 million in the fourth quarter of 2008 compared to a loss of $427 million in the fourth quarter of 2007. This change was primarily due to the change in crude oil prices during the fourth quarter 2008 compared to the fourth quarter 2007 noted above, as well as the fact that the Company no longer uses derivatives to mitigate its domestic crude oil acquisition price risk. These favorable variances were partially offset by an unfavorable year-over-year quarterly impact from a narrowing in the average sweet/sour differential on the Company's cost of sour crude oil purchases. In addition, Marathon's ethanol blending margins are projected to be less favorable in the fourth quarter 2008 versus fourth quarter 2007 primarily due to a narrowing in the differential between gasoline and ethanol prices.

Crude oil refined is expected to average approximately 950,000 bpd for the entire fourth quarter 2008, compared to 956,000 bpd in the fourth quarter of 2007. Total refinery throughputs for the fourth quarter 2008 are expected to be about 1,175,000 bpd compared to 1,179,000 bpd in the fourth quarter of 2007.

Speedway SuperAmerica LLC's (SSA) gasoline and distillate gross margin averaged $0.2044 per gallon during October and November 2008 and is expected to average approximately $0.18 per gallon for the fourth quarter of 2008. SSA same store gasoline sales volume for the first two months of the fourth quarter 2008 decreased slightly compared to the first two months of the fourth quarter 2007; however, the Company projects that SSA's same store gasoline sales volume for the entire quarter will be slightly better than 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 5,750 net metric tonnes per day (mtpd) of LNG in the fourth quarter of 2008, within the previous guidance of 5,500 to 6,100 mtpd.

Other Information

The overall corporate effective income tax rate for full year 2008, excluding special items and foreign currency remeasurement effects, is anticipated to remain between 46 and 49 percent. The actual annual effective tax rate is influenced by several factors including the geographical mix and timing of product sales.

Earnings Release Date and Conference Call Information

Marathon will report its fourth quarter 2008 results on Feb. 3, 2009. The Company will also conduct a conference call and webcast that same day at 2 p.m. EST. The call will cover fourth quarter and full year 2008 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 Fourth Quarter 2008 Financial Results Conference Call link. Replays of the conference call will be available on the Web site through Feb. 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 sales volumes, LNG sales volumes, and the corporate effective income tax rate for 2008. 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, 2007, 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)

4Q 3Q Oct - Nov 4Q
2007 2008 2008 2008
Actual Actual Actual Actual
Exploration and Production
Net Sales(1)
Domestic - Liquid Hydrocarbons
(MBPD) 60 63 65 --
Domestic - Natural Gas (MMCFD) 474 426 459 --
International - Liquid
Hydrocarbons (MBPD) 130 161 190 --
International - Natural Gas
(MMCFD)(2) 510 502 621 --
MBOEPD(1) 354 379 435 --

Market Prices
NYMEX prompt WTI oil price
($/BBL) 90.50 118.22 68.01 59.08
Dated Brent oil price ($/BBL) 88.45 115.09 62.86 55.48
HH prompt natural gas price
($/MMBTU) 6.92 9.13 6.68 6.38
HH bid week natural gas price
($/MMBTU) 6.97 10.25 6.98 6.95

Average Realizations(3)
Liquid Hydrocarbons:
Domestic ($/BBL) 74.16 106.81 55.70 --
International ($/BBL) 84.64 113.10 63.30 --
Natural Gas:
Domestic ($/MCF) 5.70 7.70 4.59 --
International ($/MCF) 3.96 2.92 2.87 --

Oil Sands Mining
Net bitumen production (MBPD)(4) 15 28 24 --
Net synthetic crude sales (MBPD)(4) 17 32 32 --
Synthetic crude average
realization ($/BBL)(3) 71.07 113.42 58.99 --

Refining, Marketing and
Transportation
Chicago LLS 6-3-2-1 crack spread
($/BBL) 2.88 7.81 3.52 2.31
Gulf Coast LLS 6-3-2-1 crack
spread ($/BBL) 1.42 6.32 0.06 (0.01)
Chicago LLS 3-2-1 crack spread
($/BBL) 7.54 13.75 7.37 5.30
Gulf Coast LLS 3-2-1 crack spread
($/BBL) 5.81 11.88 3.05 2.45

Sweet/sour differential ($/BBL)(5) 14.23 11.38 9.59 9.90
Refinery Runs:
Crude oil refined (MBPD) 956 955 954 --
Other charge & blend stocks
(MBPD) 223 189 223 --
Total (MBPD) 1,179 1,144 1,177 --
Crude oil capacity utilization
(%)(6) 98 94 94 --
Refined product sales volumes
(MBPD)(7) 1,432 1,357 1,432 --
Refining & wholesale marketing
gross margin ($/gal)(8) 0.0480 0.2519 0.1809 --
SSA gasoline and distillate sales
(MMGal) 836 796 558 --
SSA gasoline and distillate gross
margin ($/gal) 0.1131 0.1690 0.2044 --
SSA merchandise gross margin
($million) 172 197 121 --

Integrated Gas
Sales Volumes (MTPD)(9)
LNG 3,890 6,048 7,126 --
Methanol 1,376 757 790 --


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


(1) Amounts reflected are after royalties, except for Ireland and Canada where amounts are before royalties.

(2) Includes natural gas acquired for injection and subsequent resale.

(3) Excludes gains and losses on traditional derivative instruments and the unrealized effects of long-term U.K. natural gas contracts that are accounted for as derivatives.

(4) The oil sands mining operations were acquired October 18, 2007.

(5) 15% Arab Light, 20% Kuwait, 10% Maya, 15% Western Canadian Select, 40% Mars.

(6) Prior to January 1, 2008, crude oil capacity utilization was based on historical crude oil refining capacity of 974 MBPD. As of December 31, 2007, crude oil refining capacity was revised to 1.016 MMBPD.

(7) Total average daily volumes of all refined product sales to wholesale, branded and retail (SSA) customers.

(8) Sales revenue less cost of refinery inputs, purchased products and manufacturing expenses, including depreciation.

(9) LNG sales volumes include both consolidated sales and our share of the sales 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
Michol Ecklund 713-296-3919
Chris Phillips 713-296-3213


SOURCE Marathon Oil Corporation

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