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
Chris Phillips 713-296-3213
Michol Ecklund 713-296-3919
