HOUSTON, March 23 /PRNewswire-FirstCall/ -- Marathon Oil Corporation (NYSE: MRO) President and CEO Clarence P. Cazalot, Jr. today provided investors with a comprehensive report on the Company's global operations and strategic plans at the Howard Weil Energy Conference in New Orleans. The slide presentation is available on the Company's website at www.marathon.com.
"Marathon intends to outperform its peers and deliver top-quartile total shareholder returns by capitalizing on its strong, diversified asset base and delivering defined growth over the next three years through major projects, while pursuing a rich opportunity set for growth beyond 2011 and continuing its track record of exploration success," said Cazalot.
In his remarks, Cazalot emphasized that the catalysts for earnings growth in 2009 and beyond will include a full year of production from the Alvheim/Vilje developments and the projected fourth quarter start-up of Volund both in Norway, as well as the planned fourth quarter start-up of the Garyville Major Expansion (GME) project at its refinery in Louisiana. Marathon intends to build upon a sound foundation of diverse, long-life assets and capture the benefits of financial diversification through strong growth prospects in its upstream businesses and the incremental value generated from strategic projects in its top-tier downstream business.
Upstream Business: Growth Vehicle
Marathon's upstream businesses, which include exploration and production (E&P), integrated gas and oil sands mining, are projected to deliver a combined production growth of 4 percent compound average annual growth rate (CAGR) through 2011. During that period, the near-term growth favors liquid hydrocarbon production (including bitumen), increasing the Company's liquids balance to 64 percent of hydrocarbons produced by 2011.
Cazalot highlighted the Company's top-tier E&P cost structure, as well as efforts underway to lower costs at its oil sands mining operations in Canada. Additionally, Marathon's 2008 worldwide drilling performance (measured by number of days to drill 10,000 feet) was a 25 percent improvement over 2007, with particularly impactful results being achieved in Norway and the Bakken Shale play in North Dakota.
Cazalot said the Company intends to increase its position in domestic onshore resource plays, balanced by a strong deepwater exploration program focused on the Gulf of Mexico and Indonesia. From 2002 to 2008, Marathon's worldwide exploration team delivered 48 significant discoveries, finding approximately 1 billion barrels of oil equivalent (BOE) of net oil and gas resource at a cost of less than $3 per BOE.
"We also have a very attractive opportunity set for growth beyond 2011," Cazalot said. "Marathon's track record of exploration success, combined with our high-impact, drill-ready portfolio, provides a great deal of upside potential."
Downstream Business: Maximize Free Cash
"When completed in fourth quarter 2009, the Garyville refinery expansion project will leverage our most efficient and profitable downstream asset, and will generate significant incremental income for Marathon," Cazalot said. "Overall, we're making strategic investments in our downstream business that will lower feedstock costs as well as increase efficiency and flexibility, so we can continue providing maximum earnings and cash flow in an increasingly challenging environment."
A key example of Marathon's plan to improve efficiency and flexibility is the Company's investments to more than double its coking capacity by 2012. There is also emphasis on growing distillate production, leveraging the Company's transportation infrastructure and growing retail marketing volumes.
Financial Philosophy
Marathon continues to maintain a strong financial position with a conservative net debt-to-capital ratio of 22 percent as of Dec. 31, 2008, and an undrawn credit facility of approximately $3 billion. It also intends to maintain a competitive dividend for its shareholders.
The 2009 capital, investment and exploration budget of $5.7 billion is 24 percent lower than 2008 actual spending. Future spending is projected to be in the $5.5 - $6 billion range with increases targeted for the upstream. There is flexibility, however, to adjust these spending levels based on overall industry conditions.
As part of Marathon's emphasis on financial discipline, Cazalot explained how the Company is using targeted expense reductions to lower costs by 5 - 8 percent year-over-year across the corporation.
Marathon is an integrated international energy company engaged in exploration and production; oil sands mining; integrated gas; and refining, marketing and transportation operations. Marathon has principal operations in the United States, Angola, Canada, Equatorial Guinea, Gabon, Indonesia, Ireland, Libya, Norway and the United Kingdom. Marathon is the fourth largest United States-based integrated oil company and the nation's fifth largest refiner.
This release contains forward-looking statements with respect to the timing and levels of the Company's worldwide liquid hydrocarbon and natural gas production, bitumen production, the Volund development and other possible developments, deepwater exploration in the Gulf of Mexico and Indonesia, future exploratory and development drilling activity, the Garyville refinery expansion project, a refinery heavy oil upgrading project, and expected capital, investment and exploration spending. Some factors that could potentially affect the timing and levels of the Company's worldwide liquid hydrocarbon and natural gas production, bitumen production, the Volund development and other possible developments, deepwater exploration in the Gulf of Mexico and Indonesia, and future exploratory and development drilling activity include pricing, supply and demand for petroleum products, the amount of capital available for exploration and development, regulatory constraints, timing of commencing production from new wells, drilling rig availability, unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response thereto, and other geological, operating and economic considerations. Except for the Volund development, the foregoing forward-looking statements may be further affected by the inability or delay in obtaining government and third-party approvals and permits. Factors that could affect the Garyville refinery expansion project and the other refinery heavy oil upgrading project include transportation logistics, availability of materials and labor, unforeseen hazards such as weather conditions, delays in obtaining or conditions imposed by necessary government and third-party approvals, and other risks customarily associated with construction projects. The expected capital, investment and exploration spending is based on current expectations, estimates and projections and is not a guarantee of future performance. Some factors that could cause actual results to differ materially include prices of and demand for crude oil, natural gas and refined products, actions of competitors, disruptions or interruptions of our production or refining operations due to the shortage of skilled labor and unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response, and other operating and economic considerations. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements. 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, cautionary language identifying other 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.
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