HOUSTON, April 14 /PRNewswire-FirstCall/ -- Marathon Oil Corporation (NYSE: MRO) today is providing information on market factors and operating conditions that occurred during the first 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 first quarter results on April 30, 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 first quarter is estimated to be approximately 404,000 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 first quarter is expected to be approximately 429,000 boepd, which is 7 percent higher than the fourth quarter 2008 result of 402,000 boepd. The available for sale estimate exceeded the 400,000 to 415,000 boepd first quarter guidance due to improved reliability across production operations, highlighted by outstanding performance at Marathon's Alvheim oil development in Norway and the Equatorial Guinea natural gas complex, as well as approximately 5,000 boepd of production by Marathon Oil Ireland Limited which was not included in the original estimate due to the pending sale of these operations.
As shown in the attached table, Marathon's average liquid hydrocarbon realization for the first two months of the first quarter, as compared to the fourth quarter of 2008, decreased $13.70 per barrel domestically and $15.18 per barrel internationally, reflecting the general market price movements during the first two months of the quarter. For the entire first quarter of 2009, the average West Texas Intermediate (WTI) crude oil market price indicator was $15.77 per barrel lower than the fourth quarter of 2008 while the average Dated Brent indicator decreased $11.02 per barrel.
Marathon's domestic average natural gas price realization for January and February decreased $0.25 per thousand cubic feet (mcf) from the Company's average realized price in the fourth quarter of 2008. The average Henry Hub (HH) prompt natural gas price for the first quarter decreased $1.80 per million British Thermal Units (BTUs) compared to the fourth quarter of 2008, while the average HH bid week natural gas price decreased $2.04 per million BTUs during this same period. International average gas realizations decreased $0.43 per mcf in the first two months of the first quarter compared to the fourth 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.
First quarter 2009 exploration expense is now expected to be approximately $65 million, which is within previous guidance.
Oil Sands Mining
For the first quarter 2009, the Company estimates that its share of bitumen production 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 22,000 to 27,000 bpd for the first quarter. Marathon's synthetic crude oil sales from AOSP for the first quarter 2009 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 first quarter was $35.14 per barrel, as compared to $48.98 reported for the fourth quarter of 2008. The first quarter realizations reflect the general market price movements during the first two months of the first quarter.
For the first quarter 2009, the Company expects the income effect of crude oil derivative instruments intended to mitigate price risk related to sales of synthetic crude oil will not be significant. During the first quarter 2009, the Company sold derivative instruments at an average exercise price of $50.50 which effectively offset open put positions. All derivative instruments related to the Oil Sands Mining segment expire at year end 2009.
Refining, Marketing and Transportation
The Company estimates its refined products sales volume will average approximately 1,285,000 bpd in the first quarter of 2009 compared to 1,279,000 bpd in the first quarter of 2008.
The Company estimates its first quarter 2009 refining and wholesale marketing gross margin will be approximately $0.08 per gallon as compared to a negative $0.0026 per gallon earned in the first quarter 2008.
A primary factor contributing to the projected quarter-to-quarter increased margin is stronger market-based indicators in the Midwest (Chicago) and Gulf Coast markets, as illustrated by the Light Louisiana Sweet (LLS) 6-3-2-1 crack spreads on the attached table. In addition, improved average refined product wholesale price realizations, and a relatively lower cost of crude oil than the average prices reflected in the market indicators further enhanced the gross margin. These favorable variances are partially offset by lower ethanol blending margins primarily due to the lower absolute price of gasoline in the first quarter of 2009 compared to the same quarter last year. The refining and wholesale marketing per gallon gross margin includes an estimated loss on derivative instruments of approximately $60 million in the first quarter 2009 compared to a loss of $120 million in the first quarter of 2008.
Crude oil refined is expected to average approximately 850,000 bpd for the first quarter 2009, compared to 845,000 bpd in the first quarter 2008. Total refinery throughputs for the first quarter 2009 are expected to be about 1,070,000 bpd compared to 1,079,000 bpd in the first quarter of 2008.
Speedway SuperAmerica LLC's (SSA) gasoline and distillate gross margin averaged $0.1072 per gallon during January and February 2009 and is expected to average approximately the same amount for the first quarter of 2009. The Company projects that SSA's first quarter same store gasoline sales volume will increase about 1 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 6,750 net metric tonnes per day (mtpd) of LNG in the first quarter of 2009, above the previous guidance of 5,700 to 6,700 mtpd due to better than expected reliability.
Other Information
The overall corporate effective income tax rate for the first quarter 2009, excluding special items and foreign currency remeasurement effects, is anticipated to be between 52 and 57 percent. 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.
Earnings Release Date and Conference Call Information
Marathon will report its first quarter 2009 results on April 30, 2009. The Company will also conduct a conference call and webcast that same day at 2 p.m. EDT. The call will cover first 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 First Quarter 2009 Financial Results Conference Call link. Replays of the conference call will be available on the Web site through May 14, 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 and refining, marketing and transportation 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 first quarter 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, 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)
1Q 4Q Jan - Feb 1Q
2008 2008 2009 2009
Actual Actual Actual Actual
Exploration and Production
Net Sales (1)
Domestic - Liquid Hydrocarbons
(MBPD) 63 64 66 --
Domestic - Natural Gas (MMCFD) 482 454 429 --
International - Liquid
Hydrocarbons (MBPD) 127 185 161 --
International - Natural Gas
(MMCFD) (2) 647 552 663 --
MBOEPD(1) 378 417 409 --
Market Prices
NYMEX prompt WTI oil price ($/BBL) 97.82 59.08 40.57 43.31
Dated Brent oil price ($/BBL) 96.71 55.48 43.31 44.46
HH prompt natural gas price ($/
MMBTU) 8.58 6.38 4.92 4.58
HH bid week natural gas price
($/MMBTU) 8.03 6.95 5.33 4.91
Average Realizations(3)
Liquid Hydrocarbons:
Domestic ($/BBL) 83.98 47.06 33.36 --
International ($/BBL) 91.03 55.76 40.58 --
Natural Gas:
Domestic ($/MCF) 6.83 5.00 4.75 --
International ($/MCF) 3.19 3.14 2.71 --
Oil Sands Mining
Net bitumen production (MBPD) 24 25 26 --
Net synthetic crude sales (MBPD) 31 32 33 --
Synthetic crude average
realization ($/BBL) (3) 88.85 48.98 35.14 --
Refining, Marketing and Transportation
Chicago 6-3-2-1 crack spread ($/BBL) 0.07 2.31 3.88 2.91
Gulf Coast 6-3-2-1 crack spread
($/BBL) 1.39 (0.01) 3.70 2.89
Chicago 3-2-1 crack spread ($/BBL) 4.93 5.30 5.66 5.06
Gulf Coast 3-2-1 crack spread
($/BBL) 6.75 2.45 5.33 4.93
Sweet/sour differential ($/BBL) (4) 12.82 10.03 10.09 7.07
Refinery Runs:
Crude oil refined (MBPD) 845 952 875 --
Other charge & blend stocks (MBPD) 234 225 235 --
---- ---- ---- ----
Total (MBPD) 1,079 1,177 1,110 --
Crude oil capacity utilization (%) 83 94 86 --
Refined product sales volumes
(MBPD) (5) 1,279 1,404 1,295 --
Refining & wholesale marketing gross
margin ($/gal) (6) (0.0026) 0.1248 -- --
SSA gasoline and distillate sales
(MMGal) 792 839 515 --
SSA gasoline and distillate
gross margin ($/gal) 0.1147 0.1821 0.1072 --
SSA merchandise gross margin
($million) 163 175 111 --
Integrated Gas
Sales Volumes (MTPD)(7)
LNG 6,912 5,786 6,905 --
Methanol 1,130 837 1,188 --
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) Sales volumes reflected are after royalties, except for Ireland where
amounts are before royalties.
(2) Includes natural gas acquired for injection and subsequent resale.
(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 our share of the
sales volumes of equity method investees.
