HOUSTON, April 8, 2008 /PRNewswire-FirstCall/ -- Marathon Oil
Corporation (NYSE: MRO) today is providing information on market factors
and operating conditions that occurred during the first 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 first
quarter results on May 1, 2008, 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 375,000 barrels of oil equivalent
per day (boepd), compared to 354,000 boepd during the fourth quarter 2007.
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 372,000 boepd, within the previous
guidance of 360,000 to 380,000 boepd and higher than the 352,000 boepd
available for sale in the fourth quarter of 2007.
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 2007, increased $4.68 per barrel domestically and
$1.95 per barrel internationally, reflecting the general market price
movements during the first two months of the quarter. For the same
two-month period, the average West Texas Intermediate (WTI) crude oil
market price indicator was $3.61 per barrel higher than the fourth quarter
of 2007 while the average Dated Brent indicator increased $5.03 per barrel.
Market prices continued to strengthen in the third month of the quarter, as
indicated in the attached table.
Marathon's domestic average natural gas price realization for January
and February increased $0.75 per thousand cubic feet (mcf) over the
Company's average realized price in the fourth quarter of 2007. The average
Henry Hub (HH) bid week natural gas price for the same two-month period
increased $0.60 per million British Thermal Units (BTUs). The larger
increase in Marathon's domestic average realized price for the first two
months of the first quarter as compared to the average HH bid week market
indicator primarily reflects the impact of regional pricing differentials
to Henry Hub. Domestic market prices for natural gas continued to increase
during the third month of the quarter.
International average natural gas realizations decreased $0.60 per mcf
in the first two months of the first quarter compared to the fourth quarter
of 2007, primarily reflecting the higher volume of Equatorial Guinea (EG)
natural gas sales to the EG Liquefied Natural Gas (LNG) production
facility, which was down for a portion of fourth quarter 2007 for warranty
repairs.
Marathon's actual crude oil and natural gas price realizations vary
from market indicators primarily due to product quality and location
differentials.
First quarter 2008 exploration expense is now estimated to be between
$135 and $145 million, within previous guidance of $120 to $145 million for
the quarter. U.S. exploration expense is estimated to be between $55 and
$60 million, while international exploration expense is estimated to be
between $80 to $85 million.
Oil Sands Mining
For first quarter 2008, the Company estimates that its net share of
bitumen production before royalties from the Athabasca Oil Sands Project
(AOSP) mining operation, acquired in fourth quarter 2007, will be
approximately 24,000 barrels per day (bpd), which is lower than previous
guidance of 30,000 bpd due to weather-related issues at the mine and
unplanned maintenance at the Scotford upgrader. Marathon's synthetic crude
oil sales from AOSP for first quarter 2008 are estimated to be
approximately 31,000 bpd. Marathon's average synthetic crude oil
realization (excluding derivative impacts) for the first two months of the
first quarter, as compared to fourth quarter 2007, increased $11.33 per
barrel, reflecting the general market price movements during the first two
months of the quarter.
At the time of Marathon's 2007 acquisition of Western Oil Sands, Inc.
(Western), Western held crude oil derivative instruments intended to
mitigate price risk related to future sales of synthetic crude oil. Due to
rising crude oil prices, the Company expects to recognize an after-tax loss
on these instruments of approximately $36 million for the first quarter
2008. The last of these derivative instruments is set to expire in fourth
quarter 2009.
Refining, Marketing and Transportation
The Company currently projects that refined products sales volume will
average approximately 1,280,000 bpd in the first quarter of 2008, compared
to 1,343,000 bpd in the first quarter of 2007.
The Company projects its first quarter 2008 refining and wholesale
marketing per gallon gross margin will be slightly negative. For
comparison, the refining and wholesale marketing gross margin for the first
quarter 2007 was $0.1246 per gallon. The primary reason for the
quarter-to-quarter reduction was the substantially weaker refining margins
experienced in the first quarter 2008 in the Midwest (Chicago) and Gulf
Coast markets. For example, the Light Louisiana Sweet (LLS) 6-3-2-1 crack
spread on a two-thirds Chicago, one-third Gulf Coast basis decreased from
$5.14 per barrel in first quarter 2007 to $0.51 per barrel in first quarter
2008. Manufacturing expenses, which are included in the refining and
wholesale marketing per gallon gross margins noted above, are estimated to
be approximately $170 million higher in first quarter 2008 compared to the
same quarter last year, primarily due to the significant amount of planned
turnaround and other major maintenance-related activities performed in the
first quarter 2008.
The above refining and wholesale marketing per gallon gross margins
also include a derivatives-related loss of about $120 million in the first
quarter of 2008 compared to a derivatives-related gain of $27 million in
the first quarter of 2007.
Crude oil refined during January and February 2008 averaged about
807,000 bpd and is expected to be approximately 845,000 bpd for the entire
first quarter 2008. Total refinery throughputs for the first quarter 2008
are expected to be slightly higher than the 1,072,000 bpd average for
January and February 2008. In the first quarter of 2007, crude oil refined
averaged 968,000 bpd and total throughputs averaged 1,195,000 bpd. The
primary reason for the quarter-to-quarter reduction was the significant
amount of planned maintenance activities performed in the first quarter of
2008 at the Company's Detroit, Garyville, La. and Robinson, Ill.
refineries.
Speedway SuperAmerica LLC's (SSA) gasoline and distillate gross margin
averaged $0.1213 per gallon during January and February 2008 and is
expected to average approximately $0.1125 per gallon for the first quarter
of 2008.
Integrated Gas
Marathon's share of LNG sales from operations in Equatorial Guinea and
Alaska are estimated to be approximately 6,900 metric tonnes per day (mtpd)
in the first quarter of 2008, slightly higher than previous guidance. The
Company also estimates that its share of methanol sales from Atlantic
Methanol Production Company LLC in Equatorial Guinea will be approximately
1,100 mtpd, which is lower than previous guidance.
Unallocated Administrative Expense and Other Information
Total pre-tax unallocated administrative expense for the quarter is
estimated to be $85 to $95 million.
The overall corporate effective income tax rate, excluding special
items and foreign currency effects, is expected to be approximately 45 to
48 percent for the first quarter of 2008. The effective income tax rate for
the Exploration and Production segment is expected to be approximately 51
to 54 percent, while the Refining, Marketing and Transportation segment is
expected to have a first quarter effective income tax rate of approximately
35 to 37 percent.
The Company continued its share repurchase program during the first
quarter of 2008 by repurchasing approximately 2.8 million shares at a cost
of approximately $143 million. Since January 2006, the Company's Board of
Directors has authorized the repurchase of up to $5.0 billion of Marathon's
common stock. To date, the Company has repurchased just under $2.7 billion
in Marathon shares.
Earnings Release Date and Conference Call Information
Marathon will report its first quarter 2008 results on May 1, 2008. The
Company will also conduct a conference call and webcast that same day at 2
p.m. EDT. The call will cover first quarter 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 http://www.marathon.com and clicking on the First Quarter 2008
Financial Results Conference Call link. Replays of the conference call will
be available on the Web site through May 15, 2008. 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 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, LNG and methanol sales volumes, unallocated
administrative expenses, and corporate and segment effective income tax
rates. 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 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.
(Logo: http://www.newscom.com/cgi-bin/prnh/20051027/DATH029LOGO )
Media Relations Contacts: Lee Warren 713-296-4103
Scott Scheffler 713-296-4102
Investor Relations Contacts: Howard Thill 713-296-4140
Chris Phillips 713-296-3213
Michol Ecklund 713-296-3919
Select Operating and Financial Data (unaudited)
1Q 4Q Jan - Feb 1Q
2007 2007 2008 2008
Actual Actual Actual Actual
Exploration and Production
Net Sales (1)
Domestic - Liquid Hydrocarbons
(MBPD) 69 60 61 --
Domestic - Natural Gas (MMCFD) 512 474 475 --
International - Liquid
Hydrocarbons (MBPD) 129 130 118 --
International - Natural Gas
(MMCFD) (2) 337 510 663 --
MBOEPD (1) 339 354 368 --
Market Prices
NYMEX prompt WTI oil price
($/BBL) 58.23 90.50 94.11 97.82
Dated Brent oil price ($/BBL) 57.76 88.45 93.48 96.71
HH prompt natural gas price
($/MMBTU) 7.13 6.92 8.19 8.58
HH bid week natural gas price
($/MMBTU) 6.77 6.97 7.57 8.03
Average Realizations(3)
Liquid Hydrocarbons:
Domestic ($/BBL) 49.32 74.16 78.84 --
International ($/BBL) 52.01 84.64 86.59 --
Natural Gas:
Domestic ($/MCF) 5.91 5.70 6.45 --
International ($/MCF) 4.91 3.96 3.36 --
Oil Sands Mining
Net bitumen production (MBPD)
(4) (1) -- 15 23 --
Net synthetic crude sales
(MBPD)(4) (1) -- 17 33 --
Synthetic crude average
realization ($/BBL) (3) -- 71.07 82.40 --
Refining, Marketing and
Transportation
Chicago LLS 6-3-2-1 crack spread
($/BBL) 5.26 2.88 (1.15) 0.07
Gulf Coast LLS 6-3-2-1 crack
spread ($/BBL) 4.91 1.42 0.84 1.39
Chicago LLS 3-2-1 crack spread
($/BBL) 10.08 7.54 3.23 4.93
Gulf Coast LLS 3-2-1 crack spread
($/BBL) 9.81 5.81 5.90 6.75
Sweet/sour differential ($/BBL)
(5) (12.28) (14.40) (15.47) (14.33)
Refinery Runs:
Crude oil refined (MBPD) 968 956 807 --
Other charge & blend stocks
(MBPD) 227 223 265 --
Total (MBPD) 1,195 1,179 1,072 --
Crude oil capacity utilization
(%) (6) 99 98 79 --
Refined product sales volumes
(MBPD) (7) 1,343 1,432 1,282 --
Refining & wholesale marketing
gross margin ($/gal) (8) 0.1246 0.0480 -- --
SSA gasoline and distillate sales
(MMGal) 800 836 528 --
SSA gasoline and distillate gross
margin ($/gal) 0.1217 0.1131 0.1213 --
SSA merchandise gross margin
($million) 160 172 102 --
Integrated Gas
Sales Volumes (MTPD) (9)
LNG 1,163 3,890 6,317 --
Methanol 1,324 1,376 1,148 --
BBL - barrel
MBPD - thousand barrels per day
MMCFD - million cubic feet per day
MMBTU - million British Thermal Units
MMBPD - million barrels per day
MTPD - metric tonnes per day
MCF - thousand cubic feet
gal - gallons
MMGal - million 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. Daily
volumes for the fourth quarter 2007 represent total volumes since the
acquisition date over total days in the period.
(5) 15% Bow River, 15% Maya, 35% Kuwait, 35% Arab Medium.
(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. Methanol
sales volumes represent our share of sales of an equity method
investee.
SOURCE Marathon Oil Corporation
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Related links:
http://www.marathon.com
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CONTACT:
Media Relations, Lee Warren, +1-713-296-4103,
or Scott Scheffler, +1-713-296-4102; or Investor Relations,
Howard Thill, +1-713-296-4140, Chris Phillips, +1-713-296-3213,
Michol Ecklund, +1-713-296-3919
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