HOUSTON, Oct. 8 /PRNewswire-FirstCall/ -- Marathon Oil Corporation
(NYSE: MRO) today is providing information on market factors and operating
conditions that occurred during the third 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 third quarter
results on Oct. 30, 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.
(Logo: http://www.newscom.com/cgi-bin/prnh/20051027/DATH029LOGO )
Exploration and Production
Liquid hydrocarbon and natural gas production sold during the third
quarter is estimated to be approximately 384,000 barrels of oil equivalent
per day (boepd), compared to 350,000 boepd during the second quarter 2008.
Revenues reported are 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 held in storage. Liquid
hydrocarbon and natural gas production available for sale during the third
quarter is expected to be approximately 388,000 boepd, above both the
initial quarterly guidance of 360,000 to 385,000 boepd, and the 374,000
boepd available for sale in the second quarter of 2008.
As shown in the attached table, Marathon's average liquid hydrocarbon
realization for the first two months of the third quarter, as compared to
the second quarter of 2008, increased $3.01 per barrel domestically and
$8.49 per barrel internationally. For the same two-month period, the
average West Texas Intermediate (WTI) crude oil market price indicator was
$1.48 per barrel higher than the second quarter of 2008, and the average
Dated Brent indicator increased $2.38 per barrel. The larger increase in
Marathon's international liquid hydrocarbon realizations compared to Dated
Brent was largely a result of higher sales volumes for July when prices
averaged about $20 per barrel higher than in August. Market prices
continued to weaken in the third month of the quarter, as indicated in the
attached table.
Marathon's domestic average natural gas realization for July and August
and the average Henry Hub (HH) bid week natural gas price for the same two-
month period increased slightly compared to the averages in the second
quarter 2008.
Internationally, average natural gas realizations increased 54 cents
per mcf in the first two months of the third quarter compared to the second
quarter 2008. September sales results are expected to bring full quarter
realizations for international natural gas closer to that experienced in
the second quarter.
Marathon's actual crude oil and natural gas price realizations
generally vary from market indicators primarily due to product quality and
location differentials.
Third quarter 2008 exploration expense overall is forecast to be within
previous guidance of $100 to $160 million for the quarter.
Oil Sands Mining
For the third 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 27,000 barrels per day (bpd),
which is higher than second quarter production and within the previous
guidance of 25,000 to 28,000 bpd. During the third quarter, the royalty
calculation rate applicable to bitumen production from the Muskeg River
Mine increased from 1 percent of gross revenue to 25 percent of net
revenue, as per applicable regulations, following the achievement of the
project's payout. Marathon's synthetic crude oil sales from AOSP for third
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 third quarter, as compared to second quarter
2008, increased $5.26 per barrel, reflecting the general market price
movements during the first two months of the third quarter.
For the third quarter 2008, the Company expects a net after-tax gain of
$189 million on crude oil derivative instruments intended to mitigate price
risk related to sales of synthetic crude oil. The Company estimates it will
realize an after-tax loss of approximately $24 million and an unrealized
after-tax mark-to-market gain of approximately $213 million. 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 1,365,000 bpd in the third quarter of 2008 compared to
1,440,000 bpd in the third quarter of 2007.
The Company estimates its third quarter 2008 refining and wholesale
marketing gross margin will be approximately 40 percent higher than the
$0.1717 per gallon earned in the third quarter 2007. The primary reason for
the projected quarter-to-quarter increase in the refining and wholesale
marketing gross margin was the impact from crude oil prices falling
approximately $40 per barrel during the third quarter of 2008 compared to
increasing approximately $10 per barrel during the third quarter of 2007.
Third quarter 2008 results also benefited from an increase in the average
sweet/sour differentials quarter-over-quarter. Additionally, the gross
margin includes an estimated gain on derivative instruments of
approximately $150 million in the third quarter of 2008 compared to a loss
of $360 million in the third quarter of 2007. This change was primarily due
to the substantial change in crude oil prices during the third quarter 2008
compared to the third quarter 2007 noted above, as well as the fact that
the Company is no longer using derivatives to mitigate its domestic crude
oil acquisition price risk. Most of these derivatives have an underlying
physical commodity transaction; however, the income effect related to the
derivatives and the income effect related to the underlying physical
transactions may not necessarily be recognized in net income in the same
period. These favorable variances were partially offset by higher
manufacturing costs.
Crude oil refined is expected to average approximately 950,000 bpd for
the third quarter 2008, compared to 1,042,000 bpd in the third quarter of
2007. Total refinery throughputs for the third quarter 2008 are expected to
be about 1,150,000 bpd compared to 1,241,000 bpd in the third quarter of
2007. Hurricane related impacts caused about half of the
quarter-over-quarter variance in total throughputs.
Speedway SuperAmerica LLC's (SSA) gasoline and distillate gross margin
averaged $0.1645 per gallon during July and August 2008 and is expected to
average approximately $0.1600 per gallon for the third quarter 2008.
Integrated Gas
Marathon's share of LNG sales from operations in Equatorial Guinea and
Alaska is estimated to be approximately 6,100 metric tonnes per day (mtpd)
in the third quarter of 2008, above previous guidance of 5,300 to 5,800
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 to 49 percent. The actual annual effective
tax rate is influenced by several factors including the geographical mix
and timing of product sales.
The Company continued its share repurchase program during the third
quarter of 2008 by repurchasing approximately 2.3 million shares at a cost
of approximately $107 million. Since January 2006, the Company's Board of
Directors has authorized the repurchase of up to $5 billion of Marathon's
common stock. To date, the Company has repurchased $2.9 billion in Marathon
shares.
Earnings Release Date and Conference Call Information
Marathon will report its third quarter 2008 results on Oct. 30, 2008.
The Company will also conduct a conference call and webcast that same day
at 2:00 p.m. EDT. The call will cover third 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 website at http://www.marathon.com and clicking on the Third Quarter
2008 Financial Results Conference Call link. Replays of the conference call
will be available on the website through Nov. 13, 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, royalties,
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, 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.
Media Relations Contacts: Lee Warren 713-296-4103
Paul Weeditz 713-296-3910
Investor Relations Contacts: Howard Thill 713-296-4140
Chris Phillips 713-296-3213
Michol Ecklund 713-296-3919
Select Operating and Financial Data (unaudited)
3Q 2Q July - Aug 3Q
2007 2008 2008 2008
Actual Actual Actual Actual
Exploration and Production
Net Sales (1)
Domestic - Liquid Hydrocarbons
(MBPD) 63 63 71 --
Domestic - Natural Gas (MMCFD) 464 431 429 --
International - Liquid
Hydrocarbons (MBPD) 136 119 178 --
International - Natural Gas
(MMCFD)(2) 567 573 458 --
MBOEPD(1) 371 350 397 --
Market Prices
NYMEX prompt WTI oil price
($/BBL) 75.15 123.80 125.28 118.22
Dated Brent oil price ($/BBL) 74.74 121.18 123.56 115.09
HH prompt natural gas price
($/MMBTU) 6.17 11.32 9.81 9.13
HH bid week natural gas price
($/MMBTU) 6.16 10.94 11.17 10.25
Average Realizations(3)
Liquid Hydrocarbons:
Domestic ($/BBL) 63.53 109.85 112.86 --
International ($/BBL) 70.37 112.99 121.48 --
Natural Gas:
Domestic ($/MCF) 5.14 8.66 8.75 --
International ($/MCF) 2.38 2.58 3.12 --
Oil Sands Mining
Net bitumen production (MBPD)(4) -- 24 27 --
Net synthetic crude sales (MBPD)(4) -- 31 32 --
Synthetic crude average realization
($/BBL) (3) -- 116.40 121.66 --
Refining, Marketing and
Transportation
Chicago LLS 6-3-2-1 crack
spread ($/BBL) 10.51 2.71 3.82 7.81
Gulf Coast LLS 6-3-2-1 crack
spread ($/BBL) 6.01 1.99 2.00 6.32
Chicago LLS 3-2-1 crack spread
($/BBL) 16.77 10.32 8.83 13.75
Gulf Coast LLS 3-2-1 crack
spread ($/BBL) 11.22 9.33 6.32 11.88
Sweet/sour differential
($/BBL) (5) 9.06 13.74 11.48 11.38
Refinery Runs:
Crude oil refined (MBPD) 1,042 1,023 971 --
Other charge & blend stocks
(MBPD) 199 180 184 --
Total (MBPD) 1,241 1,203 1,155 --
Crude oil capacity utilization
(%)(6) 107 101 96 --
Refined product sales volumes
(MBPD)(7) 1,440 1,369 1,393 --
Refining & wholesale marketing
gross margin ($/gal) (8) 0.1717 0.0835 0.1632 --
SSA gasoline and distillate
sales (MMGal) 892 788 542 --
SSA gasoline and distillate
gross margin ($/gal) 0.1103 0.0862 0.1645 --
SSA merchandise gross margin
($million) 191 181 135 --
Integrated Gas
Sales Volumes (MTPD)(9)
LNG 6,137 6,402 5,637 --
BBL - barrel MBPD - thousand barrels MMCFD - million cubic
per day feet per day
MMBTU - million MMBPD - million barrels MTPD - metric tonnes
British Thermal per day per day
Units
MCF - thousand gal - gallons MMGal - million gallons
cubic feet
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.
SOURCE Marathon Oil Corporation
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Related links:
http://www.marathon.com/
Photo Notes:
NewsCom: http://www.newscom.com/cgi-bin/prnh/20051027/DATH029LOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
CONTACT:
Media Relations: Lee Warren, +1-713-296-4103,
Paul Weeditz, +1-713-296-3910, Investor Relations Contacts:
Howard Thill, +1-713-296-4140, Chris Phillips, +1-713-296-3213,
Michol Ecklund, +1-713-296-3919, all of Marathon Oil Corporation
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