Goldman Sachs Global Energy Conference. January 14-15, 2009

Transcription

1 Goldman Sachs Global Energy Conference January 14-15, 2009

2 Forward Looking Statement Except for historical information, this presentation contains forward-looking information with respect to the timing and levels of the company's worldwide liquid hydrocarbon and natural gas production, net bitumen production, the Alvheim/Vilje, Droshky, Angola and other potential development projects, exploration and drilling plans, expansion plans for Libya, expansion plans for oil sands mining, the Garyville major expansion project, the Detroit heavy oil upgrade project, and the Gas-to-Fuels technology. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied from such information. 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. Cautionary Note to U.S. Investors The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. Marathon Oil Corporation uses certain terms in this presentation, such as, resource base, in-situ resource and net resource, that the SEC's guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosures in Marathon's periodic filings with the SEC, available from us at 5555 San Felipe, Houston, Texas and the Company's website at You can also obtain this information from the SEC by calling SEC

3 Focused Integrated RM&T Asset Base Unparalleled Terminal and Pipeline System 7 Refineries; 1,016 MBD Pipeline & barge logistics Enables refineries to operate as single system Destination choice in product markets Efficiency, flexibility, speed Terminal network Critical mass in key markets Key to E-10 expansion Refineries Terminals 3 Pipelines Definitions in Appendix. Inland water terminal Coastal water terminal

4 Geographic Advantage: Midwest Continues Product-Short MMBD 1.0 MMBD Midwest imports must continue despite increased ethanol use and refinery upgrades 4 Source: EIA, Marathon Economics.

5 Garyville Major Expansion - 180,000 B/D Projected $3.35B* project Projected value capitalized ~$2.5B* at 12/31/08 4Q 2009 start-up Leverages our most efficient and profitable downstream asset Ability to process wide crude slate Overall project 70% complete On time 5 *Excludes capitalized interest. Definitions in Appendix. GME crack spread margin expected to approximate Mars

6 Garyville Major Expansion /31/08 Average Case Average YTD Mars Price $47.70 $93.95 Mars / WTI differential $5.80 $6.11 Mars Crack Spread $16.20 $19.65 Incremental average annual after tax Project contribution to: Cash flow (2010+) Profit (2010+) $575 MM $450 MM 6 6 Definitions in Appendix.

7 Detroit Heavy Oil Upgrade Project Similar product yield lower feedstock costs Projected $1.9B* project Projected value capitalized ~$500MM* at 12/31/08 Commenced construction July 2008 Increases heavy oil feedstock 80 MBD Evaluating timing of project completion *Excludes capitalized interest. 7 Definitions in Appendix.

8 GME Drives Diesel Production Increase Distillate Production as % of Crude Throughput Distillate Yeld (% of Crude) Growth Marathon = 3.7% Industry = 1.9% Industry Average Marathon Closing the gap in distillate production 8 Source: EIA for industry average. Definitions in Appendix.

9 GME / DHOUP Lower Feedstock Cost MBD More than doubling coking capacity Definitions in Appendix.

10 Positioned for Ethanol Growth Primary ethanol production area Target area for ethanol market penetration Capacity to blend 1.2 billion gallons of ethanol per year MRO terminals Rail lines 10 Definitions in Appendix.

11 Strong Retail Position 4,400 Marathon dealer / jobbers 1,600 SSA company owned / operated Assured volumes Operating efficiency Potentially significant RFS compliance advantage 11 Definitions in Appendix.

12 Upstream Multifaceted production/value growth Conventional Oil and Gas Resource Plays Oil Sands Deepwater Exploration Integrated Gas 12

13 Conventional Oil and Gas Norway / UK / Ireland Lower 48 Libya Gulf of Mexico EG / Gabon 13

14 Successful Exploration Program Net Resources Added ~860 MMBOE 2007 ~190 MMBOE Finding Cost ~$2.10 / BOE ~$2.85 / BOE # of Significant Discoveries 43 8 Exploration / Appraisal Success Rate ~60% ~57% 2008 success rate 63% from 8 wells 14 Note: Excludes exploitation activities. Definitions in Appendix.

15 Norway: Alvheim / Vilje Development High margin impact volumes Alvheim ~65% WI / operator Vilje 47% WI ~150 MMBOE net resource 90 MMBOE booked as proved Reached nameplate capacity of 120 MBOED gross (75 MBOED net) in 80 days 10 Wells completed Additional wells to be drilled Strong margins Definitions in Appendix.

16 Norway: Alvheim Satellites Low-risk Phased Developments Volund under development 65% WI / operator ~30 MMBOE net resource 7 MMBOE booked as proved First oil planned 2009 Low-risk exploration 5 Alvheim satellite prospects Commence drilling 2009 Rig capacity secured First production 2013/2014 Boa Volund Marihoene A & B U K Kameleon N O R W A Y Alvheim Kneler Viper South Kneler Vilje South Gekko Development or producing Pipelines Low risk prospect 16 Definitions in Appendix.

17 GOM - Droshky Development Green Canyon Block % WI* Bullwinkle Potential pipeline Subsea tie back to Bullwinkle 4 development wells Peak ~52 MBOED First production mi 14 mi Droshky Troika MRO Acreage Oil Development 17 *Excludes royalty adjustments. Definitions in Appendix.

18 Libya Waha Concessions 16.33% WI ~6.5% Net revenue margin terms Producing capacity ~360 MBOED gross Significant development and exploration potential 18

19 Bakken Shale Unconventional Resource Development Net Production Growth (MBOED) ~320,000 Net acres > 100 MMBOE net resource 4 Operated rigs currently running Net peak rate: ~20 MBOED (2012) Definitions in Appendix.

20 Emerging Resource Plays UK coal seam gas 260,000 net acres Marcellus shale (WV, PA) 65,000 net acres Haynesville shale (LA, TX) 25,000 net acres Woodford shale (OK) 30,000 net acres U N I T E D S T A T E S Upside to current resource base 20 Definitions in Appendix.

21 Oil Sands Mining Portfolio World-Class Project Athabasca Oil Sands Project % Interest 300,000+ gross acres Net resource ~2 B barrels bitumen Current net production capacity ~30 MBD Series of planned expansions Growth potential to ~130 MBD by 2020 with expansions ALBERTA C A N A D A Muskeg River Mine Expansion 1 Long-lived, secure North American resource 21 Definitions in Appendix.

22 Canadian In-situ High Potential In-situ (E&P) Undergoing appraisal Net resource increased from 600 MMBO at YE 2007 to ~1.5B barrels currently Birchwood (100% WI) First production Namur Ells River Fort McKay Future Exp FutureExp Base + Exp 1 Ells River (20% WI) Birchwood Namur (~60% WI / operator) C A N A D A ALBERTA 22 Definitions in Appendix.

23 Deepwater Exploration Indonesia Gulf of Mexico Angola 23

24 Deepwater Angola Large Discovered Resource Block 31, 10% WI Block 32, 30% WI Results Announced 28 discoveries 1 Approved development 3 Potential additional developments 3 Exploration wells at TD yet to be announced Discovered > 400 MMBO net resource Exploration / appraisal plans 1 Rig currently drilling Shift focus from exploration to development BLOCK 31 10% WI Terra Miranda Venus Portia Cordelia BLOCK 32 30% WI Potential Eastern Development Area Marte Plutao Saturno Titania PSVM Development Area Ceres Hebe Potential Mid Development Area Juno Urano Astraea Dione Palas Alho Colorau Manjericao Gengibre Louro Cominhos Caril Mostarda MRO acreage Potential SE Development Area Gindungo Canela Salsa Oil discovery New core area with queue of development projects 24 Definitions in Appendix.

25 Gulf of Mexico Multi-Year Exploration Program Rebuilt inventory 27 Blks at Oct 07 sale 15 Blks at Mar 08 sale 3 + Years drilling opportunities Interest in 24 prospects Plan to operate ~50% Avg WI 67% Drilling plans Drill ~3 wells / year 2 Rigs under contract Shelf MRO acreage Producing or discovery well High quality prospects Deepwater Miocene Trend Lower Tertiary 40 Miles Ozona Shenandoah Solomon Cedar Smuggler Shiner Black Pearl Stones SW Jack Discovery Catalina Droshky Stones Daytona Mandalay Neptune Andromeda Focus Area Raptor Madagascar Freedom Mavericks Focus on near-term Miocene plays 25

26 U.S. Gulf of Mexico Stones Appraisal Program Walker Ridge Block 508 Discovery 25% WI Very large structure Across 9 blocks Lower Tertiary discovery Successful appraisal well Multiple hydrocarbon-bearing intervals 2009 Next steps Well test and / or SW prospect MRO acreage Discovery Prospect Salt Edge Stones SW Discovery Well Appraisal Well Stones Large potential development in Lower Tertiary trend Stones 26 Definitions in Appendix.

27 Indonesia Exploration High Potential Acreage Pasangkayu Block K A L I M A N T A N 70% WI / operator Kutei Basin ~15 billion boe Acquired 3-D seismic 2008 Potential promote Bone Bay Block Pasangkayu Block S U L A W E S I 49% WI / operator 2009 acquire seismic Operator of 2-year deepwater rig consortia Area Shown Bone Bay Block Kilometers 300 Additional highimpact opportunities I N D O N E S I A 27 Definitions in Appendix.

28 Integrated Gas EG LNG and Methanol Stable, long-lived income stream World-class scale 3.7 MMTPA LNG plant 60% Ownership >1 MMTPA methanol plant 45% Ownership LNG operating at ~98% of capacity as of 9/30/ EG LNG & Methanol Income from Equity Method Investments $345 $MM 200 $ Definitions in Appendix $ /30/08 YTD

29 Gas-to-Fuels TM Marathon Proprietary Technology Direct (catalytic) conversion of natural gas The GTF TM advantage Lower cost 110+ octane gasoline Higher carbon-conversion efficiencies Patents in hand Number of Fields >13,800 Gas-to-Fuels (GTF TM ) LNG, GTL <0.25 >0.5 >1 >5 >50 Resource Size, TCF Majority of opportunities exist at scales below GTL and LNG Demonstrated operations 2 years of lab and pilot tests Commissioning 10 BD demo plant Expect commerciality decision mid Source: Morgan Stanley, Marathon.

30 Resource Base Tripled in 6 Years E&P and Oil Sands Mining 6.6 North America Europe BBOE 5.0 Africa 1.6 Proved Unproved YE production ~13% of resource base 30 Definitions in Appendix.

31 Delivering Shareholder Value Solid financial position 3Q Net debt to total cap ratio 23% Qtr end cash and cash equivalents: $1.5B Net Debt to Cap Ratio & Cash + Cash Equivalents Net Debt to Cap Ratio Cash + Cash Equivalents Metric ($ MM) As at Sept 30, Q YTD Net Debt to Cap % $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 Cash + Cash Equivalents Billions Op Cash Flow Op Cash Flow bf Changes in Working Capital Capital Expenditures Dividends 1,852 2,693 1, ,807 5,564 5, Q Q Q Q Q Q Q 2008 $0.0 Share Repurchase

32 Appendix

33 Definitions Term $ AOSP BBOE BCF BOE CAGR Cap & Expl Spend Debt DHOUP E-10 EG Exploration Spending Finding Costs Definition U.S. dollars unless otherwise indicated. Athabasca Oil Sands Project, a Canadian oil sands operation owned by Shell (60%), Chevron (20%), and Marathon (20%). Billion barrels of oil equivalent. Billion cubic feet. Barrel of oil equivalent. Compound annual growth rate, which is the annual growth rate calculated based on each year's previous number anchored to a base starting point. Capital expenditures, cash investments in equity method investees, exploration costs that are expensed as incurred rather than capitalized such as geological and geophysical costs and certain staff costs, and other miscellaneous investment expenditures. See slide 70 for reconciliations to GAAP. Calculated as follows: (Long-term Debt + Short-term Debt including commercial paper). Detroit Heavy Oil Upgrade Project. A fuel mixture of 10% ethanol and 90% gasoline. Equatorial Guinea. Total exploration costs including staff, seismic, drilling, etc., excluding exploitation. A non-gaap measure calculated as follows: (Net Resources Discovered) (Total Marathon Exploration Spending). 33

34 Definitions 34 Term FPSO GME GOM GTF TM GTL LNG MBD MBOED MM MMBD MMBO MMBOE MMCFD MMTPA MRO Net Debt to Total Capital Ratio Net Risked Resource Definition Floating production, storage and offloading vessel. Garyville Major Expansion project. Gulf of Mexico. Gas-to-fuels TM, a Marathon-proprietary gas-conversion process Gas-to-liquids. Liquefied natural gas. Thousand barrels per day. Thousand barrels of oil equivalent per day. Millions. Million barrels per day Million barrels of oil. Million barrels of oil equivalent. Million cubic feet per day. Million metric tonnes per annum. Marathon Oil Corporation. Calculated as follows: (Cash Adjusted Debt ) (Total Stockholders' Equity + Cash Adjusted Debt). Cash includes trusteed funds from revenue bonds. Calculated as follows: (Proved Reserves+ 70% of Petroleum Resource Management System Probable Resources + 30% of Petroleum Resource Management System Possible Resources).

35 Definitions Term Oil Sands Mining or OSM Production Available for Sale Proved Reserves Reserves Reserve Replacement or RR Resource RFS ROFR TD WTI WI Definition The business segment through which Marathon s oil sands mining results are reported. Marathon holds a 20 percent outside-operated interest in the Athabasca Oil Sands Project, an oil sands mining joint venture located in Alberta, Canada. Production volumes available for sale differs from recorded sales volumes due to the timing of liftings and natural gas held in storage. SEC proved oil and gas reserves and SEC proven mining reserves. SEC proved oil and gas reserves and SEC proven mining reserves. Calculated as follows: (Net Reserve Additions Net Production). As used in this presentation, the term resource means net risked resource, which is calculated as follows: (Proved Reserves + 70% of Petroleum Resource Management System Probable Resources + 30% of Petroleum Resource Management System Possible Resources). Renewable fuels standard, which was amended by the Energy Independence and Security Act of 2007 to require 36 billion gallons of renewable fuels by Right of first refusal. Total depth. West Texas Intermediate crude, a type of crude oil used as a benchmark in oil pricing. Working interest. 35

36 Annual Price and Margin Sensitivities $ Millions (After Tax) Crude Oil Price Sensitivity (E&P + OSM) $50 (per $1.00/barrel change in WTI) Gas Price Sensitivity (E&P + Integrated Gas) $160 (per $1.00/MMbtu change in Henry Hub) Refined Product Wholesale Margin Sensitivity (Downstream) $137 (per $0.01/gallon change) Retail Products Sensitivity (Downstream: SSA Products Margin) $21 (per $0.01/gallon change in light products margin) LLS Crack Spread Sensitivity (Downstream) ~ $280 (per $1.00 change in light products margin*) Sweet / Sour Differential Sensitivity (Downstream) ~ $110 (per $1.00/barrel change) Natural Gas Price Sensitivity (Downstream) ~ $30 (per $1.00/MMbtu change in Henry Hub) 36 * Weighted two-thirds Chicago and one-third USGC LLS crack spreads and assumes all other differentials and pricing relationships remain unchanged.