Bernstein s Strategic Decisions Conference

Transcription

1 Bernstein s Strategic Decisions Conference May 29, 2008 Clarence P. Cazalot, Jr. President and CEO

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 and condensate production, net bitumen production, the Alvheim / Vilje, Neptune, Volund, Corrib, Droshky and other potential development projects, exploration and drilling plans, quantities of proved reserves, projected growth in total resource base, possible expansion of the LNG project, expansion plans for Libya, the Garyville major expansion project, the Detroit heavy oil upgrade project, the Gas-to-Fuels TM technology, projected capital, investment and exploration spending, and the common stock repurchase program. 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 total resources, resource base 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 Well Positioned For Value Creation Marathon s largest resource* base ever (6.6 BBOE) 2 * Includes Upstream and Oil Sands Mining. Definitions in Appendix.

4 Increased Resource Base Upstream and Oil Sands Mining Resource growth drives future reserve additions 3 Definitions in Appendix.

5 Well Positioned For Value Creation Marathon s largest resource* base ever (6.6 BBOE) Year-end 2012 proved reserves* will be ~15% > * Includes Upstream and Oil Sands Mining.

6 Well Positioned For Value Creation Marathon s largest resource* base ever (6.6 BBOE) Year-end 2012 proved reserves* will be ~15% > 2007 Top-quartile production* growth through * Includes Upstream and Oil Sands Mining.

7 Global Portfolio of Development Projects Canada COS mining COS In-situ Ireland Corrib Norway Alvheim Vilje Volund Gudrun Onshore US Bakken Piceance Powder River Seminole ROZ 6 Gulf of Mexico Arnold Neptune Droshky Ozona Stones Central Africa EG LNG Train 1 Angola BL 31 NE Angola BL 31 SE Angola BL 31 Mid Angola BL 32 East Libya Dahra Jofra Faregh Phase II II NC-98 North Gialo Production Exploration / exploitation COS in-situ operations

8 Upstream Development Project Start-Ups Alba Dev. EG LNG 1 Arnold Seminole ROZ Block 31 NE Alvheim Volund Corrib Neptune Droshky Vilje Faregh II Ozona Delivered In Development 7

9 U.S. Bakken Shale Unconventional Resource Development Saskatchewan, Canada MONTANA NORTH DAKOTA Odysseus Cassandra Cazador Williston Myrmidon Yellowstone Paris Hector Ajax Marfa Blacktail Dickinson MRO acreage Areas of focus Average 85% WI ~320,000 Net acres 400 Potential well locations (gross) > 100 MMBOE net resource 6 Rigs currently running Going to 8 rigs in 2008 Drilling ~60 wells in 2008 Production (net): Current: 4.6 MBOED 2008 Exit rate: 6-7 MBOED Peak rate: ~20 MBOED (2012) 8 Definitions in Appendix.

10 U.S. Bakken Shale Hector / Ajax Core Area, Dunn County, ND Targeting middle Bakken 1,280 Acre drilling units 5.7 MMBOE / unit 2 Wells / unit Recovery factor ~6% / well Hector ~300 Well locations 45 Wells drilled to date Ajax Dunn County Expected well performance IP ~300 BOED gross EUR ~340 MBOE gross Existing well Future well Upside potential: 1-2 additional wells per drilling unit 9 Definitions in Appendix.

11 U.S. Piceance Basin Basin-centered gas development 100% WI ~9,000 Net acres Potential well locations BCF net resource 4 Rigs currently running Drilling 80 wells in 2008 MRO acreage Existing production Production (net): Current: 4 MMCFD 2008 Exit rate: MMCFD Peak: ~170 MMCFD ( ) 10 Definitions in Appendix.

12 U.S. Piceance Basin Development Status 21 Wells drilled with 4 completed Utilizing fit-for-purpose self-skiddable rigs D&C costs: ~$2.8MM / well (targeting ~$2.4MM / well) Well performance Encountering ~1,800 gross gas interval IPs: MMCFD gross (exceeding expectations) Expected recovery: 1.2 BCF / well gross Water Bearing Sands STAGE 8 STAGE 7 STAGE 6 Top Williams Fork 100% 515 Nearest wells STAGE 5 Cumulative Probability Marathon wells 75% 50% 25% 0% ,100 1,300 1,500 1,700 1,900 STAGE 4 STAGE 3 STAGE 2 STAGE 1 11 Definitions in Appendix. IP (MCFD) Base Williams Fork

13 Neptune Development 30% WI > 30 MMBOE net resource 14 MMBOE booked as proved Mini-tension leg platform 4,300 Water depth 4 Drill centers - 6 subsea wells 6,200 Water depth Start-up anticipated late 2Q Acreage Development Marco Polo K2 Mad Dog Shenzi Atlantis Neptune 30% WI Ozona Perseus NEPTUNE AREA Edge of Salt 12 Definitions in Appendix.

14 Droshky Development 100% WI MMBOE gross resource Development concept Subsea tie back to host facility PHA terms in place Potential 4-6 development wells Progressing FEED Successful appraisal well Additional deeper pay intervals Long-lead items being procured Secured rig for development drilling Project sanction expected 2008 First production Bullwinkle Aspen Troika Brutus Droshky Green Canyon 244 ~2,900 WD 13 Definitions in Appendix.

15 Alvheim / Vilje Development Alvheim ~65% WI / operator Vilje 47% WI ~150 MMBOE net resource 80 MMBOE booked as proved FPSO in place, commissioning continues First production in May 7 Wells ready 3 Wells to be drilled in 2008 Peak net production ~75 MBOED by early 2009 ~$1.2B Norwegian tax loss carry-forward Definitions in Appendix.

16 Volund Development 65% WI / operator ~30 MMBOE net resource 7 MMBOE booked as proved Tie back to Alvheim 3 Production wells 1 Injection well Rig secured Long-lead items ordered Commenced construction First oil planned 2009 Boa Alvheim FPSO Kameleon Kneler Volund East Kameleon Vilje 15 Definitions in Appendix.

17 Libya Waha Concessions 16.33% WI ~6.5% Net revenue margin terms Producing ~345 MBOED gross Significant development and exploration potential Faregh Phase II - being implemented; first production 2010 North Gialo - feasibility studies; first production post-2012 NC-98 - feasibility studies; first production post-2012 Dahra Jofra - secondary recovery pilot being evaluated Gross Production (MBOED) Base Growth Potential MBOED gross in ~10 yrs

18 Angola Development Opportunities Block 31 10% WI Block 32 30% WI Discovered > 400 MMBO net resource 4 Potential development areas Block 31 NE 6,500 Water depth Conversion FPSO 150 MBD annual avg capacity Sanction 2008 First production Feasibility studies underway Block 31 NE Development Area Terra BLOCK 31 Portia 10% WI Miranda Cordelia Potential Mid Development Area Potential SE Development Area BLOCK 32 30% WI Potential Eastern Development Area Marte Venus Plutao Titania Urano Saturno Ceres Hebe Palas Colorau Manjericao Juno Alho Caril Astraea Canela Gengibre Mostarda Louro Salsa MRO acreage Oil discovery Cominhos Gindungo 17 Significant production potential 2012+

19 Oil Sands Mining Net Bitumen Production Profile Future Expansions MBD Expansions 2 & 3 Expansion 1 - Under construction Muskeg River Mine Long-lived, secure resource 18

20 Production Upstream and Oil Sands Mining CAGR: ~7% Medium Term Key Projects: EG LNG Train 1 Alvheim / Vilje Neptune Volund Long Term Key Projects: Angola BL 31 NE AOSP Expansion 1 Corrib Droshky Libya major projects Ozona CAGR: : ~10% 19 Note: Excludes potential asset acquisitions/divestitures and potential future exploration success.

21 Well Positioned For Value Creation Marathon s largest resource* base ever (6.6 BBOE) Year-end 2012 proved reserves* will be ~15% > 2007 Top-quartile production* growth through 2012 Building production* growth beyond * Includes Upstream and Oil Sands Mining.

22 Post 2012 Growth Projects Ongoing Angola developments / Blocks 31 and 32 Gudrun - Norway Libya growth Oil Sands Mining - Canada Stones - GOM Potential LNG Train 2 - EG Future exploration success - GOM, Norway & Indonesia Gas-to-Fuels TM In-situ - Canada 21

23 Exploration Track Record 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% Pipeline for future reserve adds, < 10% moved to proved 22 Note: Excludes exploitation activities. Definitions in Appendix.

24 Expected Production Adds From Exploration Discoveries Exploration discoveries add near- and long-term production 23

25 Planned Exploration Activities Norway / United Kingdom ( 7-8 wells ) Lower 48 Exploitation ( wells ) Ukraine (0-5 wells) Libya ( wells ) Indonesia ( 4 wells ) Gulf of Mexico (8-9 wells ) Angola ( 7-12 wells ) Add to existing core areas Build new core areas 24 Possible new entry

26 U.S. Gulf of Mexico Past Results and Future Plans Past results Petronius Perseus 5 Discoveries Ermine Andromeda Rebuilt inventory 27 Blks at Oct 07 sale 15 Blks at Mar 08 sale 3 + Years drilling opportunities Troika Lobster Droshky Raptor Plan forward Black Pearl Producing or discovery well Drill ~3 wells / year Stones appraisal drilling Ozona Neptune Potential 2008 exploration well Continue to grow portfolio Jack Discovery Stones 2 Rigs under contract Stones SW Shelf Deepwater Focus Area Focus on near-term Miocene plays 25

27 U.S. Gulf of Mexico Stones Appraisal Program 25% WI Lower Tertiary discovery 3 miles Appraisal location Stones Successful appraisal well Salt edge Multiple hydrocarbon-bearing intervals Very large structure Discovery well Next steps Sidetrack appraisal well Well test and / or SW prospect Stones SW SW prospect Shelf Deepwater Stones Potentially large discovery in Lower Tertiary trend 26 Definitions in Appendix.

28 Norway Past Results and Future Plans U.K. Norway Vale Vilje Peik Boa Kameleon Heimdal Deep Alvheim Kneler South Kneler Volund Alvheim South Gekko Viper Ibsen Byggve Skirne Byggve South East Heimdal Past results 5 Discoveries (6 wells) 5 Prospects drill ready Future plans Rig capacity secured Drill 5 Alvheim satellite prospects late 2008 / 2009 Add acreage for new core area Development or producing Marihoene A & B Low risk prospect / discovery Higher risk prospects or marginal discovery Pipelines Goal: Add > 20 MBOED net to Alvheim via satellites 27

29 Indonesia Building a New Core Area Pasangkayu Block 70% WI / operator Acquiring 3-D seismic Operator of 2-year deepwater rig consortia (drill 2009 / 2010) Significant leverage Potential reduction to 55% WI Study Agreements Provides ROFR on other acreage First acreage offered ~2008 / Definitions in Appendix.

30 Canada In-situ Projects 80% of Canadian oil sands too deep to mine MRO in-situ resource ~600 MMBO Namur Ells River Birchwood Ells River Namur 29 3 Project areas Ells River Appraisal drilling ongoing 20% WI Birchwood Appraisal drilling 100% WI Namur Evaluating appraisal program WI ~60% (operator) Definitions in Appendix. Fort McKay Birchwood Significant resource potential with technology advancements Fort McMurray ALBERTA, CANADA Edmonton Calgary

31 Well Positioned For Value Creation Marathon s largest resource* base ever (6.6 BBOE) Top-quartile production* growth through 2012 Year-end 2012 proved reserves* will be ~15% > 2007 Building production* growth beyond 2012 Integrated long-lived asset base provides stability 30 * Includes Upstream and Oil Sands Mining.

32 Equatorial Guinea World-Class Gas Processing Acquired < 40,000 BOE/D Gross Condensate >60,000 B/D Gross LPG >20,000 B/D Gross Methanol >20,000 BOE/D Gross First Cargo 2007 LNG 75,000 BOE/D Gross Total >175,000 BOE/D Gross 31 Capturing the value of gas integration

33 Equatorial Guinea - LNG Train 1 Backfill volume targeted for 2014 Discussions in progress / planned with suppliers Feedstock price anticipated to be higher Minimal Capital Spend required Strong profitability 4 MM Tonnes Per Annum BG Contract 3 TCF certified reserves Train 1 Capacity Definitions in Appendix.

34 Equatorial Guinea - LNG Train MMTPA train Estimated Capital Spend $3B Reserves targeted 4+ TCF Global LNG supply constraint supports economics Project recently boosted by EG Government Marathon lead partner in new consortium Plans to engage suppliers in first half Definitions in Appendix. 33

35 Gas-to-Fuels TM Marathon Proprietary Technology Direct (catalytic) conversion of natural gas 110+ octane gasoline; diesel Significant cost advantage to current GTL processes (no syngas step) The GTF TM advantage Cheaper to build / operate Higher carbon-conversion efficiencies Wider resource size range applications (500 BCF+) Base patent received 2007 Demonstrated operations 2 years of lab and pilot tests 10 BD demo plant under construction Demo plant operations / commerciality decision 2008 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 A technology differentiator 34 Source: Morgan Stanley, Marathon.

36 Well Positioned For Value Creation Marathon s largest resource* base ever (6.6 BBOE) Top-quartile production* growth through 2012 Year-end 2012 proved reserves* will be ~15% > 2007 Building production* growth beyond 2012 Integrated long-lived asset base provides stability Strengthening refining / midstream asset base 35 * Includes Upstream and Oil Sands Mining.

37 Increasing Diesel Production Distillate Production as % of Crude Throughput Growth Marathon = 3.7% Industry = 1.9% Closing the gap in distillate production 36 Source: EIA for industry average.

38 Building Margin Through Coking Additions More than doubling coking capacity MBD 37 Coking capacity leads to lower feedstock costs

39 Garyville Major Expansion - 180,000 B/D Projected $3.2 Billion project 4Q 2009 start-up Leverages our most efficient and profitable downstream asset Ability to process wide crude slate ~47% complete On time and budget 38

40 Garyville Major Expansion Case Alternative Case WTI Price $31 $60 USGC WTI Crack Spread $4.70 $9.25 Mars / WTI differential $4.30 $6.30 Maya / WTI differential $7.90 $13.75 Incremental average annual after tax Net cash flow (2010+) $350 MM $600 MM Income (2010+) $225 MM $475 MM 39

41 Detroit Heavy Oil Upgrade Project $1.9B project Crude capacity increases 15 MBD 28 MBD delayed coker 33 MBD distillate hydrotreater Sulfur recovery complex Increases heavy oil capacity 80 MBD 40

42 Midstream Advantage 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 41 Pipelines Inland water terminal Coastal water terminal

43 Positioned for Ethanol Growth Primary ethanol production area Target area for ethanol market penetration MRO terminals Rail lines 42

44 Well Positioned For Value Creation Marathon s largest resource* base ever (6.6 BBOE) Top-quartile production* growth through 2012 Year-end 2012 proved reserves* will be ~15% > 2007 Building production* growth beyond 2012 Integrated long-lived asset base provides stability Strengthening refining / midstream asset base Sound financial position to fund growth 43 * Includes Upstream and Oil Sands Mining.

45 Net Debt to Total Capital Ratio Year-end *Assumptions First Call estimates March 13, 2008 No asset sales Complete stock buy-back in 2009 Built-in dividend increases Trend Flexibility to fully fund capital program 44 Definitions in Appendix.

46 Well Positioned For Value Creation Marathon s largest resource* base ever (6.6 BBOE) Top-quartile production* growth through 2012 Year-end 2012 proved reserves* will be ~15% > 2007 Building production* growth beyond 2012 Integrated long-lived asset base provides stability Strengthening refining / midstream asset base Sound financial position to fund growth Asset review underway to enhance shareholder value 45 * Includes Upstream and Oil Sands Mining.

47 Total Shareholder Return December 2004 to December Year Total Shareholder Return 46 Marathon s average closing stock price for December 2004 was $18.60 (on a post-split basis) and the average closing stock price for December 2007 was $ Definitions in Appendix.

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