OSU Energy Conference The Benefits of Demerging

Transcription

1 OSU Energy Conference The Benefits of Demerging April 17, 2012 Howard J. Thill VP Investor Relations & Public Affairs

2 Forward-Looking Statement Except for historical information, this presentation contains forward-looking information including, but not limited to, the timing and levels of the Company's worldwide liquid hydrocarbon and natural gas production, synthetic crude production, the Eagle Ford, Anadarko Woodford, Bakken, DJ Basin (Niobrara), Oil Sands Mining, Angola and other existing and potential development projects, anticipated future exploratory and development drilling activity, the possibility of a new significant resource base in Kurdistan, the capital spending forecast, and expectations of reserve replacement. 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, has included in its Annual Report on Form 10-K for the year ended December 31, 2011, 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. 2

3 Established in 1887 Global Independent E&P Employees: ~3,300 Headquartered in Houston, Texas Focused on: Safety Profitable growth Liquids-rich resources Social responsibility 3

4 Announced Spin-offs ITT (Defense, Water and Engineered products) Motorola ConocoPhillips (Upstream and downstream) Williams (Pipelines and E&P) Valero (NuStar) Sunoco (SunCoke) Abbott Expedia (TripAdvisor) 4

5 Anticipated Spin-off Benefits Enhanced flexibility to pursue tailored strategies - each company will have a greater ability to make business and operational decisions in the best interests of its business and to allocate capital and corporate resources with a focus on achieving its own strategic priorities Expanded growth opportunities a more focused business strategy will result in an expanded portfolio of attractive growth opportunities for each company Strengthened ability to attract and retain talent more focused business models will enhance each company s ability to attract and retain individuals with the appropriate skill sets as well as to better align compensation and incentives with the performance of these different businesses Superior transparency improved investor focus as independent energy companies, analysis and investment decisions will be more transparent, allow for more specific comparisons against peers, competitors, benchmarks and performance metrics and thus facilitate evaluation assessments which will likely make the two companies appeal to different sets of shareholders seeking to invest in specific segments of the oil and gas industry 5

6 Typical Objectives and Hurdles Two strong, investment grade companies Credit rating agencies Each with sufficient liquidity and financial flexibility to pursue their strategic objectives Division of assets, including cash Spin-off intended to be tax-free to the corporation and domestic shareholders IRS private letter ruling Separation of non-operating assets IT, telecommunications HR, including employee tracking and payroll systems Other corporate services, Accounting, Legal, HES, IR/PA, etc Corporate offices 6

7 Marathon Oil - Pre June 30, 2011 Fourth largest U.S. based integrated oil Fifth largest refining operation Estimated upstream production growth 3-5% CAGR Invested in major downstream projects 7

8 National Oil Companies 8

9 National Oil Companies Russia Iran Saudi Arabia Canada Qatar Iraq United Arab Emirates Venezuela Kuwait Nigeria United States Libya Kazakhstan Algeria China Azerbaijan Exxon Mobil Brazil Angola Mexico Proven Reserves, BBOE Source: 2011 World Fact Book 9

10 Integrated Oils Market Cap - $ Billions ExxonMobil 387 Shell 208 Chevron 201 BP 134 Total 114 ConocoPhillips (but not for much longer) 94 Marathon Oil + Marathon Petroleum 35 Hess 19 * Source: Factset at close of business April 10,

11 Writing the Next Chapter for The Ohio Oil Company Spun off Marathon Petroleum Corporation June 30, 2011 Well positioned versus peers Strong balance sheets Experienced and focused management teams Enhanced flexibility to pursue tailored strategies Expanded growth opportunities Superior transparency improved investor focus 11

12 Independent E&P s Market Cap - $ Billions Oxy 73 Anadarko 38 Apache 36 Devon 28 EOG 28 Marathon Oil 21 Hess 19 Noble 17 Chesapeake 14 Encana 13 Talisman 13 Murphy 10 * Source: Factset at close of business April 10,

13 High Liquids Content 2011 Liquids as % of Total Production High leverage to liquids Source: Company annual reports Includes OSM results for applicable companies Comparator group contains: APA, APC, CHK, DVN, ECA, EOG, HES, MRO, MUR, NBL, OXY, TLM 13

14 Very Competitive E&P Cost Structure MRO #6 on Total Expenses MRO #1 on Total Expenses excluding non-cash items High leverage to liquids Competitive cost structure Total Expense = Production + S&H + Exploration + DD&A expense + Taxes other than income Source: Company annual reports. Oil/Gas ratio of 6:1 Excludes OSM results from applicable companies Comparator group contains: APA, APC, CHK, DVN, ECA, EOG, HES, MRO, MUR, NBL, OXY, TLM Total Expense excluding non-cash items = Production + S&H + Exploration expense + Taxes other than income Source: Company annual reports. Oil/Gas ratio of 6:1 Excludes OSM results from applicable companies Comparator group contains: APA, APC, CHK, DVN, ECA, EOG, HES, MRO, MUR, NBL, OXY, TLM 14

15 High Income per Barrel Business 2011 Income per BOE High leverage to liquids Competitive cost structure Fourth highest income per BOE Source: Company annual reports Includes OSM results and excludes R&M income and discontinued operations from applicable companies Comparator group contains: APA, APC, CHK, DVN, ECA, EOG, HES, MRO, MUR, NBL, OXY, TLM 15

16 Continued Focus on Returns 2011 ROCE High leverage to liquids Competitive cost structure Fourth highest income per BOE Liquids focus and high income per BOE drive strong ROCE Source: Company annual reports Includes OSM results and excludes R&M income and discontinued operations from applicable companies Comparator group contains: APA, APC, CHK, DVN, ECA, EOG, HES, MRO, MUR, NBL, OXY, TLM 16

17 Analysis of Investment Style CURRENT BREAKDOWN OF PORTFOLIO TURNOVER (% of Institutional Shares) HISTORICAL BREAKDOWN OF PORTFOLIO TURNOVER (% of Institutional Shares) 35.0% Specialty 12.8% GARP 8.4% Growth 26.2% 30.0% 25.0% 20.0% Income 7.2% 15.0% 10.0% Value 23.2% Index 22.2% 5.0% 0.0% Growth Index Value Specialty GARP Income 12/31/2010 3/31/2011 6/30/2011 9/30/2011 NOTE: The style breakdown of MRO reflects a detailed shareholder breakout of MRO s institutional style all the way down to the mutual fund level. Mutual fund positions are cut off at 100,000 shares and the remaining institutional position is assigned the firm s designated general style. Smaller institutional positions are cut off at 100,000 shares as well. -Value investors include Deep Value and Core Value -Income investors include Yield and Income Value -Growth Investors include Growth, Core Growth and Aggressive Growth -Specialty is comprised of VC/Private Equity, Broker-Dealer, Sector Specific and Hedge Fund 17

18 Investor Styles of E&P Peers Most recent filings February 16, % A B MRO C D E F G H Value Speciality/Other Index Income/Yield Hedge Fund Growth GARP Source: Morgan Stanley 18

19 MRO Investor Styles % Q Q Q Q Q Value Speciality/Other Index Income/Yield Hedge Fund Growth GARP Source: Morgan Stanley 19

20 Marathon Oil A Strong New E&P Company Strong and stable base assets generate significant cash 2011 Net cash provided by continuing operations - ~$5.4 B 2011 Proved reserves BBOE, 75% liquids Profitable growth in reserves and production 5-7% CAGR Low risk growth ~80% liquids and driven by US resource plays 2011 to 2012 Projected ~5% growth excluding Libya Impact exploration provides significant upside potential Focused on total shareholder return Top quartile execution Capital discipline 20

21 Strong Base Assets and Growth Portfolio Liquids Gas Base Assets Growth Assets * Production = Available for Sale 21

22 Growth Assets Significant Low Risk Production Growth >50% CAGR ~80% Liquids CAPEX $3.0B - $3.8B per year 22

23 Exploration Drilling The Gulf of Mexico has a portfolio of 20 prospects for drilling multiple opportunities Kurdistan has a portfolio of seven very large exploration prospects defined on four existing blocks Poland is a large frontier play with shale gas potential CAPEX ~$0.5B* per year GOM 4 Wells, 3 appraisals 2012 Drilling Program Poland 6 Wells Kurdistan 3 Wells, 2 appraisals * Does not include exploration/exploitation in base assets or growth assets, or development capital for exploration success 23

24 Marathon Oil Driving Shareholder Value Close Hilcorp Eagle Ford acreage transaction and begin ramp-up Strong 2011 reserve replacement Increased rig activity in U.S. resource plays Exploration drilling Resumed Gulf of Mexico Continued Kurdistan Initiated Poland Anticipate 2012 reserve replacement >150%, excl acquisitions & divestitures First production Angola Block 31 PSVM 2 nd half 2012 Full year AOSP base plus expansion Net production up 5% excluding Libya Focus and Execute to deliver consistent top quartile results 24

25 MRO Stock Performance Full Year % 30% 20% 10% 0% -10% -20% -30% -40% -50% MRO NBL EOG APC OXY Peer Average CHK DVN APA MUR HES ECA TLM MRO adjusted for downstream spinoff 25

26 MRO Post Spin Stock Performance July 1, 2011 through April 9, % 0% -10% -20% -30% -40% -50% NBL EOG APC MRO DVN OXY Peer Average MUR APA HES CHK TLM ECA 26