EX-99.1 2 a05-12176_1ex99d1.htm EX-99.1

Exhibit 99.1

 

MARATHON OIL CORPORATION PROVIDES

SECOND QUARTER 2005 INTERIM UPDATE

 

HOUSTON, July 7, 2005 – Marathon Oil Corporation (NYSE: MRO) today is providing information on market factors and operating conditions which occurred during the second quarter 2005 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 the actual second quarter results. The company will report actual results on July 28. Details concerning the company’s earnings conference call and webcast are noted at the end of this release.

 

Exploration and Production

 

Marathon estimates oil and natural gas production available for sale for the second quarter will be approximately 350,000 barrels of oil equivalent per day (boepd) exceeding the previous guidance of 332,000 to 347,000 boepd. As a result of the timing of international crude oil liftings, production sold during the second quarter is expected to be approximately 365,000 boepd.

 

As shown in the attached table, crude oil and natural gas market price indicators have remained strong during the second quarter. Marathon’s actual crude oil and natural gas price realizations vary from these market indicators primarily due to product quality and location differentials.

 

Estimated second quarter exploration expense remains unchanged from previous guidance at between $35 and $55 million. U.S. exploration expense is estimated to be $20 to $30 million, while international exploration expense is expected to be $15 to $25 million.

 

During the second quarter 2005, the 18-month forward gas price curve in the United Kingdom strengthened compared to the first quarter 2005 resulting in an estimated $167 million, non-cash mark-to-market loss in the second quarter on two long-term gas sales contracts related to Marathon’s Brae gas production.

 

Due to the volatility of the forward gas sales curve in the United Kingdom, Marathon will continue to exclude these non-cash mark-to-market gains and losses related to these United Kingdom contracts from “net income adjusted for special items.”

 

Refining, Marketing and Transportation

 

Market indicators for refining margins (crack spreads) in the Midwest and Gulf Coast strengthened during the quarter as compared to the first quarter 2005 as reflected in the attached table. When compared to the second quarter 2004, the second quarter 2005 crack spread for the Midwest was slightly lower while the Gulf Coast crack spread was higher.

 

Crude run rates remained strong in April and May averaging nearly 1,009,000 barrels per day (bpd). The company estimates that crude runs for the quarter will average approximately 1,010,000 bpd.

 


 

The Speedway SuperAmerica LLC gasoline and distillate gross margin was relatively strong averaging $.1286 per gallon in the first two months of the second quarter 2005, which is higher than both the second quarter 2004 and first quarter 2005. Indications for the month of June are that retail margins softened.

 

Derivative contracts entered into to protect crack spread values are anticipated to generate approximately a $5 million positive income impact for the quarter.  Also benefiting downstream operations, when compared to the same quarter last year, was a widening differential for sour crudes. Approximately 60 percent of the crude oil the company processes in its refineries is sour grade crudes.

 

Due to the increase in the price of crude oil during the quarter, the company will record a crude oil in-transit charge of approximately $20 million in the second quarter of 2005.  This adjustment is related to internationally-sourced crude oil that had not been priced as of the end of the second quarter.

 

Unallocated Administrative Expense

 

Administrative expense for the quarter, excluding costs related to equity based compensation (primarily stock appreciation rights), is now expected to be approximately $70 million versus the previous guidance of $65 million.  Non-cash equity based compensation expense is estimated to be $20 to $25 million for the second quarter. This non-cash expense is a result of the approximately $6.50 per share increase in Marathon’s common stock price during the quarter.

 

Earnings Release Date and Conference Call Information

 

Marathon will report its second quarter 2005 results on July 28, 2005.  The company also will conduct a conference call with analysts on that same day at 2 p.m. EDT.  The call will cover second quarter 2005 financial results and may include forward-looking information.  Interested parties can listen to this call by accessing the Marathon Oil Corporation Web site at www.marathon.com and then clicking on the Second Quarter 2005 Financial Results Conference Call link. Replays of the conference call will be available on the Web site through August 11, 2005. Financial information, including earnings releases and other investor-related material, also is available online.

 

-xxx-

 

This release contains forward-looking statements with respect to the estimated levels of the company’s worldwide liquid hydrocarbon and natural gas production, and estimated exploration expenses, an U.K. mark-to-market loss, crude run rates, downstream mark-to-market derivative gains, losses, crude oil in-transit charges and administrative expenses.  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, 2004, and in 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 Contact:

 

Paul Weeditz

 

713-296-3910

 

 

 

 

 

Investor Relations Contacts:

 

Ken Matheny

 

713-296-4114

 

 

Howard Thill

 

713-296-4140

 


 

Select Operating and Financial Data (unaudited)

(Millions of dollars unless otherwise noted)

 

 

 

2Q
2004
Actual

 

1Q
2005
Actual

 

Apr.-May
2005
Actual

 

2Q
2005
Actual

 

Exploration and Production (E&P)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic – Liquids (MBPD)

 

87

 

72

 

85

 

 

 

Domestic – Gas (MMCFD)

 

641

 

570

 

569

 

 

 

International – Liquids (MBPD)

 

91

 

91

 

119

 

 

 

International – Gas (MMCFD)

 

324

 

455

 

351

 

 

 

MBOED

 

339

 

334

 

357

 

 

 

 

 

 

 

 

 

 

 

 

 

Marker Prices

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NYMEX prompt WTI oil price ($/BBL)

 

38.28

 

50.03

 

51.52

 

53.22

 

Spot natural gas ($/MMBTU)

 

6.09

 

6.40

 

6.82

 

6.94

 

Bid Week natural gas price ($/MMBTU)

 

6.00

 

6.27

 

7.05

 

6.74

 

 

 

 

 

 

 

 

 

 

 

Average Sales Proceeds Excluding Derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liquids

 

 

 

 

 

 

 

 

 

Domestic ($/BBL)

 

31.74

 

38.47

 

40.24

 

 

 

International ($/BBL)

 

30.91

 

39.10

 

43.22

 

 

 

Natural Gas

 

 

 

 

 

 

 

 

 

Domestic ($/MCF)

 

5.02

 

4.95

 

5.97

 

 

 

International ($/MCF)

 

3.07

 

4.17

 

3.33

 

 

 

 

 

 

 

 

 

 

 

 

 

Refining, Marketing and Transportation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chicago 3-2-1 crack spread ($/BBL)

 

11.11

 

7.27

 

11.38

 

10.88

 

Gulf 3-2-1 crack spread ($/BBL)

 

9.20

 

6.71

 

10.60

 

10.05

 

Mars Differential ($/ BBL)

 

(4.87

)

(7.25

)

(6.99

)

(6.36

)

 

 

 

 

 

 

 

 

 

 

Refinery Runs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude Oil Refined (MBPD)

 

1,013

 

922

 

1,009

 

 

 

Other Charge & Blend Stock (MBPD)

 

142

 

172

 

176

 

 

 

Total (MBPD)

 

1,155

 

1,094

 

1,185

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil capacity utilization (%)

 

107

 

97

 

106

 

 

 

Consolidated refined products sold (MBPD)

 

1,440

 

1,370

 

1,460

 

 

 

 

 

 

 

 

 

 

 

 

 

SSA gasoline and distillate sales (MMGal)

 

802

 

745

 

543

 

 

 

SSA gross margin (gasoline and distillates) ($/gal)

 

0.1192

 

0.1058

 

0.1286

 

 

 

SSA merchandise margin ($million)

 

140

 

143

 

109

 

 

 

 

BBL – barrel

MMBTU – million British Thermal Units

MCF - thousand cubic feet

MBPD - thousand barrels per day

MBOED - thousand barrels of oil equivalent per day

MMGal - millions of gallons

MMCFD - million cubic feet per day