Marathon Oil Corporation Reports Fourth Quarter And Full-Year 2012 Results

HOUSTON, Feb. 6, 2013 (GLOBE NEWSWIRE) -- Marathon OilCorporation (NYSE:MRO) today reported fourth quarter 2012 netincome of $322 million, or $0.45 per diluted share, compared to netincome in the third quarter of 2012 of $450 million, or $0.63 perdiluted share. For the fourth quarter of 2012, adjusted net incomewas $388 million, or $0.55 per diluted share, compared to adjustednet income of $454 million, or $0.64 per diluted share, for thethird quarter of 2012.

Marathon Oil reported full-year 2012 net income of $1.582billion, or $2.23 per diluted share. Net income in 2011 was $2.946billion, or $4.13 per diluted share. Net income for 2011 includedincome of $1.239 billion from the Company's former Refining,Marketing and Transportation business, which was spun off on June30, 2011 and reported as discontinued operations in 2011, so incomefrom continuing operations is better suited for year-over-yearcomparison. For full-year 2012, adjusted income from continuingoperations was $1.736 billion, or $2.45 per diluted share, comparedto adjusted income from continuing operations of $2.293 billion, or$3.21 per diluted share, for full-year 2011.
  Three MonthsEnded   Year Ended
  Dec. 31 Sept. 30   Dec. 31 Dec. 31
(In millions, except per dilutedshare data) 2012 2012   2012 2011
Adjusted income from continuingoperations (a) $388 $454   $1,736 $2,293
Adjustments for special items (net oftaxes):          
Impairments           (64)                -          (231)        (195)
Gain (loss) on dispositions                -            (11)              72            45
Unrealized gain on crude oil derivativeinstruments              5            29              34               -
Pension settlement            (7)           (22)             (29)           (19)
Loss on early extinguishment of debt               -               -                  -        (176)
Tax effect of subsidiary restructure               -               -                  -        (122)
Deferred income tax items               -               -                  -           (61)
Water abatement - Oil Sands               -               -                  -           (48)
Eagle Ford transaction costs               -               -                  -           (10)
Income from continuing operations $322 $450   $1,582 $1,707
Discontinued operations (b)            -              -                -         1,239
Net income $322 $450   $1,582 $2,946
Adjusted income from continuing operations -per diluted share (a) $0.55 $0.64   $2.45 $3.21
Income from continuing operations - perdiluted share $0.45 $0.63   $2.23 $2.39
Discontinued operations - per diluted share(b)               -               -                 - $1.74
Net income - per diluted share $0.45 $0.63   $2.23 $4.13
Revenues and other income (b) $4,236 $4,161   $16,221 $15,282
Weighted average shares - diluted           711           709             710           714
Cash Flow          
Cash flow from continuing operations beforechanges in working capital (c) $1,146 $992   $4,454 $4,908
Changes in working capital from continuingoperations            59            78   (437)           526
Cash flow from continuingoperations $1,205 $1,070   $4,017 $5,434

(a)   Adjusted income from continuing operations is anon-GAAP financial measure and should not be considered asubstitute for income from continuing operations as determined inaccordance with accounting principles generally accepted in theUnited States. See below for further discussion of adjusted incomefrom continuing operations.

(b)   The spin-off of Marathon's downstream businesswas completed on June 30, 2011, and all comparative periods havebeen recast to reflect the downstream business as discontinuedoperations.

(c)   Cash flow from continuing operations beforechanges in working capital is a non-GAAP financial measure andshould not be considered a substitute for cash flow from operationsas determined in accordance with accounting principles generallyaccepted in the United States. See below for further discussion ofcash flow from continuing operations before changes in workingcapital.

"Last year, the first full year for Marathon Oil as anindependent Exploration and Production (E&P) company, wasmarked by outstanding execution in our domestic resource plays,continued safe and reliable operations in our base assets and entryinto new, high-potential exploration opportunities," said ClarenceP. Cazalot Jr., Marathon Oil's chairman, president and CEO.

"Our strong position in the top U.S. resource plays, a stableportfolio of base assets and solid operational performance allowedus to increase full-year Upstream (E&P and Oil Sands Mining[OSM]) net production available for sale, excluding Libya which hadproduction disruptions in 2011, 8 percent over the prior year,exceeding our 2012 production targets.

"We project 2013 production available for sale from our Upstreambusinesses will be 6 to 8 percent higher than 2012, excluding Libyabecause of the uncertainty in production levels and Alaska as wesold that asset at the end of January 2013. Importantly, thisgrowth will continue to be focused on higher-value liquids.

"Our future growth is underpinned by our growing resource baseand net proved reserves of 2 billion barrels of oil equivalent(boe) at year end 2012, a 12 percent increase over the prior yearend and our highest level of proved reserves in 40 years. During2012 we replaced 226 percent of our production, 185 percentexcluding acquisitions, both at a preliminary cost estimate ofapproximately $17 per boe. This outstanding performance was largelydriven by what we consider to be the highest-value resource playsin the world - the Eagle Ford shale in south Texas, the Bakkenshale in North Dakota and the Oklahoma Resource Basins. We'veestablished a 10-year plus drilling inventory across these plays atcurrent rig levels and expect to spend approximately one-third ofour $5.2 billion capital, investment and exploration budget for2013 in the Eagle Ford, the cornerstone of our growth strategy.

"Importantly, our investments in recent years have afforded usthe ability to scale our growth to optimize value. We're committedto our goal of growing production at a 5 to 7 percent compoundannual rate from 2010 through 2017, and we'll do so with ourlong-standing commitment to spending largely within our cash flows.While volume growth is critical to our success, value growth is theultimate goal. A key focus in 2013 will be improving our earningsand cash margins as we grow," Cazalot added.

2012 Key Highlights

·           Demonstrated ability to execute strategy in first full year as anindependent E&P company

o    Achieved 8 percent year-over-year growth inUpstream net production available for sale, excluding Libya

·           Doubled Lower 48 onshore net production available for sale over thepast five quarters

o    Increased average net production more thanfour-fold in the Eagle Ford shale from approximately 15,000 barrelsof oil equivalent per day (boed) in December 2011 to more than65,000 boed in December 2012. For the same period, average netproduction in the Bakken shale increased from 24,000 to 35,000boed, while average net production in the Oklahoma Resource Basinsincreased from 2,500 to 9,600 boed

o    Expanded midstream infrastructure in theEagle Ford to support production growth

o    In total, spud 392 gross operated wells inU.S. resource plays in 2012, compared to 123 in 2011

·           Completed targeted acquisitions in the Eagle Ford of approximately$1 billion, increased the Company's acreage position and workinginterest in the core of the play and added production and drillinglocations

·           Replaced 226 percent of 2012 Upstream production, includingacquisitions and Libya

o    Increased total net proved reserves 12percent to 2.0 billion boe

o    Replaced 268 percent of net proved liquidhydrocarbon and synthetic crude oil (SCO) reserves, consistent withliquids-focused strategy

·           Recorded more than 95 percent average operational availability forCompany-operated E&P assets

·           Enhanced global exploration program, announcing plans to pursueactivities in Kenya, Ethiopia and Gabon, to create a balancedportfolio targeting significant value creation

·           Continued commitment to financial discipline and progress towardthe previously stated goal of divesting between $1.5 billion and $3billion of non-core assets over the period of 2011 through 2013, ofwhich approximately $1.3 billion was completed or contractedthrough the end of 2012

·           Issued $1 billion of 3-year senior notes at 0.9 percent interestand $1 billion of 10-year senior notes at 2.8 percent interest

·           Increased quarterly dividend 13 percent to $0.17 per share

2013 Key Benchmarks

·           Project 6 to 8 percent growth in Upstream net production availablefor sale compared to 2012, progressing toward the Company's goal of5 to 7 percent compound annual net production growth from 2010through 2017. (Both exclude Libya and Alaska. Libya is excludedbecause of the uncertainty around sustained production levels,while Marathon Oil sold its Alaska business on Jan. 31, 2013.)

o    Implement $5.2 billion capital, investmentand exploration expenditures budget

o    Spud 350-400 gross operated wells in keyU.S. resource plays

o    Continue downspacing pilot in Eagle Ford toidentify optimal spacing of wells

o    Continue to build infrastructure to supportproduction growth across Eagle Ford operating area

·           Anticipate 2013 Upstream reserve replacement ratio of more than 100percent, excluding acquisitions, divestitures and Libya

·           Expect to participate in 10 to 13 exploration wells across thedeepwater Gulf of Mexico, Ethiopia, Kenya, Gabon, the KurdistanRegion of Iraq and Norway

·           Continue portfolio optimization through divestitures and capitaldiscipline

Reserves

Driven by strong reserves growth in the Company's U.S. resourceplays, Marathon Oil's total net proved reserves were 2.0 billionboe at the end of 2012, an increase of 12 percent from the prioryear. Of that total, 77 percent were liquid hydrocarbons and SCOand 72 percent were developed. The Company's overall reservereplacement ratio was 226 percent, with 389 million boe of netproved reserves added, while producing 172 million boe. Excludingacquisitions of 70 million boe, the overall reserve replacementratio was 185 percent.

Net additions, including acquisitions, were driven primarily byU.S. resource play activity in the Eagle Ford shale, the OklahomaResource Basins and the Bakken shale as well as additions inCanada, Norway and Libya.

Consistent with the Company's liquids-focused strategy, MarathonOil added a total of 316 million barrels of net proved liquidhydrocarbon and SCO reserves, including acquisitions of 52 millionbarrels, while producing 118 million barrels, resulting in a totalliquids reserve replacement ratio of 268 percent.

For the three-year period ended Dec. 31, 2012, Marathon Oiladded net proved reserves of 808 million boe, excluding thedispositions of 3 million boe, while producing 467 million boe,resulting in a three-year average reserve replacement ratio of 173percent.
Estimated Net ProvedReserves
  E&P OSM Total Percent Proved Developed ofTotal
  Liquid Hydrocarbons Natural Gas Total Synthetic Crude Oil    
  (mmbbl) (bcf) (mmboe) (mmbbl) (mmboe)  
As of Dec. 31, 2011 733 2,666 1,177 623 1,800 78%
   Additions 219 330 274 45 319  
   Acquisitions 52 105 70 -- 70  
   Production (103) (322) (157) (15) (172)  
As of Dec. 31,2012 901 2,779 1,364 653 2,017 72%
Reserve Replacement Ratio (includingacquisitions) 263% 135% 219% 300% 226%  
Reserve Replacement Ratio (excludingacquisitions) 213% 102% 175% 300% 185%  

Segment Results

Total segment income was $555 million in the fourth quarter of2012 and $2.148 billion for the full-year 2012, compared to $590million in the third quarter of 2012 and $2.591 billion forfull-year 2011.
  Three MonthsEnded   Year Ended
  Dec. 31 Sept. 30   Dec. 31 Dec. 31
(In millions) 2012 2012   2012 2011
Segment Income          
Exploration and Production          
  United States $104 $110   $393 $366
  International 397 376   1,488 1,791
      TotalE&P 501 486   1,881 2,157
Oil Sands Mining 19 65   176 256
Integrated Gas 35 39   91 178
  Segment Income(a)  $555 $590    $2,148 $2,591

(a)    See Supplemental Statistics below for areconciliation of segment income to net income as reported undergenerally accepted accounting principles.
  Three MonthsEnded   Year Ended
  Dec. 31 Sept. 30   Dec. 31 Dec. 31
(mboed) 2012 2012   2012 2011
Net Sales Volumes          
Exploration and Production          
  United States 200 172   167 130
  International 287 280   266 233
    Total E&P          487           452             432          363
  Oil Sands Mining 48 53   47 43
    Total Upstream 535 505   479 406
Libya 64 53   44 5
  Total Upstream ExcludingLibya 471 452   435 401
  Three MonthsEnded   Year Ended
  Dec. 31 Sept. 30   Dec. 31 Dec. 31
(mboed) 2012 2012   2012 2011
Production Available forSale          
Exploration and Production          
  United States          198          171            166          129
  International 264 295   270 236
    Total E&P          462          466            435          365
  Oil Sands Mining 43 46   41 38
    Total Upstream 505 512   476 403
Libya 42 74   49 8
  Total Upstream ExcludingLibya 463 438   427 395

Exploration and Production

E&P segment income totaled $501 million in the fourthquarter of 2012, compared to $486 million in the third quarter of2012. On a pre-tax basis, the increase was primarily the result ofhigher liquid hydrocarbon sales volumes, along with higher naturalgas prices mostly offset by higher depreciation, depletion andamortization (DD&A) and operating costs associated with theadditional volumes and higher exploration expenses. For full-year2012, E&P segment income was $1.881 billion, compared to $2.157billion for 2011. The decrease included lower earnings in the U.K.and Equatorial Guinea, partially offset by higher earnings inLibya. Also, in 2011 the Company was not in an excess foreign taxcredit position for the entire year as it was in 2012.

E&P sales volumes per day (excluding Libya) during thefourth quarter of 2012 averaged 423,000 net boed, up 6 percentcompared to 399,000 net boed for the third quarter. For full-year2012, sales volumes (excluding Libya) averaged 388,000 net boed, an8 percent increase from the 2011 average of 358,000 boed. Theincreases in the quarter and for the full year were largely theresult of ramped up production in the Company's U.S. resourceplays, particularly the Eagle Ford and Bakken shale plays.

E&P production available for sale for the fourth quarter of2012 averaged 420,000 net boed (excluding Libya), which was 7percent higher than the third quarter 2012 average of 392,000 netboed. For full-year 2012, E&P production available for sale(excluding Libya) increased 8 percent over 2011 volumes, with 2012available for sale volumes averaging 386,000 net boed compared to357,000 net boed for full-year 2011.

The difference between production volumes available for sale andrecorded sales volumes was primarily due to the timing ofinternational liftings.

Production operations in Libya were suspended in the firstquarter of 2011 and resumed with limited production in the fourthquarter of 2011. During the fourth quarter of 2012, net productionavailable for sale averaged 42,000 boed, compared to 74,000 boed inthe third quarter, and net sales averaged 64,000 boed compared to53,000 boed in the third quarter. Production available for sale washigher in the third quarter compared to the fourth quarter becauseof a natural gas sales agreement executed in the third quarter.Fourth quarter sales were higher than third quarter sales becauseof the lifting of the majority of the previous liquid hydrocarbonunderlift.

Marathon Oil estimates first quarter 2013 E&P productionavailable for sale will be between 415,000 and 430,000 net boed,which includes one month of Alaska production but excludes Libya.Full-year 2013 E&P production available for sale is projectedto be between 395,000 and 420,000 net boed, reflecting the sale ofthe Alaska business on Jan. 31, 2013 as well as planned turnaroundsin Norway, Equatorial Guinea and the U.K. during the year. Thisguidance excludes the effect of acquisitions or dispositions notpreviously announced.

United States E&P income was $104 million for the fourthquarter of 2012, compared to $110 million in the third quarter of2012, with the decrease largely the result of higher explorationexpenses. Higher sales volumes of liquids, reflecting the Company'songoing development programs primarily in the Eagle Ford and Bakkenshale plays, were partially offset by higher DD&A and othercosts associated with these increased activities.

For full-year 2012, U.S. E&P income was $393 million,compared to $366 million for the prior year. The increase was aresult of higher sales volumes, partially offset by lower realizedproduct prices, higher DD&A and operating expenses primarilyassociated with increased activities in the shale resource playsand higher exploration expenses. On a per boe basis, operatingcosts and DD&A each showed improvement by approximately $0.30per boe.

International E&P income was $397 million in the fourthquarter of 2012, compared to $376 million in the third quarter of2012. On a pre-tax basis, the increase reflects the impact ofhigher liquid hydrocarbon sales volumes and realizations and lowerDD&A.

International E&P income for full-year 2012 was $1.488billion, compared to $1.791 billion in 2011. The decrease includedlower earnings in the U.K. and Equatorial Guinea, partially offsetby higher earnings in Libya. Also, in 2011 the Company was not inan excess foreign tax credit position for the entire year as it wasin 2012.

Total E&P exploration expenses were $238 million for thefourth quarter of 2012 and $729 million for the entire year,compared to $176 million in the third quarter of 2012 and $644million for full-year 2011. Fourth quarter 2012 explorationexpenses included $85 million of dry well costs associated with theInnsbruck prospect in the Gulf of Mexico.

EAGLE FORD: Marathon Oil's average net production in the TexasEagle Ford shale rose 50 percent in the fourth quarter toapproximately 60,000 boed compared to 40,000 net boed in the priorquarter. Approximately 64 percent of the production was crudeoil/condensate, 16 percent was natural gas liquids (NGLs) and 20percent was natural gas. For the month of January, the Companyprojects average production was approximately 70,000 net boed.During the fourth quarter, Marathon Oil reached total depth on 70gross Company operated wells and brought 70 gross operated wells tosales. For all of 2012, the Company reached total depth on 248Eagle Ford gross operated wells, an increase of approximately 15percent from original 2012 estimates, and brought 215 grossoperated wells to sales. Marathon Oil has continued to deliver atop-quartile drilling performance in the areas in which it operatesin the Eagle Ford. The Company improved its spud-to-spudperformance 40 percent from the fourth quarter of 2011 (35 days) tothe fourth quarter of 2012 (21 days). During January, the Companyimproved another 10 percent averaging 19 days spud-to-spud on wellsdrilled in the Eagle Ford. The Company fully expects thespud-to-spud time to continue dropping during 2013 as it moves tomore pad drilling.

Additionally, Marathon Oil continues to build infrastructure tosupport liquid hydrocarbon and natural gas production growth acrossthe Eagle Ford operating area. Approximately 370 miles of gatheringlines were installed in 2012, while 12 new central gathering andtreating facilities were commissioned, with seven additionalfacilities in various stages of planning or construction. MarathonOil also owns and operates the Sugarloaf gathering system, a42-mile natural gas pipeline through the heart of the Company'sacreage in Karnes, Atascosa and Bee counties. The Company currentlytransports approximately 60 percent of its product by pipeline,with additional contract negotiations and facility designs underway. In 2013, Marathon Oil plans to drill 215-250 net wells(275-320 gross, all Company operated) in the Eagle Ford.

BAKKEN: Marathon Oil averaged production of approximately 35,000net boed during the fourth quarter compared to 30,000 net boed inthe previous quarter. For the month of January, the Companyprojects average production was approximately 33,000 net boed, downslightly from the previous month because of weather and completionschedules. The Company reached total depth on 18 gross wells duringthe fourth quarter and brought 18 gross wells to sales. In thefourth quarter Marathon Oil's average time to drill a well was 27days spud-to-spud, a top-quartile performance in the areas in whichMarathon Oil operates. Marathon Oil's Bakken production averagesapproximately 90 percent crude oil, 5 percent NGLs and 5 percentnatural gas. Marathon Oil plans to drill 65-70 net wells (190-220gross, 60-70 Company operated) in 2013.

OKLAHOMA RESOURCE BASINS: The Company's unconventionalproduction averaged 9,800 net boed during the fourth quartercompared to 9,600 net boed in the previous quarter. During thefourth quarter, five gross wells were brought to sales. For themonth of January, the Company projects average production wasapproximately 12,000 net boed. Marathon Oil's plans call fordrilling 15-19 net wells (42-50 gross, 12-14 Company operated) inthe Oklahoma Resource Basins in 2013. 

NORWAY: In January, Marathon Oil was awarded a 20 percentnon-operated working interest in Production License (PL) 694 by theNorwegian Ministry of Petroleum and Energy as part of the country's2012 Awards in Predefined Areas (APA 2012). PL 694 consists ofthree blocks south of the Sverdrup prospect area in the northernpart of the Norwegian Sea. Also as part of APA 2012, Marathon Oiland its partners were awarded additional acreage in the North Seanorth of the Alvheim area in PL 203 B. The Company's 65 percentworking interest and role as operator are the same as PL 203.

The Darwin (formerly Velsemoy) exploration well in the BarentsSea is expected to begin drilling in the first quarter of 2013 onPL 531, in which the Company holds a 10 percent non-operatedworking interest. Drilling is expected to commence in the thirdquarter of 2013 on the Sverdrup exploration well on license PL 330where the Company holds a 30 percent non-operated workinginterest.

KURDISTAN: In December, Marathon Oil reached total depth ofapproximately 12,500 feet on its first operated exploration well onthe Harir block in the Kurdistan Region of Iraq. The well wastested and is now being plugged and abandoned. The Company plans tospud two exploration wells on its operated blocks in the first halfof 2013. One well will be drilled on the Harir block and the otheron the Safen block. Marathon Oil holds a 45 percent workinginterest in each block.

Additionally, following the successful appraisal program on theoutside-operated Atrush block, a Declaration of Commerciality hasbeen filed with the Ministry of Natural Resources and a Plan ofDevelopment is anticipated in the second quarter of 2013. On theoutside-operated Sarsang block, the Mangesh exploration well wasspud in September and the Gara exploration well was spud inNovember. Both wells are currently drilling and are expected toreach total depth in the first half of 2013. Marathon Oil holds a20 percent working interest in the Atrush block and a 25 percentworking interest in the Sarsang block.

ETHIOPIA: In January, Marathon Oil received Ethiopian governmentapprovals of the Company's agreement, announced in October, toacquire a 20 percent non-operated working interest in the onshoreSouth Omo concession. The Sabisa exploration well was spud in theSouth Omo concession in January and is expected to takeapproximately 60 days to reach the planned total depth ofapproximately 8,500 feet.

GABON: Exploration drilling is expected to begin in the firstquarter of 2013 on the Diaman No. 1 well in the Diaba LicenseG4-223, offshore Gabon, to test the deepwater presalt play.Marathon Oil acquired a 21.25 percent non-operated working interestin the Diaba Block in October 2012.

GULF OF MEXICO: The outside-operated Shenandoah appraisal wellreached total depth in January and is currently being logged. TheENSCO 8501 rig arrived on the outside-operated Gunflint prospectand spud a second appraisal well in early February.

ANGOLA: During the fourth quarter, production commenced from theBlock 31 deepwater PSVM development, in which Marathon Oil holds a10 percent non-operated working interest, but no sales wererecorded during the quarter.

Oil Sands Mining

The OSM segment reported income of $19 million for the fourthquarter of 2012, compared to $65 million in the third quarter of2012. Results were negatively impacted by unplanned downtime at theScotford upgrader in the fourth quarter of 2012. With lessthroughput at the upgrader, a higher percentage of lower-valueproducts were sold, leading to lower price realizations. Forfull-year 2012, OSM reported income of $176 million compared toincome of $256 million for full-year 2011. This decrease wasprimarily the result of lower price realizations, partially offsetby an increase in sales volumes.
  Three MonthsEnded   Year Ended
  Dec. 31 Sept. 30   Dec. 31 Dec. 31
  2012 2012   2012 2011
Key Oil Sands MiningStatistics          
Net Synthetic Crude Oil Sales (mbbld) 48 53   47 43
Synthetic Crude Oil AverageRealizations (per bbl) $76.36 $81.13   $81.72 $91.65

Marathon Oil's fourth quarter 2012 net synthetic crude oilproduction (upgraded bitumen excluding blendstocks) from itsnon-operated position in the Athabasca Oil Sands Project (AOSP)mining operation was 43,000 barrels per day (bbld). Full-year 2012net production was 41,000 bbld, compared to 38,000 bbld for 2011.Marathon Oil anticipates producing an average of 37,000 to 42,000net bbld of synthetic crude oil (upgraded bitumen excludingblendstocks) in the first quarter of 2013 and an average of 40,000to 45,000 net bbld of synthetic crude oil for full year 2013.Marathon Oil holds a 20 percent working interest in the AOSP.

Integrated Gas

Integrated Gas segment income was $35 million in the fourthquarter of 2012 compared to $39 million in the third quarter of2012. This decrease was primarily due to lower liquefied naturalgas (LNG) sales volumes. For the full year, income was $91 millionin 2012, compared to $178 million in 2011. The full-year decreasewas primarily due to lower LNG sales volumes, the result of aturnaround in the second quarter of 2012 in Equatorial Guinea andthe sale of the Company's interest in a liquefied natural gasproduction facility in Alaska during the third quarter of 2011, aswell as lower price realizations.
  Three MonthsEnded   Year Ended
  Dec. 31 Sept. 30   Dec. 31 Dec. 31
  2012 2012   2012 2011
Key Integrated GasStatistics          
Net Sales (metric tonnes per day)          
     LNG 6,327 7,065   6,290 7,086
     Methanol 1,465 1,146   1,298 1,282

Corporate and Special Items

As previously announced, Marathon Oil anticipates divestituresof $1.5 billion to $3 billion over the period of 2011 through 2013in an ongoing effort to optimize the Company's portfolio forprofitable growth. As of Feb. 5, 2013, the Company has closed onapproximately $1.3 billion in divestitures. On Jan. 31, 2013, theCompany closed on the previously announced sale of its remainingAlaska business, which had an effective date of Jan. 1, 2012 and atransaction value of $375 million. Including purchase priceadjustments, largely for the 2012 cash flows, the Company willrealize up to $195 million in cash proceeds, subject to a six-monthescrow of $50 million for various indemnities. On Feb. 5, 2013 theCompany closed on the sale of its interest in the Neptune gas plantin South Louisiana for approximately $170 million in cash.

Full year cash flow from continuing operations before changes inworking capital totaled $4.5 billion in 2012 compared to $4.9billion in 2011. Cash flow from continuing operations totaled $4.0billion in 2012 compared to $5.4 billion in 2011. The decline incash flow from continuing operations was primarily the result ofworking capital changes related to the 2012 ramp up of operationsin the Eagle Ford shale and Libya and the timing of taxpayments.

Marathon Oil previously announced a 2013 budget of $5.2 billionfor capital, investment and exploration expenditures, a slightreduction from the Company's actual $5.4 billion of expenditures in2012. Both years exclude acquisitions. 

In August 2012, Marathon Oil entered into crude oil derivativeinstruments related to a portion of its forecast U.S. E&P crudeoil sales. For the fourth quarter of 2012, an after-tax unrealizedgain of $5 million ($8 million pre-tax) was recorded related tothese crude oil derivative instruments.

As a result of lower natural gas prices, projected productionfrom the Company's Powder River Basin operations in Wyoming wasreduced. Consequently, 7 million boe of proved reserves werewritten off and an impairment charge of $47 million after-tax ($73million pre-tax) was recorded in the fourth quarter of 2012.

The Ozona development in the Gulf of Mexico is being produced toabandonment pressure, which is expected to occur in the first halfof 2013. Because projected production was reduced, approximately420,000 boe of proved reserves were written off and an impairmentcharge of $17 million after-tax ($27 million pre-tax) was recordedin the fourth quarter of 2012.

Marathon Oil recorded an after-tax settlement charge of $7million ($11 million pre-tax) in the fourth quarter of 2012 inconnection with the Company's U.S. pension plans.

The Company will conduct a conference call and webcast today,Feb. 6, at 2:00 p.m. EST, during which it will discuss fourthquarter and full-year 2012 results and will include forward-lookinginformation. To listen to the webcast of the conference call andview the slides, visit the Marathon Oil website at http://www.marathonoil.com.Replays of the webcast will be available through Feb. 20. Quarterlyand annual financial and operational information will also beprovided via the Quarterly Investor Packet available on MarathonOil's website at http://ir.marathonoil.com and onthe Company's app available for mobile devices. The webcast slidesand Quarterly Investor Packet will be posted to the Company'swebsite and to its mobile app later this morning.

# # #

In addition to income from continuing operations determinedin accordance with generally accepted accounting principles,Marathon Oil has provided supplementally "adjusted income fromcontinuing operations," a non-GAAP financial measure whichfacilitates comparisons to earnings forecasts prepared by stockanalysts and other third parties. Such forecasts generally excludethe effects of items that are considered non-recurring, aredifficult to predict or to measure in advance or that are notdirectly related to Marathon Oil's ongoing operations. Areconciliation between GAAP income from continuing operations and"adjusted income from continuing operations" is provided in a tableon page 1 of this release. "Adjusted income from continuingoperations" should not be considered a substitute for income fromcontinuing operations as reported in accordance with GAAP.Management, as well as certain investors, uses "adjusted incomefrom continuing operations" to evaluate Marathon Oil's financialperformance between periods. Management also uses "adjusted incomefrom continuing operations" to compare Marathon Oil's performanceto certain competitors

In addition to cash flow from operations determined inaccordance with GAAP, Marathon Oil has provided supplementally"cash flow from continuing operations before changes in workingcapital," a non-GAAP financial measure, which management believesdemonstrates the Company's ability to internally fund capitalexpenditures, pay dividends and service debt. A reconciliationbetween GAAP cash flow from continuing operations and "cash flowfrom continuing operations before changes in working capital" isprovided in a table on page 1 of this release. "Cash flow fromcontinuing operations before changes in working capital" should notbe considered a substitute for cash flow from continuing operationsas reported in accordance with GAAP. Management, as well as certaininvestors, uses "cash flow from continuing operations beforechanges in working capital" to evaluate Marathon Oil's financialperformance between periods. Management also uses "cash flow fromcontinuing operations before changes in working capital" to compareMarathon Oil's performance to certain competitors.

This release contains forward-looking statements withrespect to the timing and levels of the Company's worldwide liquidhydrocarbon and natural gas production, synthetic crude oilproduction, the expected number of wells to be drilled in keyresource plays, exploration drilling activity in the Gulf ofMexico, Ethiopia, Kenya, Gabon, the Kurdistan Region of Iraq andNorway, expectations as to improving earnings and cash margins in2013, the capital, investment and exploration expenditures budget,anticipated 2013 reserve replacement ratio, plans to exit theMarcellus shale play and projected asset dispositions through 2013.The average times to drill a well referenced in the release may notbe indicative of future drilling times. The current productionrates referenced in this release may not be indicative of futureproduction rates. Factors that could potentially affect the timingand levels of the Company's worldwide liquid hydrocarbon andnatural gas production, synthetic crude oil production, theexpected number of wells to be drilled in key resource plays, andexploration drilling activity in the Gulf of Mexico, Ethiopia,Kenya, Gabon, the Kurdistan Region of Iraq and Norway includepricing, supply and demand for liquid hydrocarbons and natural gas,the amount of capital available for exploration and development,regulatory constraints, timing of commencing production from newwells, drilling rig availability, unforeseen hazards such asweather conditions, acts of war or terrorist acts and thegovernmental or military response thereto, and other geological,operating and economic considerations. Expectations as to improvingearnings and cash margins in 2013, the capital, investment andexploration budget, anticipated 2013 reserve replacement ratio,plans to exit the Marcellus shale play and projected assetdispositions are based on current expectations, good faithestimates and projections and are not guarantees of futureperformance. Actual results may differ materially from theseexpectations, estimates and projections and are subject to certainrisks, uncertainties and other factors, some of which are beyondthe Company's control and difficult to predict. The foregoingfactors (among others) could cause actual results to differmaterially from those set forth in the forward-looking statements.In accordance with the "safe harbor" provisions of the PrivateSecurities Litigation Reform Act of 1995, Marathon Oil Corporationhas included in its Annual Report on Form 10-K for the year endedDecember 31, 2011, and subsequent Forms 10-Q and 8-K, cautionarylanguage identifying other important factors, though notnecessarily all such factors, that could cause future outcomes todiffer materially from those set forth in the forward-lookingstatements.
Condensed ConsolidatedStatements of Income (Unaudited)        
  Three MonthsEnded   Year Ended
  Dec. 31 Sept. 30 Dec. 31   Dec. 31 Dec. 31
(In millions, except per sharedata) 2012 2012 2011   2012 2011
Revenues and otherincome:            
   Sales and other operatingrevenues $4,117 $4,018 $3,634   $15,630 $14,603
   Sales to related parties 15 16 15   58 60
   Income from equity methodinvestments 110 122 102   370 462
   Net gain (loss) on disposal ofassets 1 (12) 40   127 103
   Other income (loss) (7) 17 18   36 54
            Total revenues and other income 4,236 4,161 3,809   16,221 15,282
Costs and expenses:            
   Cost of revenues (excludes itemsbelow) 1,214 1,296 1,554   5,219 6,225
   Purchases from relatedparties 57 72 66   248 250
   Depreciation, depletion andamortization 699 625 550   2,478 2,266
   Impairments 100 8 3   371 310
   General and administrativeexpenses 166 139 173   555 544
   Other taxes 81 63 60   289 230
   Exploration expenses 238 176 140   729 644
           Total costs and expenses 2,555 2,379 2,546   9,889 10,469
Income from operations 1,681 1,782 1,263   6,332 4,813
   Net interest and other (59) (53) (45)   (219) (107)
   Loss on early extinguishment ofdebt               -              -               -                - (279)
Income from continuing operationsbefore income taxes 1,622 1,729 1,218   6,113 4,427
   Provision for income taxes 1,300 1,279 669   4,531 2,720
Income from continuingoperations           322          450           549          1,582        1,707
   Discontinued operations (a)               -             -               -                -        1,239
Net income $322 $450 $549   $1,582 $2,946
Adjusted income from continuingoperations (b) $388 $454 $552   $1,736 $2,293
Adjustments for special items (net oftaxes):            
Impairments           (64)             -                -           (231)        (195)
Gain (loss) on dispositions                -            (11)           22              72            45
Unrealized gain on crude oil derivativeinstruments 5 29              -   34              -
Pension settlement             (7)           (22)           (19)            (29)           (19)
Loss on early extinguishment of debt                -               -                -                 -        (176)
Tax effect of subsidiary restructure                -               -                -                 -        (122)
Deferred income tax items                -               -               4                -           (61)
Water abatement - Oil Sands                -               -                -                 -           (48)
Eagle Ford transaction costs                -             -            (10)                -             (10)
Income from continuingoperations 322 450 549   1,582 1,707
Discontinued operations (a)               -              -              -                - 1,239
Net income $322 $450 $549   $1,582 $2,946
Per Share Data            
Basic:            
Income from continuing operations $0.46 $0.64 $0.78   $2.24 $2.40
Discontinued operations (a)                -               -                -                 - $1.75
Net income $0.46 $0.64 $0.78   $2.24 $4.15
Diluted:            
Adjusted income from continuing operations(b) $0.55 $0.64 $0.78   $2.45 $3.21
Income from continuing operations $0.45 $0.63 $0.78   $2.23 $2.39
Discontinued operations (a)                -               -                -                 - $1.74
Net income $0.45 $0.63 $0.78   $2.23 $4.13
Weighted AverageShares:            
  Basic 707 706 704   706 710
  Diluted 711 709 707   710 714

(a)    The spin-off of Marathon's downstreambusiness was completed on June 30, 2011, and all comparativeperiods have been recast to reflect the downstream business asdiscontinued operations.

(b)    Adjusted income from continuing operationsis a non-GAAP financial measure and should not be considered asubstitute for income from continuing operations as determined inaccordance with accounting principles generally accepted in theUnited States. See above for further discussion of adjusted incomefrom continuing operations.

Supplemental Statistics(Unaudited)            
  Three MonthsEnded   Year Ended
  Dec. 31 Sept. 30 Dec. 31   Dec. 31 Dec. 31
(in millions) 2012 2012 2011   2012 2011
Segment Income            
     Exploration andProduction            
          UnitedStates $104 $110 $129   $393 $366
         International 397 376 429   1,488 1,791
              E&P segment 501 486 558   1,881 2,157
     Oil SandsMining 19 65 63   176 256
     Integrated Gas 35 39 20   91 178
Segment income 555 590 641   2,148 2,591
Items not allocated to segments, net ofincome taxes:            
     Corporate and otherunallocated items (167) (136) (89)   (412) (298)
Impairments        (64)            -             -         (231)       (195)
Gain (loss) on dispositions             -         (11)          22            72           45
Unrealized gain on crude oil derivativeinstruments 5 29            -   34            -
Pension settlement           (7)        (22)        (19)          (29)        (19)
Loss on early extinguishment of debt             -             -             -               -        (176)
Tax effect of subsidiary restructure             -             -             -               -         (122)
Deferred income tax items             -             -            4              -         (61)
Water abatement - Oil Sands             -             -             -               -         (48)
Eagle Ford transaction costs             -             -        (10)              -         (10)
              Income from continuing operations          322           450           549         1,582       1,707
         Discontinuedoperations (a)             -             -             -               -       1,239
    Net income $322 $450 $549   $1,582 $2,946
Capital Expenditures(c)            
     Exploration andProduction            
          UnitedStates $1,104 $1,046 $738   $3,995 $2,145
         International 302 228 199   870 893
              E&P segment 1,406 1,274 937   4,865 3,038
     Oil SandsMining 52 41 72   188 308
     Integrated Gas             - 1            -   2 2
     Corporate 24 23 14   106 51
              Total $1,482 $1,339 $1,023   $5,161 $3,399
Exploration Expenses            
     United States $195 $132 $99   $564 $379
     International 43 44 41   165 265
              Total $238 $176 $140   $729 $644

(c) Capital expenditures include changes inaccruals.
Supplemental Statistics(Unaudited) Three MonthsEnded   Year Ended
  Dec. 31 Sept. 30 Dec. 31   Dec. 31 Dec. 31
  2012 2012 2011   2012 2011
E&P Operating Statistics - NetSales Volumes            
             
  United States - Liquids(mbbld)        133       111         83         107          75
     Bakken 33           29           21   28           16
     Eagle Ford          47          33            8   28            2
     AnadarkoWoodford            3            3            1   3            1
     Other U.S.          50           46           53             48           56
  United States - Crude Oil and  Condensate (mbbld)        117         98         77           96         70
     Bakken 32           28           21   27           16
     Eagle Ford          38          26            7   23            2
     AnadarkoWoodford             1             1            -     1            -  
     Other U.S.           46           43           49   45            52
  United States - Natural GasLiquids (mbbld)           16           13             6             11             5
     Bakken 1             1            -     1            -  
     Eagle Ford             9             7             1   5            -  
     AnadarkoWoodford             2             2             1   2              1
     Other U.S.             4             3             4   3              4
  United States - Natural Gas(mmcfd)        404        366        325          358        326
     Bakken           10             7             5   8              6
     Eagle Ford           72           46             8   37              2
     AnadarkoWoodford           39           38             9   29              7
     Alaska          100           88           92   92            94
     Other U.S.          183          187          211            192           217
  International - Liquids(mbbld)        191        182        136          175        144
     EquatorialGuinea           33           39           39   36            38
     Norway           79           80           78   81            80
     U.K.           20           14           19   16            21
     Libya           59           49            -     42              5
  International - Natural Gas(mmcfd)        569        585        567          544        540
     EquatorialGuinea          445          459          455   428           443
     Norway           54           54           51   53            42
     U.K. (d)           44           46           61   48            55
     Libya           26           26            -     15            -  
  Worldwide NetSales  (mboed)        487        452        368   432        363

(d) Includes natural gas acquired for injection andsubsequent resale of 12 mmcfd,18 mmcfd and 15 mmcfd in the fourthand third quarters of 2012 and the fourth quarter of 2011, and of18 mmcfd and 16 mmcfd for the years 2012 and 2011.
Supplemental Statistics(Unaudited)            
  Three MonthsEnded   Year Ended
  Dec. 31 Sept. 30 Dec. 31   Dec. 31 Dec. 31
  2012 2012 2011   2012 2011
E&P Operating Statistics -Average Realizations (e)            
         Crude Oil andCondensate (per bbl)            
            United States $89.92 $90.16 $98.13   $91.29 $94.80
            Europe 113.82 113.00 114.73   115.59 115.88
            Africa 116.53 113.30 92.80   114.52 98.80
               Total International 115.04 113.14 109.78   115.15 111.78
                       Worldwide 105.15 104.73 105.32   106.35 105.84
         Natural GasLiquids (per bbl)            
            United States $35.29 $37.88 $56.74   $39.57 $58.53
            Europe 87.78 68.17 74.05   78.81 78.76
            Africa 1.00 1.00 1.00   1.00 1.00
               Total International 9.21 8.23 5.28   8.32 6.77
                       Worldwide 23.86 23.41 21.94   23.44 21.21
         Total LiquidHydrocarbons (per bbl)            
            United States (f) $83.20 $83.80 $95.21   $85.80 $92.55
            Europe 113.50 112.34 114.43   115.16 115.55
            Africa 102.10 98.65 66.08   98.52 73.21
               Total International 108.01 105.71 100.43   107.78 102.96
                       Worldwide 97.86 97.40 98.46   99.46 99.37
             
         Natural Gas (permcf)            
            United States $4.39 $3.61 $4.68   $3.91 $4.95
            Europe 11.78 10.10 9.29   10.47 9.84
            Africa (g) 0.52 0.63 0.24   0.43 0.24
               Total International 2.46 2.25 2.03   2.29 1.97
                       Worldwide 3.26 2.77 3.00   2.94 3.09
OSM OperatingStatistics            
    Net Synthetic Crude OilSales (mbbld)  (h) 48 53           44   47 43
 Synthetic Crude Oil AverageRealizations (per bbl) (e) $76.36 $81.13 $93.81   $81.72 $91.65
IG Operating Statistics            
     Net Sales(mtd)  (i)            
         LNG 6,327 7,065 6,984   6,290 7,086
         Methanol 1,465 1,146      1,199   1,298 1,282
(e)   Excludes gains or losses onderivative instruments.
(f)   Inclusion of realized gainson crude oil derivative instruments would have increased averagedrealizations by $1.27 per bbl for the fourth quarter of 2012 and$0.39 per bbl for the year 2012.
(g)   Primarily represents fixedprices under long-term contracts with Alba Plant LLC, AtlanticMethanol Production Company LLC (AMPCO) and Equatorial Guinea LNGHoldings Limited (EGHoldings), which are equity method investees.Marathon includes its share of Alba Plant LLC's income in theExploration and Production segment and its share of AMPCO's andEGHoldings' income in the Integrated Gas segment.
(h)   Includes blendstocks.
(i)    Includes bothconsolidated sales volumes and our share of the sales volumes ofequity method investees in the full year of 2011. LNG salesfrom Alaska, conducted through a consolidated subsidiary, ceasedwhen these operations were sold in the third quarter of 2011. LNG and methanol sales from Equatorial Guinea are conducted throughequity method investees.
CONTACT: Media Relations Contacts:         Lee Warren: 713-296-4103         John Porretto: 713-296-4102                  Investor Relations Contacts:         Howard Thill: 713-296-4140         Chris Phillips: 713-296-3213