Marathon Oil Corporation Reports First Quarter 2013 Results

HOUSTON, May 7, 2013 (GLOBE NEWSWIRE) -- Marathon OilCorporation (NYSE:MRO) today reported first quarter 2013 netincome of $383 million, or $0.54 per diluted share, compared to netincome in the fourth quarter of 2012 of $322 million, or $0.45 perdiluted share. For the first quarter of 2013, adjusted net incomewas $361 million, or $0.51 per diluted share, compared to adjustednet income of $388 million, or $0.55 per diluted share, for thefourth quarter of 2012.
  Three MonthsEnded  
  Mar. 31 Dec. 31  
(In millions, except per dilutedshare data) 2013 2012  
Adjusted net income (a) $361 $388  
Adjustments for special items (net oftaxes):      
Unrealized gain (loss) on crude oilderivative instruments                     (32)                         5  
Impairments                     (10)                     (64)  
Net gain on dispositions                      64                        -    
Pension settlement                        -                         (7)  
Net income $383 $322  
Adjusted net income - per diluted share(a) $0.51 $0.55  
Net income - per diluted share $0.54 $0.45  
Revenues and other income $4,106 $4,237  
Weighted average shares - diluted                    712                    711  
Exploration expenses      
Unproved property impairments $383 $78  
Dry well costs                      21                      92  
Geological and geophysical                      27                      32  
Other                      34                      33  
Total exploration expenses $465 $235  
Cash flow      
Cash flow from operations before changes inworking capital (b) $1,601 $1,146  
Changes in working capital                     (73)                      59  
Cash flow from operations $1,528 $1,205  
(a)   Adjusted netincome is a non-GAAP financial measure and should not be considereda substitute for net income as determined in accordance withaccounting principles generally accepted in the United States. Seebelow for further discussion of adjusted net income.  
(b)   Cashflow from operations before changes in working capital is anon-GAAP financial measure and should not be considered asubstitute for cash flow from operations as determined inaccordance with accounting principles generally accepted in theUnited States. See below for further discussion of cash flow fromoperations before changes in working capital.  

"Marathon Oil's first quarter performance was highlighted bycontinued growth in production available for sale, up 4 percentover the prior quarter and 19 percent over the first quarter of2012, excluding Libya and Alaska, largely driven by our U.S.resource plays," said Clarence P. Cazalot, Jr., Marathon Oil'schairman, president and CEO. "Net sales volumes, excluding Libya,grew 3 percent over the previous quarter to 485,000 barrels of oilequivalent per day (boed). These higher sales volumes, along withimproved cash production costs per barrel of oil equivalent andhigher crude oil and condensate realizations in North America, ledto a 40 percent increase in cash flow from operations beforechanges in working capital for the quarter.

"Our strong operational performance was a result of high levelsof reliability in our base business along with continued growth inour Eagle Ford and Bakken shale plays. Average net daily productionrose approximately 22 percent in the Eagle Ford and nearly 6percent in the Bakken when compared to the fourth quarter. As aresult of continued strong performance, we have increased ourBakken guidance for 2013 to approximately 40,000 net boed, 14percent higher than our original guidance, and we continue to seehigher crude oil realizations in the Bakken driven by our increasedutilization of available rail capacity. Production from our lower48 onshore operations was 72 percent liquids for the firstquarter.

"During the quarter we recognized the non-cash impairment ofcertain unproved leases in the Eagle Ford that either expired orthat we do not expect to drill or extend, reducing earnings $340million pre-tax or $218 million after-tax. These properties areprimarily located in Bee, Dewitt, Lavaca and Wilson counties, andwe expect the relinquishment of this acreage to have minimal to noimpact on the number of wells we expect to drill or our level ofresource.

"Our refocused exploration and appraisal program is well underway, marked by the successful Shenandoah appraisal well drilled inthe Gulf of Mexico during the quarter. We're currently drilling orparticipating in eight exploration or appraisal wells and expect toevaluate the potential of this program over the next 12 months.

"Backed by our continued strong operational results, we areraising our production growth target for 2013 (excluding Libya andAlaska) to 7 to 10 percent compared to 2012 from our previousguidance of 6 to 8 percent. We also remain confident in our abilityto grow production (excluding Alaska and any future acquisitionsand divestitures) at a 5 to 7 percent compound annual rate from2012 to 2017, delivering significant value to shareholders,"Cazalot added.

Segment Changes

Beginning in 2013, Marathon Oil changed its reportable segmentsto reflect the growing importance of United States unconventionalresource plays to its business. All periods presented have beenrecast in this new segment view.

The Company has three reportable operating segments, each ofwhich is organized and managed based primarily upon geographiclocation and the nature of the products and services it offers. Thethree segments are as follows:

·         NorthAmerica Exploration and Production (E&P) - explores for,produces and markets liquid hydrocarbons and natural gas in NorthAmerica.

·         InternationalE&P - explores for, produces and markets liquid hydrocarbonsand natural gas outside of North America and produces and marketsproducts manufactured from natural gas, such as liquefied naturalgas (LNG) and methanol in Equatorial Guinea.

·         Oil SandsMining - mines, extracts and transports bitumen from oil sandsdeposits in Alberta, Canada, and upgrades the bitumen to produceand market synthetic crude oil and vacuum gas oil.

Sales and Production Volumes

Total Company sales volumes (excluding Libya) during the firstquarter of 2013 averaged 485,000 net boed, a 3 percent increasecompared to 471,000 net boed for the fourth quarter of 2012. Thisincrease was driven by the timing of International E&Pliftings, first sales from Angola Block 31 and increased productionfrom the Company's U.S. resource plays, partially offset by thedisposition of the Company's Alaska assets during the first quarterof 2013.
  Three MonthsEnded
  Mar. 31 Dec. 31
(mboed) 2013 2012
Net Sales Volumes    
North America E&P excluding Alaska 193 183
Alaska 5 17
International E&P excluding Libya(a) 236 223
Oil Sands Mining (b) 51 48
Total excluding Libya 485 471
Libya 38 64
Total 523 535
(a) Libya is excluded because of uncertaintyaround sustained production and sales levels.    
(b) Includes blendstocks.    
  Three MonthsEnded Guidance (a)
  Mar. 31 Dec. 31 Q2
(mboed) 2013 2012 2013
Net Production Available forSale      
North America E&P excluding Alaska 193 183 198-204
Alaska 5 15  
International E&P excluding Libya(b) 229 222 205-216
Oil Sands Mining (c) 44 43 40-44
Total excluding Libya 471 463  
Libya 46 42  
Total 517 505  
(a) This guidance excludes theeffect of acquisitions or dispositions not previouslyannounced.(b) Libya is excluded because of uncertainty around sustainedproduction and sales levels.
(c) Upgraded bitumen excludingblendstocks.

Production available for sale from all segments for the firstquarter of 2013 averaged 471,000 net boed (excluding Libya),compared to the fourth quarter 2012 average of 463,000 net boed.Production available for sale of 427,000 net boed for the NorthAmerica E&P and International E&P segments combined(excluding Libya) was at the upper end of the Company's guidancefor the quarter (415,000 to 430,000 net boed). The OSM segment hadnet production in the quarter of 44,000 barrels per day (bbld)(excluding blendstocks) and exceeded the Company's previousguidance of 37,000 to 42,000 bbld.

North America E&P production available for sale in the firstquarter of 2013 and the fourth quarter of 2012 both averaged198,000 net boed. Excluding Alaska production (5,000 boed in thefirst quarter of 2013 and 15,000 boed in the fourth quarter of2012), North America E&P production available for sale grew 5percent.

International E&P production available for sale for thefirst quarter of 2013 averaged 229,000 net boed (excluding Libya),which was 3 percent higher than the fourth quarter 2012 average of222,000 net boed. The first quarter of 2013 included a full quarterof production from Angola Block 31.

As per the table above, production available for sale in thesecond quarter of 2013 is expected to be lower than the firstquarter. This anticipated decrease is a result of a plannedturnaround in Equatorial Guinea, the disposition of the Company'sAlaska assets and anticipated field declines in Norway. Full year2013 guidance for production available for sale from the NorthAmerica E&P and International E&P segments combined hasbeen revised upward to a range of 405,000 to 425,000 net boed(excluding Libya), a 2 percent increase from previous guidance atthe midpoint.

The difference between production volumes available for sale andrecorded sales volumes was primarily due to the timing ofInternational E&P liftings.

Segment Results

Total segment income was $432 million in the first quarter of2013, compared to $564 million in the fourth quarter of 2012.
  Three MonthsEnded
  Mar. 31 Dec. 31
(In millions) 2013 2012
Segment Income (Loss)    
North America E&P ($59) $101
International E&P                    453                    446
Oil Sands Mining                      38                      17
  Segment Income(a) $432 $564
(a)    SeeSupplemental Statistics below for a reconciliation of segmentincome to net income as reported under generally acceptedaccounting principles.

North America E&P

The North America E&P segment reported a loss of $59 millionin the first quarter of 2013, compared to income of $101 million inthe fourth quarter of 2012. The decrease was primarily the resultof unproved property impairments and lower natural gas prices andvolumes largely driven by the disposition of the Company's assetsin Alaska. This was partially offset by higher liquid hydrocarbonsales volumes and realized prices.

First quarter 2013 exploration expenses included approximately$340 million related to the unproved property impairmentsassociated with the Eagle Ford shale previously discussed. Theseproperties are primarily located in Bee, Dewitt, Lavaca and Wilsoncounties, and the Company expects the relinquishment of thisacreage to have minimal to no impact on the number of wells itexpects to drill or its level of resource.

EAGLE FORD: Marathon Oil's average net production in the EagleFord shale grew approximately 22 percent from the fourth quarter of2012 to approximately 72,000 boed in the first quarter.Approximately 64 percent of first quarter production was crudeoil/condensate, 17 percent was natural gas liquids (NGLs) and 19percent was natural gas. For the month of April, the Companyestimates average production was approximately 76,000 net boed.During the first quarter, Marathon Oil reached total depth on 76gross Company operated wells and brought 68 gross operated wells tosales. Marathon Oil has continued to advance its drillingperformance in the Eagle Ford, improving its spud-to-spudperformance 36 percent from the first quarter of 2012 (28 days) tothe first quarter of 2013 (18 days). The Company expects thespud-to-spud time to continue dropping during 2013 as additionalefficiencies are gained from pad drilling.

Marathon Oil continues to build infrastructure to supportproduction growth across the Eagle Ford operating area.Approximately 148 miles of gathering lines were installed in thefirst quarter of 2013, while five new central gathering andtreating facilities were commissioned, with two additionalfacilities in various stages of planning or construction. TheCompany currently transports approximately 65 percent of itscrude/condensate by pipeline, with additional contract negotiationsand facility designs under way that are expected to push thatfigure to 75 percent by the end of May. The ability to transportmore barrels by pipeline enables the Company to reduce costs,improve reliability and lessen its environmental footprint.

The Company is confident the core acreage position will bedeveloped on a maximum of 80-acre spacings and continues toevaluate the potential of downspacing to 40- and 60-acre units.Marathon Oil has begun drilling wells in the Austin Chalk andPearsall formations to further test the resource potential of theseother horizons. The results to-date of the downspacing pilots havebeen in line with its expectations, and the Company anticipatesreleasing more definitive results of the downspacing pilots andadditional formation testing in the second half of this year.

BAKKEN: Marathon Oil averaged production of approximately 37,000net boed during the first quarter compared to 35,000 net boed inthe previous quarter. For the month of April, the Company estimatesaverage production was approximately 38,000 net boed. The Companyreached total depth on 18 gross wells during the first quarter andbrought 22 gross wells to sales. In the first quarter MarathonOil's average time to drill a well was 25 days spud-to-spud, atop-quartile performance in the areas in which Marathon Oiloperates. Marathon Oil's Bakken production averages approximately90 percent crude oil, 5 percent NGLs and 5 percent natural gas. TheCompany has increased its guidance for the Bakken for full-year2013 to approximately 40,000 net boed, a 14 percent increase overthe original guidance.

OKLAHOMA RESOURCE BASINS: The Company's unconventionalproduction averaged 13,000 net boed during the first quartercompared to 10,000 net boed in the previous quarter. During thefirst quarter, four gross wells were brought to sales. Marathon Oilanticipates drilling two wells each in the Mississippi Lime andGranite Wash formations during 2013.

GULF OF MEXICO: In March, Marathon Oil announced that theoutside-operated Shenandoah appraisal well in the deepwater Gulf ofMexico encountered more than 1,000 net feet of oil pay in multiplehigh-quality Lower Tertiary-aged reservoirs. The well is located onWalker Ridge Block 51, in which Marathon Oil holds a 10 percentworking interest.

The Company is currently participating in an appraisal well onthe Gunflint prospect on Mississippi Canyon Block 992, in which itholds an 18 percent outside-operated working interest. Afterpenetrating the initial appraisal targets, the well is beingdeepened to a previously untested Lower Miocene interval with aprojected total depth of 32,835 feet.

In March, the Company submitted the apparent high bids totalingapproximately $33 million for a 100 percent working interest in twoblocks in the Central Gulf of Mexico Lease Sale 227: KeathleyCanyon Block 340 on the Colonial prospect and Keathley Canyon Block153, an extension to the Meteor prospect on the Company's existingKeathley Canyon Block 196 lease. Keathley Canyon blocks 340 and 153are both inboard-Paleogene prospects.

International E&P

International E&P segment income totaled $453 million in thefirst quarter of 2013, relatively unchanged from $446 million inthe fourth quarter of 2012.

ANGOLA: During the first quarter, production available for saleaveraged 6,000 net boed while sales averaged 9,000 net boed fromthe Block 31 deepwater PSVM development, in which Marathon Oilholds a 10 percent non-operated working interest.

EQUATORIAL GUINEA: Continued strong operational performance,with availability of nearly 98 percent, bolstered production duringthe first quarter of 2013. Net production available for saleaveraged approximately 110,000 boed in the first quarter, roughlyflat compared to the fourth quarter of 2012. A 30-day plannedturnaround commenced April 1 and was safely completed eight daysahead of schedule and below budget. The Alba Field, associated gasplant and LNG facility each resumed full production on April 22,2013.

NORWAY: The production decline that Marathon Oil hasprojected and disclosed for several years in the Alvheim areacontinues to be less severe than expected. Net production availablefor sale averaged 86,500 boed for the first quarter, slightly lowerthan the 88,500 boed produced in the fourth quarter of 2012. Thebetter-than-expected results were achieved through continued strongoperational performance that delivered availability of 97 percent;reservoir and well performance at the upper end of expectations,resulting primarily from a delay in anticipated water breakthroughat the Volund field; and sustained contributions from the recentlycompleted development drilling program.

Also, the Darwin (formerly Veslemoy) exploration well in theBarents Sea was drilled in the first quarter of 2013 on PL 531, inwhich the Company holds a 10 percent non-operated fully carriedworking interest, to a total depth of 8,300 feet. Gas shows wererecorded in the Paleocene objective section, although nohydrocarbons were found in the Cretaceous section and the well hasbeen plugged and abandoned. Drilling is expected to commence in thethird quarter of 2013 on the Sverdrup exploration well on PL 330 inthe Norwegian Sea, in which the Company holds a 30 percentnon-operated working interest.

KURDISTAN REGION OF IRAQ: The Company spud the Mirawaexploration well on its operated Harir Block in March and the Safenexploration well on its operated Safen Block in April. The Mirawawell is expected to reach total depth in July and the Safen well isexpected to reach total depth in August, with testing programs tofollow on each well. Projected total depths for the Mirawa andSafen exploration wells are 12,800 feet and 10,350 feet,respectively. Marathon Oil holds a 45 percent working interest ineach block.

Additionally, following the successful appraisal program on theoutside-operated Atrush Block, a Declaration of Commerciality wasfiled with the Ministry of Natural Resources, and a Plan ofDevelopment is anticipated to be filed in May 2013. The Atrush-3appraisal well was spud in March. On the outside-operated SarsangBlock, two exploration wells, Mangesh and Gara, were spud in thesecond half of 2012 and are expected to reach total depth duringMay, with testing programs to follow on each well. Also on theSarsang Block, the East Swara Tika exploration well is expected tobe spud late in the second quarter or early in the third quarter of2013 and will test additional resource potential to the northeastof the previously announced Swara Tika discovery. Marathon Oilholds a 15 percent working interest in the Atrush Block and a 25percent working interest in the Sarsang Block.

ETHIOPIA: The Sabisa-1 exploration well on the onshore South OmoBlock has been drilled to a total depth of approximately 6,000 feetand recorded hydrocarbon indications in sands beneath a thickclaystone top seal. Hole instability issues have required thedrilling of a sidetrack to comprehensively log and sample zones ofinterest. Results from the sidetrack are expected in early June.Marathon Oil holds a 20 percent non-operated working interest inthe South Omo Block.

GABON: Exploration drilling began in April on the Diaman No. 1well in the Diaba License G4-223, offshore Gabon, to test thedeepwater presalt play. Drilling is expected to reach the projectedtotal depth of 18,300 feet in the third quarter. Marathon Oil holdsa 21.25 percent non-operated working interest in the DiabaLicense.

POLAND: After an extensive evaluation of the Company'sexploration activities in Poland and unsuccessful attempts to findcommercial levels of hydrocarbons, Marathon Oil has elected toconclude operations in the country. The Company is evaluatingdisposition options for its concessions, which had a net book valueat March 31, 2013, of $12 million.

Oil Sands Mining (OSM)

The OSM segment reported income of $38 million for the firstquarter of 2013, compared to $17 million in the fourth quarter of2012. The mines and upgrader experienced significantly improvedreliability. Primarily because of the reliabilityimprovements, combined production from the Jack Pine and MuskegRiver mines set a record bitumen production rate in the firstquarter. In addition, the upgrader availability was 100percent for the first quarter, allowing the facility to maximizeproduction of lighter synthetic crudes, which improved realizationsand profit margins.

First quarter 2013 operating costs were higher than the fourthquarter of 2012 because of seasonal activity such as overburdenremoval and infield drilling; however, because of higher productionresulting from improved reliability, operating costs per barreldecreased in the first quarter of 2013. Marathon Oil expectssecond quarter operating costs to be essentially flat compared tothe first quarter because of turnaround activities at the upgraderin the second quarter. The Company expects cost improvements onboth an absolute and per barrel basis in the third and fourthquarters of 2013 as a result of seasonal impacts and cost savingsinitiatives.

Corporate and Other

Marathon Oil changed the presentation of its consolidatedstatements of income, primarily to present additional details ofrevenues and expenses and to classify certain expenses moreconsistently with the peer group of independent exploration andproduction companies. As a result of these classificationchanges, more costs will be presented as general and administrativeexpenses in prior and future periods, primarily certain costsassociated with operations support and operations management.Offsetting reductions will be reflected in production, otheroperating and exploration expenses and taxes other than incometaxes. For the first and fourth quarters of 2012, $39 million and$38 million of such costs were reclassified, respectively.

The Company continues to progress the potential sale of assetsin an ongoing effort to optimize its portfolio for profitablegrowth. In April 2013, Marathon Oil reached an agreement to sellits interests in the DJ Basin. The transaction is expected to closein mid-2013 and a second quarter loss of approximately $115 millionis anticipated on this disposition.

As previously announced, Marathon Oil anticipates divestituresof $1.5 billion to $3 billion over the period of 2011 through 2013.As of May 6, 2013, the Company has agreed upon or closed onapproximately $1.3 billion in divestitures.

Special Items

In the first quarter of 2013, Marathon Oil recorded a net gainof $64 million after-tax ($101 million pre-tax) on three assetdispositions: a gain of $29 million after-tax ($46 million pre-tax)on the sale of its assets in Alaska; a loss of $28 millionafter-tax ($43 million pre-tax) on the conveyance of its interestin the Marcellus natural gas shale play; and a gain of $63 millionafter-tax ($98 million pre-tax) on the sale of its interest in theNeptune gas plant.

In August 2012, Marathon Oil entered into crude oil derivativeinstruments related to a portion of its forecast North AmericaE&P crude oil sales. For the first quarter of 2013, anafter-tax unrealized loss of $32 million ($50 million pre-tax) wasrecorded related to these crude oil derivative instruments.

In the first quarter of 2013, as a result of the Company'sdecision to wind down operations in the Powder River Basin due topoor economics, an after-tax impairment of $10 million ($15 millionpre-tax) was recorded.

The Company will conduct a conference call and webcast onWednesday, May 8 at 9:00 a.m. EDT, during which it will discussfirst quarter 2013 results and will include forward-lookinginformation. To listen to the webcast of the conference call andview the slides, visit the Marathon Oil website at of the webcast will be available through June 8. Financialand operational information will also be provided via the QuarterlyInvestor Packet available on Marathon Oil's website at 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 as soon as practical after theearnings release is issued.

# # #

In addition to net income determined in accordance withgenerally accepted accounting principles, Marathon Oil has providedsupplementally "adjusted net income," a non-GAAP financial measurewhich facilitates comparisons to earnings forecasts prepared bystock analysts and other third parties. Such forecasts generallyexclude the 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 net income and "adjusted net income" isprovided in a table on page 1 of this release. "Adjusted netincome" should not be considered a substitute for net income asreported in accordance with GAAP. Management, as well as certaininvestors, uses "adjusted net income" to evaluate Marathon Oil'sfinancial performance between periods. Management also uses"adjusted net income" to compare Marathon Oil's performance tocertain competitors.

In addition to cash flow from operations determined inaccordance with GAAP, Marathon Oil has provided supplementally"cash flow from operations before changes in working capital," anon-GAAP financial measure, which management believes demonstratesthe Company's ability to internally fund capital expenditures, paydividends and service debt. A reconciliation between GAAP cash flowfrom operations and "cash flow from operations before changes inworking capital" is provided in a table on page 1 of this release."Cash flow from operations before changes in working capital"should not be considered a substitute for cash flow from operationsas reported in accordance with GAAP. Management, as well as certaininvestors, uses "cash flow from operations before changes inworking capital" to evaluate Marathon Oil's financial performancebetween periods. Management also uses "cash flow from operationsbefore changes in working capital" to compare Marathon Oil'sperformance to certain competitors.

This release contains forward-looking statements withrespect to the timing and levels of the Company's worldwide liquidhydrocarbon, natural gas and synthetic crude oil production,production forecasts for the Bakken resource play, explorationdrilling activity in the Gulf of Mexico, Oklahoma Resource Basins,Ethiopia, Gabon, the Kurdistan Region of Iraq and Norway, plannedinfrastructure improvements in the Eagle Ford operating area, plansto exit Poland, the filing of a Plan of Development for the AtrushBlock, the timing of closing the sale of the Company's interests inthe DJ Basin, 2013 operating costs and projected asset dispositionsthrough 2013. The average times to drill a well referenced in therelease may not be indicative of future drilling times. The currentproduction rates referenced in this release may not be indicativeof future production rates. Factors that could potentially affectthe timing and levels of the Company's worldwide liquidhydrocarbon, natural gas and synthetic crude oil production,production forecasts for the Bakken resource play, explorationdrilling activity in the Gulf of Mexico, Oklahoma Resource Basins,Ethiopia, 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. The planned infrastructureimprovements in the Eagle Ford could be affected by the inabilityto obtain or delay in obtaining necessary government andthird-party approvals and permits. Plans to exit Poland, the timingof filing the Plan of Development for the Atrush Block, 2013operating costs and the projected asset dispositions are based oncurrent expectations, good faith estimates and projections and arenot guarantees of future performance. The timing of closing thesale of the Company's interests in the DJ Basin is subject to thesatisfaction of customary closing conditions. Actual results maydiffer materially from these expectations, estimates andprojections and are subject to certain risks, uncertainties andother factors, some of which are beyond the Company's control anddifficult to predict. The foregoing factors (among others) couldcause actual results to differ materially from those set forth inthe forward-looking statements. In accordance with the "safeharbor" provisions of the Private Securities Litigation Reform Actof 1995, Marathon Oil Corporation has included in its Annual Reporton Form 10-K for the year ended December 31, 2012, and subsequentForms 8-K, cautionary language identifying other important factors,though not necessarily all such factors, that could cause futureoutcomes to differ materially from those set forth in theforward-looking statements.
Consolidated Statements of Income(Unaudited) Three MonthsEnded
  Mar. 31 Dec. 31 Mar. 31
(In millions, except per sharedata) 2013 2012 2012
Revenues and otherincome:      
   Sales and other operatingrevenues, including related party $3,440 $3,644 $2,954
   Marketing revenues 430 487 839
   Income from equity methodinvestments 118 110 78
   Net gain on disposal ofassets 109 1 166
   Other income(loss) 9 (5) 3
Total revenues and other income 4,106 4,237 4,040
Costs andexpenses:      
   Production 578 626 514
   Marketing, includingpurchases from related parties 429 500 842
   Other operating 111 122 92
   Exploration 465 235 135
   Depreciation, depletion andamortization 747 699 574
   Impairments 38 100 262
   Taxes other thanincome 84 70 68
   General andadministrative 174 204 159
Total costs and expenses 2,626 2,556 2,646
Income fromoperations 1,480 1,681 1,394
   Net interest andother (72) (59) (50)
Income from operations beforeincome taxes 1,408 1,622 1,344
   Provision for incometaxes 1,025 1,300 927
Netincome $383 $322 $417
Adjusted net income(a) $361 $388 $478
Adjustments for special items (net oftaxes):      
Unrealized gain (loss) on crude oilderivative instruments                     (32)                         5                        -  
Impairments                     (10)                     (64)                  (167)
Net gain on dispositions                      64                        -                      106
Pension settlement                          -                       (7)                        -  
Netincome $383 $322 $417
Per Share Data      
Net income $0.54 $0.46 $0.59
Adjusted net income (a) $0.51 $0.55 $0.67
Net income $0.54 $0.45 $0.59
Weighted AverageShares:      
Basic 708 707 706
Diluted 712 711 710
(a) Adjusted net income is anon-GAAP financial measure and should not be considered asubstitute for net income as determined in accordance withaccounting principles generally accepted in the United States. Seeabove for further discussion of adjusted net income.
Supplemental Statistics(Unaudited) Three MonthsEnded
  Mar. 31 Dec. 31 Mar. 31
(in millions) 2013 2012 2012
Segment Income(Loss)      
North America E&P ($59) $101 $104
International E&P                    453                    446                    407
Oil Sands Mining 38 17 38
Segment income 432 564 549
Items not allocated to segments, net ofincome taxes:      
Corporate and unallocated (71) (176) (71)
Unrealized gain (loss)  on crude oilderivative instruments                     (32)                         5                        -  
Impairments                     (10)                     (64)                  (167)
Net gain on dispositions                      64                        -                      106
Pension settlement                        -                         (7)                        -  
Net income $383 $322 $417
Capital Expenditures(b)      
North America E&P $970 $1,101 $829
International E&P                    225                    271                    138
Oil Sands Mining                      45                      52                      52
Corporate                      30                      28                      44
Total $1,270 $1,452 $1,063
North America E&P $435 $195 $106
International E&P                      30                      40                      29
Total $465 $235 $135
Provision for IncomeTaxes      
Current income taxes 981 1,483 949
Deferred income taxes 44 (183) (22)
Total $1,025 $1,300 $927
(b)  Capitalexpenditures include changes in accruals.
Supplemental Statistics(Unaudited) Three MonthsEnded
  Mar. 31 Dec. 31 Mar. 31
  2013 2012 2012
North America E&P - Net SalesVolumes      
Liquid Hydrocarbons(mbbld)                    141                    133                      90
     Bakken 35 33 24
     EagleFord                      58                      47                      12
     AnadarkoWoodford                         4                         3                         2
     Other NorthAmerica                      44                      50                      52
  Crude Oil and Condensate(mbbld)                    121                    117                      83
     Bakken 33 32 23
     EagleFord                      46                      38                      11
     AnadarkoWoodford                         1                         1                         1
     Other NorthAmerica                      41                      46                      48
  Natural Gas Liquids(mbbld)                      20                      16                         7
     Bakken 2 1 1
     EagleFord                      12                         9                         1
     AnadarkoWoodford                         3                         2                         1
     Other NorthAmerica                         3                         4                         4
  Natural Gas(mmcfd)                    340                    404                    344
     Bakken                      13                      10                         9
     EagleFord                      83                      72                      13
     AnadarkoWoodford                      51                      39                      17
     Alaska                      31                    100                      98
     Other NorthAmerica                    162                    183                    207
International E&P - Net SalesVolumes      
Liquid Hydrocarbons(mbbld)                    180                    191                    149
     EquatorialGuinea                      37                      33                      35
     Norway                      79                      79                      90
  United Kingdom                      21                      20                         7
     Libya                      34                      59                      17
     OtherInternational                         9                        -                          -  
  Natural Gas(mmcfd)                    568                    569                    522
     EquatorialGuinea                    447                    445                    417
     Norway                      54                      54                      52
     United Kingdom(c)                      41                      44                      52
    Libya                      26                      26                         1
Oil Sands Mining - Net SalesVolumes      
Synthetic Crude Oil (mbbld) (d)                      51                      48                      44
Total Company - Net SalesVolumes (mboed)                    523                    535                    427
Net Sales Volumes of EquityMethod Investees (mtd)       
     LNG 6,787 6,327 6,291
    Methanol 1,410 1,465 1,312
(c)  Includes naturalgas acquired for injection and subsequent resale of 11 mmcfd, 12mmcfd and 14 mmcfd in first quarter of 2013, the fourth quarter of2012 and the first quarter of 2012, respectively. 
(d)   Includesblendstocks.
Supplemental Statistics(Unaudited) Three MonthsEnded
  Mar. 31 Dec. 31 Mar. 31
  2013 2012 2012
North America E&P - AverageRealizations (e)      
Liquid Hydrocarbons ($ per bbl)(f) $86.14 $83.20 $93.63
     Bakken                 88.60                 79.97                 87.04
     EagleFord                 88.06                 85.69                 99.88
     AnadarkoWoodford                 51.05                 49.43                 53.37
  Crude Oil and Condensate($ per bbl) $94.68 $89.92 $97.28
     Bakken                 91.22                 81.78                 88.15
     EagleFord              103.78                 99.21              106.02
     AnadarkoWoodford                 90.52                 88.14                 97.91
  Natural Gas Liquids ($ perbbl) $35.48 $35.29 $51.55
     Bakken                 41.05                 41.15                 51.42
     EagleFord                 28.16                 30.23                 48.66
     AnadarkoWoodford                 37.94                 32.81                 33.46
  Natural Gas ($ permcf) $3.86 $4.39 $4.13
     Bakken                   3.61                   3.50                   3.73
     EagleFord                   3.35                   3.38                   2.81
     AnadarkoWoodford                   3.67                   3.39                   3.41
     Alaska                   7.90                   7.13                   7.32
International E&P- AverageRealizations (e)      
Liquid Hydrocarbons ($ perbbl) $107.68 $108.01 $113.55
     EquatorialGuinea                 65.89                 58.12                 68.97
     Norway              117.13              114.64              124.68
     UnitedKingdom              112.25              109.04              111.96
     Libya              129.56              126.70              147.64
     OtherInternational              105.95                        -                          -  
  Natural Gas ($ permcf) $2.57 $2.46 $2.19
     EquatorialGuinea (g)                   0.24                   0.24                   0.24
     Norway                 14.00                 12.74                 10.53
     UnitedKingdom                 11.27                 10.62                   9.46
     Libya                   5.04                   5.19                   0.70
Oil Sands Mining - AverageRealizations (e)      
Synthetic Crude Oil ($ perbbl) $79.98 $76.36 $90.88
(e)   Excludesgains or losses on derivative instruments.
(f)   Inclusion ofrealized gains (losses) on crude oil derivative instruments wouldhave increased (decreased) North America E&P average liquidhydrocarbon realizations by ($0.37) per bbl for the first quarterof 2013 and $1.27 per bbl for the fourth quarter of 2012. There were no realized gains (losses) on crude oil derivativeinstruments in the first quarter of 2012.
(g)   Primarilyrepresents fixed prices under long-term contracts with Alba PlantLLC, Atlantic Methanol Production Company LLC and Equatorial GuineaLNG Holdings Limited, which are equity method investees. MarathonOil includes its share of income from each of these equity methodinvestees in the International E&P segment.
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