Marathon Oil Announces Third Quarter 2014 Results

HOUSTON, Nov. 3, 2014 (GLOBE NEWSWIRE) — Marathon Oil Corporation (NYSE:MRO) today reported third quarter

2014 adjusted income from continuing operations of $388 million, or

$0.57 per diluted share, and adjusted net income of $515 million,

or $0.76 per diluted share, both excluding the impact of certain

items not typically represented in analysts’ earnings estimates,

and that would otherwise affect comparability of results. Reported

income from continuing operations was $304 million, or $0.45 per

diluted share, and reported net income was $431 million, or $0.64

per diluted share.

Key Quarterly Highlights

• Three high-quality U.S. resource

plays averaged net production of 192,000 boed, up 43% from the

year-ago quarter and 13% higher than the second quarter of 2014. On

track for greater than 30% production growth year-over-year as

supported by:

◦ Continued

strong pace in the Eagle Ford with a record 87 gross operated wells

to sales, up 14% quarter-on-quarter

◦ Eight gross

operated Austin Chalk wells brought to sales during the quarter,

all within the previously delineated acreage; 16 additional wells

being drilled, completed or awaiting first production

◦ Nineteen

gross operated Bakken wells brought to sales of which eight are

piloting enhanced completions with encouraging early results

◦ Incremental

drilling rig added in the Bakken as of late September to provide

additional capacity for high-density spacing and enhanced

completion pilots

◦ Six gross

operated wells brought to sales in the Oklahoma Resource Basins, of

which four were in the SCOOP and two in the Southern Mississippi

Trend; best operated well to date with 30-day IP rate of 2,800 boed

(55% liquids)

◦ Executed

agreements in late October to add approx. 12,000 net acres to SCOOP

position, including prospective acres for the Springer

formation

• Began drilling the Company-operated

Key Largo exploration well in the Gulf of Mexico

• Recorded 96% average operational

availability for Company-operated assets

• Closed sale of the Norway business on

Oct. 15 for approximately $2.1 billion in proceeds

(a) The Angola assets were sold in the first quarter of 2014 and

the sale of the Company’s Norway business closed on October 15,

2014. The Angola and Norway businesses are reflected as

discontinued operations in all periods presented.

(b) Non-GAAP financial measure. See “Non-GAAP Measures”

below for further discussion.

“Marathon Oil’s U.S. resource plays delivered strong operational

performance in the third quarter, and we remain on track to achieve

greater than 30 percent production growth year-over-year in the

resource plays,” said Lee M. Tillman, Marathon Oil president and

CEO. “Both our Eagle Ford and Bakken net production delivered

double-digit growth compared to the previous quarter. However,

lower price realizations offset the impact of higher production

volumes in our financial results.

“In October we closed on the sale of our Norway business for

proceeds of approximately $2.1 billion. The first priority for the

use of proceeds is organic reinvestment in our deep and growing

U.S. unconventional portfolio. Already we’ve added an incremental

drilling rig in the Bakken and have plans to add two rigs in the

Oklahoma Resource Basins before year end, as previously announced.

Importantly, we continue to drive top-quartile drilling performance

and enhanced production rates through improved completion

designs.

“Additionally, we spud the Key Largo exploration well in

September to test an oil-prone inboard Paleogene prospect in the

Gulf of Mexico,” Tillman added, “and internationally, in the U.K.

North Sea we brought two successful South Brae infill wells online

with initial production well above pre-drill estimates.”

Sales and Production Volumes

Total Company sales volumes from continuing operations

(excluding Libya) during third quarter 2014 averaged 411,000 net

barrels of oil equivalent per day (boed) compared to 382,000 net

boed for third quarter 2013.

(a) Libya is excluded because of uncertainty around future

production and sales levels.

(b) Angola and Norway are reflected as discontinued

operations (Disc Ops).

(a) This guidance excludes the effect of acquisitions or

dispositions not previously announced.

(b) Libya is excluded because of uncertainty around future

production and sales levels.

(d) Upgraded bitumen excluding blendstocks.

The difference between production volumes available for sale and

recorded sales for exploration and production (E&P) volumes was

primarily due to the timing of international liftings.

Third quarter 2014 production available for sale from continuing

operations (excluding Libya) averaged 409,000 net boed, compared to

third quarter 2013 average of 365,000 net boed. The increase in the

third quarter of 2014 was driven by North America E&P’s

continued growth in the U.S. resource plays.

International E&P production available for sale (excluding

Libya and discontinued operations) for third quarter 2014 was lower

compared to third quarter 2013 primarily as a result of temporary

production curtailments in Equatorial Guinea due to unplanned

maintenance on the main condensate line as well as lower

reliability at the outside-operated methanol facility. Planned

maintenance activities at the outside-operated Forties Pipeline

System also resulted in lower operational availability across the

Brae complex in the U.K.

Oil Sands Mining (OSM) production available for sale for third

quarter 2014 was up 15 percent primarily the result of improved

operational availability at the upgrader and mine and higher

beginning bitumen inventories, compared to third quarter 2013.

Production available for sale for the Norway business averaged

56,000 net boed in third quarter 2014 compared to 69,000 net boed

in third quarter 2013. The decrease was primarily related to a

planned 12-day turnaround at Alvheim, versus a planned 7-day

turnaround in the year-ago quarter, as well as natural field

decline. As a result of the sale of the Company’s Norway business,

which closed Oct. 15, Norway is reflected as discontinued

operations.

In July, Libya’s National Oil Corporation rescinded force

majeure associated with third-party labor strikes at the Es Sider

terminal. Marathon Oil’s first 2014 lifting occurred in August, and

was sourced from existing inventory at the terminal. Production

from the Waha concessions resumed in August; however, considerable

uncertainty remains around future production and sales levels.

Marathon Oil has not included production from Libya in

forecasts.

For fourth quarter 2014, the Company continues to expect growth

in North America E&P production available for sale, driven by

continued strong growth from the combined U.S. resource plays.

International E&P production available for sale (excluding

Libya) is expected to increase in the fourth quarter, reflecting

improved reliability and no significant planned maintenance

activities. Fourth quarter OSM production is expected to decrease

from third quarter volumes due to planned maintenance at the

mine.

As reflected in the table above, the Company’s full-year

guidance has been narrowed to 350,000 to 360,000 net boed for

production available for sale from the combined North America

E&P and International E&P segments (excluding Libya and

discontinued operations). This guidance reflects a greater than 30

percent year-over-year growth rate in the U.S. resource plays.

Full-year 2014 production guidance for the OSM segment is 37,000 to

42,000 net barrels per day (bbld) of synthetic crude oil.

Segment Results

Total segment income from continuing operations was $491 million

in third quarter 2014, compared to $540 million in third quarter

2013.

(b) See Supplemental Statistics below for a reconciliation of

segment income to net income.

North America E&P

The North America E&P segment reported income of $292

million in third quarter 2014, compared to income of $242 million

in third quarter 2013. The increase is primarily due to higher net

sales volumes from the U.S. resource plays, partially offset by

lower crude oil price realizations and expenses associated with the

higher net sales volumes, such as production expenses and

depreciation, depletion and amortization (DD&A).

EAGLE FORD: Marathon Oil’s production in the Eagle Ford averaged

117,000 net boed in third quarter 2014, an increase of 43 percent

over the year-ago average and 15 percent over the previous quarter.

Approximately 64 percent of third quarter net production was crude

oil/condensate, 18 percent was natural gas liquids (NGLs) and 18

percent was natural gas. Enhanced completion design in the Eagle

Ford continues to deliver strong results as the growing population

of these wells achieving 180-day cumulative production continues to

average 25 percent improvement in volumes. Marathon Oil reached

total depth on 93 gross Company-operated wells and brought 87 gross

operated wells to sales in the third quarter, compared to 88 and 76

gross wells, respectively, in second quarter 2014. Marathon Oil’s

average time to drill an Eagle Ford well in third quarter 2014,

spud-to-total depth, was 13 days. The Company’s high-density pad

drilling continues to average four wells per pad.

Included with the Eagle Ford well counts noted above, the

Company brought online eight Austin Chalk wells, all drilled within

the previously delineated acreage. Thirty-day initial production

(IP) rates ranged from 800 – 1,300 boed with an average 69 percent

liquids yield. Sixteen additional Austin Chalk wells are currently

being drilled, completed or awaiting first production.

BAKKEN: Marathon Oil averaged 56,000 net boed of production in

the Bakken during third quarter 2014, an increase of 47 percent

over the year-ago average and 12 percent over the previous quarter.

The Company’s Bakken production averaged 89 percent crude oil, 6

percent NGLs and 5 percent natural gas. The Company reached total

depth on 25 gross Company-operated wells and brought 19 gross

operated wells to sales in the third quarter, compared to 19 gross

wells reaching total depth and 19 brought to sales in second

quarter 2014. The Company’s time to drill a Bakken well,

spud-to-total depth, averaged 16 days in the third quarter. The

Company re-completed 16 wells in the Hector and Ajax areas during

third quarter 2014, with 13 of these wells brought to sales.

Three of the four high-density spacing pilots have begun

drilling, with each pad comprised of six Middle Bakken and six

Three Forks first bench wells per drilling-spacing unit. The

Company also continues to execute an enhanced completion design

pilot program, including elevated proppant volumes, hybrid

slickwater fracs, increased stages and cemented liners. Of the 19

Bakken wells brought to sales in the quarter, eight are piloting

enhanced completions with encouraging early results. In late

September an incremental drilling rig was added in the Bakken to

provide additional capacity for high-density spacing and enhanced

completion pilots.

OKLAHOMA RESOURCE BASINS: The Company’s unconventional Oklahoma

production averaged 19,000 net boed during third quarter 2014, an

increase of 27 percent over the year-ago average and up modestly

compared to the previous quarter. Approximately 42 percent of third

quarter 2014 net production was liquids and 58 percent was natural

gas. During the third quarter, the Company reached total depth on

four gross Company-operated wells and brought six gross operated

wells to sales. Of the wells brought to sales, four were in the

South Central Oklahoma Oil Province (SCOOP), including the best

Company-operated well to date — a single-mile lateral with a

30-day IP rate of 2,800 boed (55 percent liquids). The two other

wells brought to sales were in the Southern Mississippi Trend. The

Company is on plan to add two incremental rigs in the Oklahoma

Resource Basins by year end.

GULF OF MEXICO: The Company-operated Key Largo exploration

prospect, located on Walker Ridge Block 578, spud in September as

the first well of a multi-year Gulf of Mexico exploration program

with a new-build deepwater drillship. Marathon Oil is operator and

holds a 60 percent working interest in the prospect.

An exploration well on the outside-operated Perseus prospect in

Desoto Canyon Block 231 was also spud in September. Marathon Oil

holds a 30 percent non-operated working interest.

The second appraisal well on the outside-operated Shenandoah

prospect was spud in late May and is still drilling. The well is

located on Walker Ridge Block 52, in which Marathon Oil holds a 10

percent working interest.

International E&P

The International E&P segment reported income of $106

million in third quarter 2014, compared to segment income of $192

million in third quarter 2013. The decrease is primarily a result

of lower net sales volumes in the U.K. and Equatorial Guinea as

previously discussed and lower commodity price realizations,

partially offset by reduced taxes and other expenses associated

with the lower sales volumes.

EQUATORIAL GUINEA: Production available for sale averaged

100,000 net boed in third quarter 2014, compared to 112,000 net

boed in third quarter 2013. As previously discussed, volumes were

impacted by planned and unplanned offshore maintenance, and lower

reliability at the outside-operated methanol facility. An

exploration well on the Sodalita West prospect is expected to spud

by the end of the year as the first of two offshore exploration

wells targeting oil-prone plays.

U.K.: Production available for sale averaged 13,000 net boed in

third quarter 2014, relatively flat compared to third quarter 2013

despite natural decline within the Brae fields. Brae production was

impacted by planned maintenance activities on the outside-operated

Forties Pipeline System, which was offset by improved Foinaven

reliability. The Company brought two South Brae infill wells online

with initial production rates above pre-drill estimates. A third

South Brae well and a new West Brae well are planned to come online

in first quarter 2015.

KURDISTAN REGION OF IRAQ: Marathon Oil resumed testing of the

Jisik-1 exploration well on the Company-operated Harir Block

following suspension of certain operations due to security concerns

in the region and continues to closely monitor the situation. In

the fourth quarter a 2D seismic program will commence and the

Mirawa-2 appraisal well is expected to spud. Marathon Oil

holds a 45 percent working interest in the Harir Block.

On the outside-operated Sarsang block, the East Swara Tika-1

exploration well continues testing. Discussions are ongoing with

the Ministry of Natural Resources to finalize the Swara Tika field

development plan. Marathon Oil holds a 20 percent working interest

in the Sarsang Block.

On the outside-operated Atrush Block, construction of the phase

one production facility continues with first oil expected in 2015.

Marathon Oil holds a 15 percent working interest in the Atrush

Block.

GABON: In August, the Company signed an exploration and

production sharing contract (EPSC) for Gabon offshore Block G13,

which was subsequently re-named Tchicuate. Located in the deepwater

pre-salt play, the block encompasses 275,000 acres; and,

acquisition of 3D seismic is planned to commence in early November.

Marathon Oil holds a 100 percent participating interest and

operatorship in the block. In the event of development, the

Republic of Gabon will assume a 20 percent financed interest in the

contract upon commencement of production. The State holds

additional rights to participate in the block in the future as a

co-investor.

Oil Sands Mining

The OSM segment reported income of $93 million for third quarter

2014, compared to $106 million in third quarter 2013. The decrease

was primarily a result of lower commodity price realizations

partially offset by higher sales volumes.

Corporate and Special Items

On Oct. 15, Marathon Oil completed the sale of its Norway

business for proceeds of approximately $2.1 billion.

Included in the adjustments to net income for third quarter 2014

were an after-tax settlement charge of $14 million ($22 million

pre-tax) in connection with the Company’s U.S. pension plans, and

impairment expense of $70 million ($109 million pre-tax) due

primarily to estimated abandonment cost revisions for Gulf of

Mexico assets and lower forecasted commodity prices.

The Company’s webcast commentary and associated slides related

to Marathon Oil’s earnings, as well as the Quarterly Investor

Packet, will be posted to the Company’s website at

http://ir.marathonoil.com and to its mobile app as soon as

practicable following this release today, Nov. 3. The Company will

conduct a question and answer webcast/call on Tuesday, Nov. 4 at 9

a.m. EST. The webcast slides, associated commentary and answers to

questions will include forward-looking information. To listen to

the Nov. 4 live webcast, visit the Marathon Oil website at

http://www.marathonoil.com. Replays of the webcast will be

available through Dec. 4.

# # #

Non-GAAP Measures

Adjusted net income and adjusted net income per diluted

share, non-GAAP financial measures, facilitate comparisons to

earnings forecasts prepared by stock analysts and other third

parties. Such forecasts generally exclude the effects of items that

are considered non-recurring, are difficult to predict or to

measure in advance or that are not directly related to Marathon

Oil’s ongoing operations. See the first table of this release for a

reconciliation between adjusted net income and net income, its most

directly comparable GAAP financial measure. Adjusted net income and

adjusted net income per diluted share should not be considered

substitutes for net income and net income per diluted share as

reported in accordance with GAAP. Management uses adjusted net

income to evaluate Marathon Oil’s financial performance between

periods and to compare Marathon Oil’s performance to certain

competitors.

Adjusted income from continuing operations and adjusted

income from continuing operations per diluted share, non-GAAP

financial measures, facilitate comparisons to earnings forecasts

prepared by stock analysts and other third parties. Such forecasts

generally exclude the effects of items that are considered

non-recurring, are difficult to predict or to measure in advance or

that are not directly related to Marathon Oil’s ongoing operations

and can exclude the impact of discontinued operations. See the

first table of this release for a reconciliation between adjusted

income from continuing operations and income from continuing

operations, its most directly comparable GAAP financial measure.

Adjusted income from continuing operations and adjusted income from

continuing operations per diluted share should not be considered

substitutes for income from continuing operations and income from

continuing operations per diluted share as reported in accordance

with GAAP. Management uses adjusted income from continuing

operations to evaluate Marathon Oil’s financial performance between

periods and to compare Marathon Oil’s performance to certain

competitors.

Management believes net cash provided by continuing

operations before changes in working capital, a non-GAAP financial

measure, demonstrates the Company’s ability to internally fund

capital expenditures, pay dividends and service debt. See the first

table of this release for a reconciliation between net cash

provided by continuing operations before changes in working capital

and net cash provided by operating activities, its most directly

comparable GAAP financial measure. Net cash provided by continuing

operations before changes in working capital should not be

considered a substitute for net cash provided by operating

activities as reported in accordance with GAAP. Management uses net

cash provided by continuing operations before changes in working

capital to evaluate Marathon Oil’s financial performance between

periods and to compare Marathon Oil’s performance to certain

competitors.

Forward-looking Statements

This release contains forward-looking statements within the

meaning of Section 27A of the Securities Act of 1933, as amended,

and Section 21E of the Securities Exchange Act of 1934, as amended.

Forward-looking statements are statements other than statements of

historical fact that give current expectations or forecasts of

future events. They include, but are not limited to: the Company’s

operational, financial and growth strategies, including planned

capital expenditures and the impact thereof, growth activities and

expectations, acreage additions, rig additions, future drilling

plans and projects, timing and expectations, seismic acquisitions,

well testing, maintenance activities and the timing and impact

thereof and well spud timing and expectations; the Company’s

ability to successfully effect those strategies and the expected

results therefrom; the Company’s financial and operational outlook,

and ability to fulfill that outlook; 2014 production guidance,

growth expectations and the drivers thereof; statements related to

enhanced completion designs and the expected benefits and results

thereof; and the planned use of proceeds from the sale of the

Norway business. While the Company believes that the assumptions

concerning future events are reasonable, a number of factors could

cause results to differ materially from those indicated by such

forward-looking statements including, but not limited to:

conditions in the oil and gas industry, including the level of

supply or demand for liquid hydrocarbons and natural gas and the

impact on the price of liquid hydrocarbons and natural gas; changes

in political or economic conditions in key operating markets,

including international markets; the amount of capital available

for exploration and development; timing of commencing production

from new wells; drilling rig availability; availability of

materials and labor; the inability to obtain or delay in obtaining

necessary government or third-party approvals and permits;

non-performance by third parties of their contractual obligations;

unforeseen hazards such as weather conditions, acts of war or

terrorist acts and the governmental or military response thereto;

changes in safety, health, environmental and other regulations; and

other geological, operating and economic considerations. These

forward-looking statements are also affected by the risk factors,

forward-looking statements and challenges and uncertainties

described in the Company’s Annual Report on Form 10-K for the year

ended December 31, 2013, and those set forth from time to time in

the Company’s filings with the Securities and Exchange Commission,

which are currently available at www.marathonoil.com. Except as

required by law, the Company expressly disclaims any intention or

obligation to revise or update any forward-looking statements

whether as a result of new information, future events or

otherwise.

(a) The Angola assets were sold in the first quarter of

2014 and the sale of the Company’s Norway business closed on

October 15, 2014. The Angola and Norway businesses are

reflected as discontinued operations in all periods presented.

(b) Non-GAAP financial measure. See “Non-GAAP Measures” above

for further discussion.

(d) Includes natural gas acquired for injection and subsequent

resale of 3 mmcfd, 5 mmcfd and 4 mmcfd in the third and second

quarters of 2014 and in the third quarter of 2013,

respectively.

(e) Includes Gulf of Mexico and other conventional onshore U.S.

production, plus Alaska in 2013.

(f) Includes blendstocks.

(g) Excludes gains or losses on derivative instruments.

(h) There were no open crude oil derivative instruments in the

second and third quarters of 2014. Inclusion of realized

losses on crude oil derivative instruments would have decreased

North America E&P average liquid hydrocarbon price realizations

by $1.81 per bbl for third quarter of 2013.

(i) Represents fixed prices under long-term contracts with

Alba Plant LLC, Atlantic Methanol Production Company LLC and

Equatorial Guinea LNG Holdings Limited, which are equity method

investees. Marathon Oil includes its share of income from each of

these equity method investees in the International E&P

segment.

CONTACT: Media Relations Contacts:

         Lee Warren: 713-296-4103

         Lisa Singhania: 713-296-4101

         

         Investor Relations Contact:

         Chris Phillips: 713-296-3213

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