Marathon Sets New Project Completion Date
Click here to go directly to the Detroit HOUP update below >>
MARATHON SETS 2009 CAPITAL, INVESTMENT AND EXPLORATION BUDGET
$5.7 BILLION BUDGET REPRESENTS
24 PERCENT REDUCTION FROM 2008 SPENDING
HOUSTON, Feb. 3, 2009 – Marathon Oil Corporation (NYSE: MRO) today announced a $5.7 billion capital, investment and exploration budget for 2009, which represents a 24 percent decrease from 2008 capital spending of $7.6 billion. Marathon’s 2008 capital spending was 5 percent less than the original $8 billion budget for the year.
“Marathon’s 2009 capital program demonstrates a balanced approach that will maintain solid production performance, enhance our strong downstream business, and provide necessary capital investments in profitable mid- and long-term growth projects. Our balanced approach to investing is designed to maintain our solid financial position, deliver a competitive dividend, and enhance shareholder value,” said Clarence P. Cazalot, Jr., Marathon president and CEO.
“With more constrained investment levels, as well as the completed and announced non-core asset sales, we now expect the combined production for 2011 from our upstream and oil sands mining segments to be approximately 450,000 barrels of oil equivalent per day (boepd). This is a 7 percent compound average growth rate from our 2007 production level and 4 percent from our 2008 level, both also adjusted for announced asset sales,” said Cazalot.
Exploration and Production
Marathon’s 2009 worldwide exploration and production budget of $2.5 billion reflects a decrease of 26 percent over 2008 capital spending of $3.3 billion.
During 2009, Marathon expects to spend $1.1 billion on projects that will sustain and grow production in the short term. This includes funds for resource plays in the Bakken Shale and Piceance Basin, domestic oil and gas assets, and international projects such as development drilling in the U.K. Foinaven area and the Volund development in Norway. Approximately $850 million will be spent on projects that provide mid-term production growth, such as Droshky and Ozona in the deepwater Gulf of Mexico, as well as emerging resource plays in the Marcellus and Woodford Shales. Funds in the amount of $480 million will be spent on long-term projects, such as the PSVM development on Angola Block 31 and the anticipated Gudrun development in Norway, as well as worldwide exploration spending in the Gulf of Mexico, Angola, Norway and Indonesia.
Marathon estimates 2009 production available for sale will be between 390,000 and 410,000 boepd, which excludes production from the announced sale of Marathon Oil Ireland Limited (MOIL) expected to close in the first quarter of 2009, and excludes the effect of any acquisitions or additional dispositions. This compares to 2008 production available for sale, excluding the MOIL and Heimdal area production, of 372,000 boepd, for an expected production growth range of between 5 and 10 percent.
Oil Sands Mining
Marathon has budgeted $887 million for its Oil Sands Mining segment in 2009 compared to 2008 spending of just under $1 billion. The 2009 budget decrease compared to the 2008 Oil Sands Mining spend reflects a stronger U.S. dollar to Canadian dollar exchange rate and expectations that non-essential projects will be deferred.
The majority of the 2009 Oil Sands Mining budget will fund the Athabasca Oil Sands Project Expansion 1. The expansion, which includes construction of mining and extraction facilities at the Jackpine Mine, expansion of froth treatment facilities at the existing Muskeg River Mine, expansion of the Scotford upgrader, and development of associated infrastructure, is expected to begin operations in the 2010/2011 timeframe.
Net bitumen production from the oil sands mining segment for 2009 is expected to be between 25,000 to 30,000 barrels per day (bpd) before royalties.
The Company holds a 20 percent interest in the Athabasca Oil Sands Project, a world-class project with a long-life, stable production profile that will contribute to Marathon’s success well into the future.
Refining, Marketing and Transportation
Refining, marketing and transportation spending is expected to total $1.9 billion for 2009, down from $2.9 billion expended in 2008. The 2009 downstream budget includes approximately $1 billion for the Garyville Major Expansion Project, $330 million for the Detroit Heavy Oil Upgrading Project (DHOUP), and $200 million to address the Mobile Source Air Toxics II regulations which go into effect on Jan. 1, 2011. The remainder of the 2009 budget is for facilities maintenance and to meet other regulatory requirements.
The Garyville refinery expansion is approximately 75 percent complete and on schedule for fourth quarter 2009 startup. The project, which is designed to improve scale efficiencies and feedstock flexibility, will increase the refinery’s capacity to process heavy crude by 180,000 bpd and add an additional 7.5 million gallons of clean transportation fuels to the market each day.
In order to better align timing of the DHOUP completion with changes in Canadian oil sands production projections and to optimize the completion of this project, the scheduled start-up date has been deferred until mid-2012. The cost of the project has increased approximately 15 percent to $2.2 billion due to additional costs associated with the project deferral as well as a scope change that will allow the Detroit refinery to process heavier and higher acidic crudes.
Corporate
During 2009, corporate spending is expected to total approximately $439 million, of which $406 million represents capitalized interest on assets under construction.
Tables detailing Marathon’s 2009 planned capital, investment and exploration budget and 2008 preliminary spending are attached.
The Company will conduct a conference call and webcast today, Feb. 3, 2009, at 2 p.m. EST during which it will discuss fourth quarter and full year 2008 results, the 2009 capital budget, as well as future prospects. The webcast will include synchronized slides. To listen to the webcast of the conference call and view the slides, visit the Marathon Web site at www.marathon.com. Replays of the webcast will be available through Feb. 17, 2009. Quarterly financial and operational information is also provided on Marathon’s Web site at http://ir.marathon.com in the Quarterly Investor Packet.
Marathon is an integrated international energy company engaged in exploration and production; oil sands mining; integrated gas; and refining, marketing and transportation operations. Marathon, which is based in Houston, Texas, has principal operations in the United States, Angola, Canada, Equatorial Guinea, Gabon, Indonesia, Ireland, Libya, Norway and the United Kingdom. Marathon is the fourth largest United States-based integrated oil company and the nation’s fifth largest refiner.
# # #
Note to investors: Marathon’s capital, investment and exploration budget includes items that will not be reported as capital expenditures under generally accepted accounting principles. See the table at the end of this release for a reconciliation of forecasted capital expenditures to the capital, investment and exploration budget. In the above discussion, segment amounts do not include capitalized interest. Capitalized interest for all capital projects is budgeted in total as part of the Company’s corporate capital spending budget.
This release contains forward-looking statements with respect to expected capital, investment and exploration spending, exploration and drilling plans, investments in new resource plays and development projects, the Athabasca Oil Sands Project Expansion 1, the Garyville refinery expansion project, the Detroit refinery heavy oil upgrading and expansion project, the timing and levels of the Company’s worldwide liquid hydrocarbon and natural gas production, bitumen production, the Droshky development, the Angola Block 31 development, and anticipated asset dispositions. The capital, investment and exploration spending budget is based on current expectations, estimates and projections and is not a guarantee of future performance. Some factors that could cause actual results to differ materially include prices of and demand for crude oil, natural gas and refined products, actions of competitors, disruptions or interruptions of our production or refining operations due to the shortage of skilled labor and unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response, and other operating and economic considerations. Some factors that could potentially affect the timing and levels of liquid hydrocarbon and natural gas production, bitumen production, the Droshky and Angola developments, exploration and drilling activities, and investments in new resource plays and the development projects include pricing, supply and demand for petroleum products, amount of capital available for exploration and development, occurrence of acquisitions or dispositions of oil and natural gas properties, regulatory constraints, inability or delay in obtaining government and third-party approvals and permits, timing of commencing production from new wells, drilling rig availability, unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response thereto, and other geological, operating and economic considerations. Some factors that could potentially affect the anticipated asset dispositions include changes in prices of and demand for crude oil, natural gas and refined productions, actions of competitors, future financial condition and operating results, and economic, business, competitive and/or regulatory factors affecting the Company businesses. Factors that could affect the Athabasca Oil Sands Project Expansion 1, Garyville refinery expansion and Detroit refinery heavy oil upgrading and expansion projects include transportation logistics, availability of materials and labor, unforeseen hazards such as weather conditions, delays in obtaining or conditions imposed by necessary government and third-party approvals and other risks customarily associated with construction projects. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements. In accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Marathon Oil Corporation has included in its Annual Report on Form 10-K for the year ended December 31, 2007, and subsequent Forms 10-Q and 8-K, cautionary language identifying other important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward- looking statements.
Media Relations Contacts:
Lee Warren 713-296-4103
Leslie Hiltabrand 713-296-4102
Investor Relations Contacts:
Howard Thill 713-296-4140
Chris Phillips 713-296-3213
Michol Ecklund 713-296-3919
Capital, investment and exploration spending includes capital expenditures, cash investments in equity method investees, exploration costs that are expensed as incurred rather than capitalized, such as geological and geophysical costs and certain staff costs, and other miscellaneous investment expenditures. The components of the 2009 budgeted and 2008 preliminary capital, investment and exploration spending are as follows:
The 2008 amounts contained in the foregoing tables are preliminary and unaudited. Actual results may differ materially from the estimates given in this update. In accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Marathon Oil Corporation has included in its Annual Report on Form 10-K for the year ended December 31, 2007, and subsequent Forms 10-Q and 8-K, cautionary language identifying important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in these forward-looking statements.
