Marathon Oil (MRO)

achieved at our refineries last quarter, wider sweet/sour differentials, which were partially offset by higher expenses and other costs, accounted for the remainder of the quarter-to-quarter variance.

As shown on Slide 16, Speedway SuperAmerica’s gasoline and distillate sales were up about 31 million gallons quarter-over-quarter or about 4%. Same-store gasoline sales were up about 5%, even though Speedway SuperAmerica’s retail gasoline prices averaged $2.45 per gallon in the quarter just completed, compared to $1.81 per gallon in the same quarter last year. Speedway SuperAmerica’s merchandise sales on a same-store basis increased almost 11% last quarter from the same quarter last year, and this marked the 11th consecutive quarter that Speedway SuperAmerica’s merchandise sales have increased over 9% on a same-store basis.

Turning to slide 17, the integrated gas segment incurred a $6 million loss during the the third quarter of 2005, compared to income of $11 million in the second quarter 2005. The decrease was primarily the result of mark-to-market changes in the fair value of derivatives used to support gas marketing activities. In the unallocated category, administrative expenses were $108 million in the third quarter. The increase from the second quarter total of $85 million was due primarily to an increase in the non-cash charge related to equity-based compensation, as our share price increased by more than $15 during the quarter.

Net interest and other financing costs were $32 million in the third quarter, $3 million lower than the second quarter, largely a result of higher capitalized interest, partially offset by reduced interest income in the current quarter. Pretax income for the the third quarter was $1.2 billion, and the tax provision was $469 million for a 37.9% effective tax rate. This was higher than our guidance, due to adjustments to income tax accruals and the tax treatment of certain derivative instruments, and we now expect our tax rate to be in the 36 to 37% range for the year.

Cash adjusted debt went up by $182 million during the the third quarter to $3.286 billion. Cash adjusted debt-to-capital  at September 30th, 2005 is approximately 24%, and I’ll note that that cash adjusted debt balance continues to include approximately $587 million of debt that’s serviced by United States steel. I will remind you, these are preliminary numbers. Third quarter preliminary cash flow from operations was approximately $449 million. Preliminary cash flow from operations before working capital changes was approximately $1.05 billion. And for the first nine months, preliminary cash flow from operations was approximately $1.963 billion and approximately $3.27 billion before working capital changes.

Finally, Slide 18 provides information from prior quarters, as well as estimates for the fourth quarter. Total liquids production available for sale in the fourth quarter is expected to be approximately 186,000 to 199,000 barrels per day. The increase over the third quarter is expected as a result of lower hurricane down time. Worldwide gas production is estimated at 980 million to 1 billion 25 million cubic feet per day, higher than the third quarter because of seasonal gas sales in Europe and Alaska, and, again, lower hurricane downtime in the Gulf of Mexico.

Total production available for sale for the fourth quarter therefore, is estimated at 350,000 to 370,000 barrels of oil equivalent per day. While we cannot predict the exact timing of liftings, given our significant underlift position of approximately 2.5 million barrels at the end of the third quarter, production sales for the fourth quarter are likely to fall between the production available for sale just provided and 380,000-barrels of oil equivalent per day. Finally, we now estimate 2005 production available for sale to be between 340,000 and 350,000 barrels of oil equivalent per day, excluding the impact of any acquisitions, dispositions, or of our potential re-entry into Libya.