Marathon Oil (MRO)

Cash Flows

Net cash provided from operating activities totaled $6,782 million in 2008, compared to $6,521 million in 2007 and $5,488 million in 2006. The $261 million increase in 2008 primarily reflects the impact of higher average realized prices. The $1,033 million increase in 2007 primarily reflects working capital changes partially offset by lower net income.

Cash Flows

Net cash provided from operating activities totaled $6,782 million in 2008, compared to $6,521 million in 2007 and $5,488 million in 2006. The $261 million increase in 2008 primarily reflects the impact of higher average realized prices. The $1,033 million increase in 2007 primarily reflects working capital changes partially offset by lower net income.

Cash flows

Plan Contributions – We expect to make contributions to the funded pension plans of up to $439 million in 2009. Cash contributions to be paid from our general assets for the unfunded pension and postretirement plans are expected to be approximately $11 million and $40 million in 2009.

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Table of Contents

Index to Financial Statements

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements

Estimated Future Benefit Payments – The following gross benefit payments, which reflect expected future service, as appropriate, are expected to be paid in the years indicated.

Other Plan Contributions – We also contribute to several defined contribution plans for eligible employees. Contributions to these plans totaled $49 million in 2008, $55 million in 2007 and $47 million in 2006.

Cash flows

Plan Contributions – We expect to make contributions to the funded pension plans of up to $439 million in 2009. Cash contributions to be paid from our general assets for the unfunded pension and postretirement plans are expected to be approximately $11 million and $40 million in 2009.

111

Table of Contents

Index to Financial Statements

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements

Estimated Future Benefit Payments – The following gross benefit payments, which reflect expected future service, as appropriate, are expected to be paid in the years indicated.

Other Plan Contributions – We also contribute to several defined contribution plans for eligible employees. Contributions to these plans totaled $49 million in 2008, $55 million in 2007 and $47 million in 2006.

Cash flows

Cash flows

Plan Contributions – Marathon expects to make contributions to the Company’s funded pension plans of approximately $37 million in 2008. Cash contributions to be paid from the general assets of the Company for the unfunded pension and postretirement plans are expected to be approximately $9 million and $41 million in 2008.

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Table of Contents

Index to Financial Statements

Estimated Future Benefit Payments – The following gross benefit payments, which reflect expected future service, as appropriate, are expected to be paid in the years indicated.

Other Plan Contributions – Marathon also contributes to several defined contribution plans for eligible employees. Contributions to these plans totaled $55 million in 2007, $47 million in 2006 and $39 million in 2005.

Cash flows

Cash Flows

        Net cash provided from operating activities totaled $2.951 billion in the first nine months of 2007, compared to $3.745 billion in the first nine months of 2006.

        Net cash used in investing activities totaled $2.609 billion in the first nine months of 2007, compared to $1.852 billion in the first nine months of 2006.  Capital expenditures were $2.725 billion compared with $2.405 billion for the comparable prior-year period, with the increased spending primarily related to the Garyville refinery expansion in the RM&T segment and the Neptune development in the E&P segment.  See Supplemental Statistics for information regarding capital expenditures by segment.  Investing activities for the first nine months of 2007 also included $163 million withdrawn from the trusteed proceeds of the revenue bonds associated with our Garyville, Louisiana refinery expansion.  As discussed below, the proceeds from these bonds were held in trust at issuance and therefore were not reflected as a borrowing in the accompanying consolidated statement of cash flows for the first nine months of 2007.  When the funds are released to us in reimbursement of expenditures associated with the expansion, the cash inflow is presented as part of investing activities. Investing activities for the first nine months of 2006 also included net cash proceeds of $832 million from the sale of our Russian oil exploration and production businesses in June 2006 and cash paid for acquisitions of $543 million, primarily related to the initial $520 million payment associated with our 2005 re-entry into Libya.

        Net cash provided by financing activities was $333 million in the first nine months of 2007, compared to $1.726 billion used by financing activities in the first nine months of 2006. Significant uses of cash in financing activities during both periods included stock repurchases, repayments of maturing debt and dividend payments.  Financing activities for the first nine months of 2007 included the issuance of $1.5 billion in senior notes and borrowings of $578 million from the Norwegian export credit agency.

Cash Flows

        Net cash provided from operating activities totaled $1.026 billion in the first quarter of 2007, compared to $240 million in the first quarter of 2006. The $786 million increase reflects the impact of various working capital changes during the quarters.

        Net cash used in investing activities totaled $711 million in the first quarter of 2007, compared to $987 million in the first quarter of 2006. Capital expenditures were $737 million compared to $572 million for the comparable prior-year period, with the increased spending related primarily to the Neptune development project in the E&P segment and the Garyville refinery expansion in the RM&T segment. For information regarding capital expenditures by segment, refer to Supplemental Statistics. Cash paid for acquisitions in the first quarter of 2006 were $527 million, primarily related to the initial $520 million payment associated with our re-entry into Libya.

        Net cash used in financing activities was $555 million in the first quarter of 2007, compared to $604 million in the first quarter of 2006. Significant uses of cash in financing activities during both periods included stock repurchases and dividend payments. In 2006, we also repaid our $300 million 6.65% notes that matured during that quarter.

Cash Flows

        Net cash provided from operating activities totaled $5.488 billion in 2006, compared with $4.738 billion in 2005 and $3.766 billion in 2004. The $750 million increase in 2006 primarily reflects the impact of higher net income, partially offset by contributions of $635 million to our funded defined benefit pension plans and working capital changes. The 2005 increase mainly resulted from higher net income, partially offset by the effects of receivables which were transferred to Ashland at the Acquisition date.

        Net cash used in investing activities totaled $2.955 billion in 2006, compared with $3.127 billion in 2005 and $2.324 billion in 2004. Significant investing activities include capital expenditures, acquisitions of businesses and asset disposals.

        Capital expenditures by segment for continuing operations for each of the last three years are summarized in the following table.

        The $637 million increase in capital expenditures in 2006 over 2005 primarily resulted from increased spending in the E&P segment and primarily relates to significant acreage acquisitions in the Bakken Shale in North Dakota and eastern Montana and the Piceance Basin of Colorado, as well as to continued work on the Alvheim/Vilje development offshore Norway and the Neptune development in the Gulf of Mexico. The $264 million decrease in integrated gas spending reflects the fact that the LNG production facility in Equatorial Guinea is nearing completion. The $655 million increase in 2005 capital expenditures over 2004 mainly resulted from increased spending related to the Alvheim development and the Equatorial Guinea LNG production facility.

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        Acquisitions in 2006 primarily included cash payments of $718 million associated with our re-entry into Libya. Acquisitions in 2005 included cash payments of $506 million for the acquisition of Ashland's 38 percent ownership in MPC. For further discussion of acquisitions, see Note 6 to the consolidated financial statements.

        Disposal of assets and of discontinued operations totaled $966 million in 2006, compared with $131 million in 2005 and $76 million in 2004. Proceeds of $832 million from the disposal of discontinued operations in 2006 related to the sale of our Russian exploration and production businesses in June 2006. In 2006, other disposals of assets included proceeds from the sale of 90 percent of our interest in Syrian natural gas fields, SSA stores and other domestic production and transportation assets. In 2005 and 2004, proceeds were primarily from the sale of various domestic producing properties and SSA stores.

        Net cash used in financing activities totaled $2.581 billion in 2006, compared with $2.345 billion in 2005, and net cash provided of $527 million in 2004. Significant uses of cash in financing activities during 2006 included common stock repurchases under a previously announced plan, which is discussed under Liquidity and Capital Resources, dividend payments, the repayment of our 6.65% notes that matured during 2006 and the early extinguishment of portions of our outstanding debt. The most significant use of cash in 2005 was related to the repayment of $1.920 billion of debt assumed as a part of the acquisition of Ashland's 38 percent of MPC. In 2004, cash provided from financing activities was primarily related to the issuance of 69,000,000 shares of common stock on March 31, 2004, resulting in net proceeds of $1.004 billion. The change from 2004 to 2005 also included an increase in dividends paid and distributions to the minority shareholder of MPC prior to the Acquisition, net of an increase in contributions from the minority shareholders of EGHoldings.

Cash flows

        Plan Contributions – Marathon expects to make contributions to the Company's funded pension plans of approximately $50 million in 2007. Cash contributions to be paid from the general assets of the Company for the unfunded pension and postretirement benefit plans are expected to be approximately $8 million and $41 million in 2007.

        Estimated Future Benefit Payments – The following gross benefit payments, which reflect expected future service, as appropriate, are expected to be paid in the years indicated:

^(a)

Expected Medicare reimbursements for 2007 through 2016 total $64 million.

        Other Plan Contributions – Marathon also contributes to several defined contribution plans for eligible employees. Contributions to these plans totaled $47 million in 2006, $39 million in 2005 and $35 million in 2004.

25. Asset Retirement Obligations

The following summarizes the changes in asset retirement obligations:

26. Stock-Based Compensation Plans

Description of the plans  –  The Marathon Oil Corporation 2003 Incentive Compensation Plan (the "Plan") authorizes the Compensation Committee of the Board of Directors to grant stock options, stock appreciation rights, stock awards, cash awards and performance awards to employees. The Plan also allows Marathon to provide equity compensation to its non-employee directors. No more than 40,000,000 shares of common stock may be issued under the Plan, and no more than 17,000,000 of those shares may be used for awards other than stock options or stock appreciation rights. Shares subject to awards that are forfeited, terminated, settled in cash, exchanged for other awards, tendered to satisfy the purchase price of an award or withheld to satisfy tax obligations or that expire unexercised or otherwise lapse become available for future grants. Shares issued as a result of awards granted under the Plan are generally funded out of common stock held in treasury, except to the extent there are insufficient treasury shares, in which case new common shares are issued.

        The Plan replaced the 1990 Stock Plan, the Non-Officer Restricted Stock Plan, the Non-Employee Director Stock Plan, the deferred stock benefit provision of the Deferred Compensation Plan for Non-Employee Directors, the Senior Executive Officer Annual Incentive Compensation Plan and the Annual Incentive Compensation Plan (the "Prior Plans"). No new grants will be made from the Prior Plans. Any awards previously granted under the Prior Plans shall continue to vest and/or be exercisable in accordance with their original terms and conditions.

Cash flows

        Plan Contributions – Marathon expects to make contributions to the Company's funded pension plans of approximately $50 million in 2007. Cash contributions to be paid from the general assets of the Company for the unfunded pension and postretirement benefit plans are expected to be approximately $8 million and $41 million in 2007.

        Estimated Future Benefit Payments – The following gross benefit payments, which reflect expected future service, as appropriate, are expected to be paid in the years indicated:

^(a)

Expected Medicare reimbursements for 2007 through 2016 total $64 million.

        Other Plan Contributions – Marathon also contributes to several defined contribution plans for eligible employees. Contributions to these plans totaled $47 million in 2006, $39 million in 2005 and $35 million in 2004.

25. Asset Retirement Obligations

        The following summarizes the changes in asset retirement obligations:

26. Stock-Based Compensation Plans

        Description of the plans – The Marathon Oil Corporation 2003 Incentive Compensation Plan (the "Plan") authorizes the Compensation Committee of the Board of Directors to grant stock options, stock appreciation rights, stock awards, cash awards and performance awards to employees. The Plan also allows Marathon to provide equity compensation to its non-employee directors. No more than 20,000,000 shares of common stock may be issued under the Plan, and no more than 8,500,000 of those shares may be used for awards other than stock options or stock appreciation rights. Shares subject to awards that are forfeited, terminated, settled in cash, exchanged for other awards, tendered to satisfy the purchase price of an award or withheld to satisfy tax obligations or that expire unexercised or otherwise lapse become available for future grants. Shares issued as a result of awards granted under the Plan are generally funded out of common stock held in treasury, except to the extent there are insufficient treasury shares, in which case new common shares are issued.

        The Plan replaced the 1990 Stock Plan, the Non-Officer Restricted Stock Plan, the Non-Employee Director Stock Plan, the deferred stock benefit provision of the Deferred Compensation Plan for Non-Employee Directors, the Senior Executive Officer Annual Incentive Compensation Plan and the Annual Incentive Compensation Plan (the "Prior Plans"). No new grants will be made from the Prior Plans. Any awards previously granted under the Prior Plans shall continue to vest and/or be exercisable in accordance with their original terms and conditions.

                 Cash Flows

                 Contributions

        Both MAP and Marathon's foreign subsidiaries expect to make contributions to their funded pension plans in 2005 approximating $127 million and $31 million, respectively. Marathon is not required to make a cash contribution to its funded domestic pension plan in 2005. Cash contributions to be paid from the general assets of the company for both the unfunded pension and postretirement benefit plans are expected to be approximately $2 million and $34 million in 2005.