Marathon Oil (MRO)

4. Deconsolidation of Equatorial Guinea LNG Holdings Limited

Equatorial Guinea LNG Holdings Limited (“EGHoldings”), in which we hold a 60 percent interest, was formed for the purpose of constructing and operating an LNG production facility. During facility construction, EGHoldings was a variable interest entity (“VIE”) that was consolidated because we were its primary beneficiary. Once the LNG production facility commenced its primary operations and began to generate revenue in May 2007,

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Table of Contents

Index to Financial Statements

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements

EGHoldings was no longer a VIE. Effective May 1, 2007, we no longer consolidate EGHoldings, despite the fact that we hold majority ownership, because the minority shareholders have rights limiting our ability to exercise control over the entity. We account for our investment in EGHoldings, using the equity method of accounting, at our share of net assets plus loans and advances. Our investment is included in the equity method investments line of our consolidated balance sheet (see Note 14 to the consolidated financial statements).

4. Deconsolidation of Equatorial Guinea LNG Holdings Limited

Equatorial Guinea LNG Holdings Limited (“EGHoldings”), in which we hold a 60 percent interest, was formed for the purpose of constructing and operating an LNG production facility. During facility construction, EGHoldings was a variable interest entity (“VIE”) that was consolidated because we were its primary beneficiary. Once the LNG production facility commenced its primary operations and began to generate revenue in May 2007,

86

Table of Contents

Index to Financial Statements

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements

EGHoldings was no longer a VIE. Effective May 1, 2007, we no longer consolidate EGHoldings, despite the fact that we hold majority ownership, because the minority shareholders have rights limiting our ability to exercise control over the entity. We account for our investment in EGHoldings, using the equity method of accounting, at our share of net assets plus loans and advances. Our investment is included in the equity method investments line of our consolidated balance sheet (see Note 14 to the consolidated financial statements).

4. Deconsolidation of Equatorial Guinea LNG Holdings Limited

3.      Deconsolidation of Equatorial Guinea LNG Holdings Limited

Equatorial Guinea LNG Holdings Limited (“EGHoldings”), in which Marathon holds a 60 percent interest, was formed for the purpose of constructing and operating a liquefied natural gas (“LNG”) production facility.  During facility construction, EGHoldings was a variable interest entity (“VIE”) that was consolidated by Marathon because Marathon was its primary beneficiary.  Once the LNG production facility commenced its primary operations and began to generate revenue in May 2007, EGHoldings was no longer a VIE.  Effective May 1, 2007, Marathon no longer consolidates EGHoldings, despite the fact that the Company holds majority ownership, because the minority shareholders have rights limiting Marathon’s ability to exercise control over the entity.   Marathon’s investment is accounted for prospectively using the equity method of accounting, is carried at the Company’s share of net assets plus loans and advances, which totaled $1.023 billion as of September 30, 2007, and is included in equity method investments in the consolidated balance sheet as of that date.