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MRO » Topics » Exploration and Production (E&P)

These excerpts taken from the MRO 10-K filed Feb 27, 2009.

Exploration and Production

In the discussion that follows regarding our exploration and production operations, references to “net” wells, sales or investment indicate our ownership interest or share, as the context requires.

We conduct exploration, development and production activities in ten countries: the United States, Angola, Canada, Equatorial Guinea, Gabon, Indonesia, Ireland, Libya, Norway and the United Kingdom.

Our 2008 worldwide net liquid hydrocarbon sales averaged 211 thousand barrels per day (“mbpd”). Our 2008 worldwide net natural gas sales, including natural gas acquired for injection and subsequent resale, averaged 1,016 million cubic feet per day (“mmcfd”). In total, our 2008 worldwide net sales averaged 381 thousand barrels of oil equivalent per day (“mboepd”). For purposes of determining barrels of oil equivalent (“boe”), natural gas volumes are converted to approximate liquid hydrocarbon barrels by dividing the natural gas volumes expressed in thousands of cubic feet (“mcf”) by six. The liquid hydrocarbon volume is added to the barrel equivalent of natural gas volume to obtain boe.

Exploration and Production

In the discussion that follows regarding our exploration and production operations, references to “net” wells, sales or investment indicate our ownership interest or share, as the context requires.

We conduct exploration, development and production activities in ten countries: the United States, Angola, Canada, Equatorial Guinea, Gabon, Indonesia, Ireland, Libya, Norway and the United Kingdom.

Our 2008 worldwide net liquid hydrocarbon sales averaged 211 thousand barrels per day (“mbpd”). Our 2008 worldwide net natural gas sales, including natural gas acquired for injection and subsequent resale, averaged 1,016 million cubic feet per day (“mmcfd”). In total, our 2008 worldwide net sales averaged 381 thousand barrels of oil equivalent per day (“mboepd”). For purposes of determining barrels of oil equivalent (“boe”), natural gas volumes are converted to approximate liquid hydrocarbon barrels by dividing the natural gas volumes expressed in thousands of cubic feet (“mcf”) by six. The liquid hydrocarbon volume is added to the barrel equivalent of natural gas volume to obtain boe.

Exploration and Production

In the discussion that follows regarding our exploration and production operations, references to “net” wells, sales or
investment indicate our ownership interest or share, as the context requires.

We conduct exploration, development and production
activities in ten countries: the United States, Angola, Canada, Equatorial Guinea, Gabon, Indonesia, Ireland, Libya, Norway and the United Kingdom.

SIZE="2">Our 2008 worldwide net liquid hydrocarbon sales averaged 211 thousand barrels per day (“mbpd”). Our 2008 worldwide net natural gas sales, including natural gas acquired for injection and subsequent resale, averaged
1,016 million cubic feet per day (“mmcfd”). In total, our 2008 worldwide net sales averaged 381 thousand barrels of oil equivalent per day (“mboepd”). For purposes of determining barrels of oil equivalent
(“boe”), natural gas volumes are converted to approximate liquid hydrocarbon barrels by dividing the natural gas volumes expressed in thousands of cubic feet (“mcf”) by six. The liquid hydrocarbon volume is added to the barrel
equivalent of natural gas volume to obtain boe.

Exploration and Production

Prevailing prices for the various qualities of crude oil and natural gas that we produce significantly impact our revenues and cash flows. Prices were extremely volatile in 2008 with the following table listing high and low spot prices during the year for key benchmarks.

 

Benchmark    High       Date    Low    Date

WTI crude oil (Dollars per barrel)

   $   145.29   July 3    $ 33.87    December 19

Brent crude oil (Dollars per barrel)

   $   144.22   July 3    $ 33.66    December 24

Henry Hub natural gas (Dollars per mcf)(a)

    $     13.11   July 1    $ 6.47    November 1

(a)

First-of-month price index.

On average, crude oil prices in 2008 were higher than in 2007. Crude oil prices climbed rapidly through the first half of 2008 based upon expected strong global demand, a declining dollar, ongoing concerns about supplies of

 

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Index to Financial Statements

crude oil, and political unrest in the Middle East and elsewhere. Later in 2008, crude oil prices dropped more rapidly than they had climbed as the U.S. dollar rebounded and other countries entered recessions which decreased demand.

During 2008, the average spot price per barrel for WTI was $99.75, up from an average of $72.41 in 2007, but ended the year at $44.60. The average spot price per barrel for Brent was $97.26 in 2008, up from an average of $72.39 in 2007, but ended the year at $36.55. The differential between WTI and Brent average prices widened to $2.49 in 2008 from $0.02 in 2007. Our domestic crude oil production is on average heavier and higher in sulfur content than light sweet WTI. Heavier and higher sulfur crude oil (commonly referred to as heavy sour crude oil) sells at a discount to light sweet crude oil. Our international crude oil production is relatively sweet and is generally sold in relation to the Brent crude oil benchmark.

Natural gas prices on average were higher in 2008 than in 2007. A significant portion of our U.S. lower 48 states natural gas production is sold at bid-week prices or first-of-month indices relative to our specific producing areas. The average Henry Hub first-of-month price index was $2.18 per thousand cubic feet (“mcf”) higher in 2008 than the 2007 average. Natural gas sales in Alaska are subject to term contracts. Our other major natural gas-producing regions are Europe and Equatorial Guinea, where large portions of our natural gas sales are subject to term contracts, making realized prices in these areas less volatile. As we sell larger quantities of natural gas from these regions, to the extent that these fixed prices are lower than prevailing prices, our reported average natural gas prices realizations may decrease.

E&P segment income during 2008 was up 57 percent from 2007, with revenue increases tied to these increases in average commodity prices accounting for almost half of the income improvement. Liquid hydrocarbon and natural gas sales volumes were also higher in 2008 than 2007.

Exploration and Production

Prevailing prices for the various qualities of crude oil and natural gas that we produce significantly impact our revenues and cash flows. Prices were extremely volatile in 2008 with the following table listing high and low spot prices during the year for key benchmarks.

 

Benchmark    High       Date    Low    Date

WTI crude oil (Dollars per barrel)

   $   145.29   July 3    $ 33.87    December 19

Brent crude oil (Dollars per barrel)

   $   144.22   July 3    $ 33.66    December 24

Henry Hub natural gas (Dollars per mcf)(a)

    $     13.11   July 1    $ 6.47    November 1

(a)

First-of-month price index.

On average, crude oil prices in 2008 were higher than in 2007. Crude oil prices climbed rapidly through the first half of 2008 based upon expected strong global demand, a declining dollar, ongoing concerns about supplies of

 

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Index to Financial Statements

crude oil, and political unrest in the Middle East and elsewhere. Later in 2008, crude oil prices dropped more rapidly than they had climbed as the U.S. dollar rebounded and other countries entered recessions which decreased demand.

During 2008, the average spot price per barrel for WTI was $99.75, up from an average of $72.41 in 2007, but ended the year at $44.60. The average spot price per barrel for Brent was $97.26 in 2008, up from an average of $72.39 in 2007, but ended the year at $36.55. The differential between WTI and Brent average prices widened to $2.49 in 2008 from $0.02 in 2007. Our domestic crude oil production is on average heavier and higher in sulfur content than light sweet WTI. Heavier and higher sulfur crude oil (commonly referred to as heavy sour crude oil) sells at a discount to light sweet crude oil. Our international crude oil production is relatively sweet and is generally sold in relation to the Brent crude oil benchmark.

Natural gas prices on average were higher in 2008 than in 2007. A significant portion of our U.S. lower 48 states natural gas production is sold at bid-week prices or first-of-month indices relative to our specific producing areas. The average Henry Hub first-of-month price index was $2.18 per thousand cubic feet (“mcf”) higher in 2008 than the 2007 average. Natural gas sales in Alaska are subject to term contracts. Our other major natural gas-producing regions are Europe and Equatorial Guinea, where large portions of our natural gas sales are subject to term contracts, making realized prices in these areas less volatile. As we sell larger quantities of natural gas from these regions, to the extent that these fixed prices are lower than prevailing prices, our reported average natural gas prices realizations may decrease.

E&P segment income during 2008 was up 57 percent from 2007, with revenue increases tied to these increases in average commodity prices accounting for almost half of the income improvement. Liquid hydrocarbon and natural gas sales volumes were also higher in 2008 than 2007.

These excerpts taken from the MRO 10-K filed Feb 29, 2008.

Exploration and Production

We announced nine discoveries in 2007 (eight in deepwater Angola and one in the Gulf of Mexico). Major exploration activities, which are currently underway or under evaluation, include those:

 

  •  

offshore Angola, on Block 31 in which we hold a 10 percent outside-operated interest and have announced 15 discoveries, and on Block 32, in which we hold a 30 percent outside-operated interest and have announced 11 discoveries. We plan to participate in four to five exploration or appraisal wells in these deepwater blocks in 2008. Current plans call for a potential development area in the northeastern part of Block 31, which encompasses the Plutao, Saturno, Venus and Marte discoveries. Additional potential development areas lie in the southeast and middle portions of the block. Seven of the Block 32 discoveries form our first potential development in the eastern area of that block.

 

  •  

in Equatorial Guinea, where we are evaluating development scenarios for the Deep Luba and Gardenia discoveries on the Alba Block, one of which includes production through the Alba field infrastructure. We own a 63 percent interest in the Alba Block and serve as operator;

 

  •  

in Norway, where we now own interests in 16 licenses covering over 800,000 gross acres offshore and plan to drill one or two exploration wells during 2008;

 

  •  

in the United Kingdom, where we plan to participate in the U.K. Onshore Licensing Round during 2008 to secure additional coal bed methane acreage; and

 

  •  

in the Gulf of Mexico, where we plan to participate in two to three exploration wells during 2008.

During 2007, we continued to make progress in advancing key development projects that will help serve as the basis for our production growth profile in the coming years. Major development and production activities currently underway or under evaluation include those:

 

  •  

in the Gulf of Mexico, with the Neptune development and the Droshky discovery. The Neptune development, in which we own a 30 percent outside-operated working interest, is on target for first production by early 2008. Development of the Droshky discovery, in which we own a 100 percent working interest, is expected to be sanctioned during 2008, with first production as early as 2010 dependent upon delivery of key equipment and regulatory approvals. Rig capacity has been secured for Droshky development drilling.

 

  •  

in Norway, where our Alvheim/Vilje development will consist of an FPSO vessel with subsea infrastructure. The FPSO sailed from the shipyard in mid-February 2008 to undergo testing, after which it will proceed offshore for connection to the subsea infrastructure. First production is expected at the end of the first quarter of 2008, weather permitting, at which time six wells will be available. Drilling activities will continue in 2008. A peak net production rate of 75 mboepd is expected in 2008. We are the operator of the Alvheim development, which includes the Kameleon and Kneler discoveries, in which we have a 65 percent working interest, and the Boa discovery, in which we have a 58 percent working interest. We own a 47 percent outside-operated interest in the nearby Vilje discovery. Also, the Volund discovery, a tie-back to the Alvheim FPSO continues to make progress towards first production in 2009. We own a 65 percent interest in Volund and serve as operator;

 

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  •  

in Libya, where we continue to work with our partners to maximize the potential of this major asset. We own a 16.33 percent outside-operated interest in the approximately 13 million acre Waha concessions;

 

  •  

in Ireland, where the Corrib natural gas development project continues and the operator expects first production in 2009. We own a 19 percent outside-operated interest in Corrib;

 

  •  

in the Piceance Basin of Colorado, where we have two drilling rigs running, and plan to increase the rig count to four by the end of 2008, drilling 165 wells in the region over the next two years; and

 

  •  

in the Williston Basin of North Dakota and eastern Montana (the Bakken shale formation), where we have six rigs running and plan to drill approximately 350 locations over the next four to five years.

With the Alvheim/Vilje and Neptune developments coming online, we estimate that our 2008 liquid hydrocarbon and natural gas sales will average approximately 380 to 420 mboepd, excluding the impact of acquisitions and dispositions. Projected liquid hydrocarbon and natural gas sales are based on a number of assumptions, including (among others) pricing, supply and demand for petroleum products, the amount of capital available for exploration and development, regulatory constraints, timing of commencing production from new wells, drilling rig availability, inability or delay in obtaining necessary government and third-party approvals and permits, unforeseen hazards such as weather conditions, acts of war or terrorist acts and the government or military response, and other geological, operating and economic considerations. These assumptions may prove to be inaccurate.

The above discussion includes forward-looking statements with respect to anticipated future exploratory and development drilling, the possibility of developing Blocks 31 and 32 offshore Angola and the Droshky discovery in the Gulf of Mexico, the timing of production from the Neptune development, the Droshky discovery, the Alvheim/Vilje development, the Volund field and the Corrib project. Some factors which could potentially affect these forward-looking statements include pricing, supply and demand for petroleum products, the amount of capital available for exploration and development, regulatory constraints, drilling rig availability, unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response, and other geological, operating and economic considerations. Except for the Neptune, Alvheim/Vilje and Volund developments, the foregoing forward-looking statements may be further affected by the inability to or delay in obtaining necessary government and third-party approvals and permits. The possible developments of the Droshky discovery and Blocks 31 and 32 offshore Angola could further be affected by presently known data concerning size and character of reservoirs, economic recoverability, future drilling success and production experience. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

Exploration and Production

STYLE="margin-top:12px;margin-bottom:0px; text-indent:3%">We announced nine discoveries in 2007 (eight in deepwater Angola and one in the Gulf of Mexico). Major exploration activities, which are currently
underway or under evaluation, include those:

 







 • 

offshore Angola, on Block 31 in which we hold a 10 percent outside-operated interest and have announced 15 discoveries, and on Block 32, in which we hold a 30
percent outside-operated interest and have announced 11 discoveries. We plan to participate in four to five exploration or appraisal wells in these deepwater blocks in 2008. Current plans call for a potential development area in the northeastern
part of Block 31, which encompasses the Plutao, Saturno, Venus and Marte discoveries. Additional potential development areas lie in the southeast and middle portions of the block. Seven of the Block 32 discoveries form our first potential
development in the eastern area of that block.

 







 • 

in Equatorial Guinea, where we are evaluating development scenarios for the Deep Luba and Gardenia discoveries on the Alba Block, one of which includes production
through the Alba field infrastructure. We own a 63 percent interest in the Alba Block and serve as operator;

 







 • 

in Norway, where we now own interests in 16 licenses covering over 800,000 gross acres offshore and plan to drill one or two exploration wells during 2008;

 







 • 

in the United Kingdom, where we plan to participate in the U.K. Onshore Licensing Round during 2008 to secure additional coal bed methane acreage; and

 







 • 

in the Gulf of Mexico, where we plan to participate in two to three exploration wells during 2008.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:3%">During 2007, we continued to make progress in advancing key development projects that will help serve as the basis for our production growth profile in
the coming years. Major development and production activities currently underway or under evaluation include those:

 







 • 

in the Gulf of Mexico, with the Neptune development and the Droshky discovery. The Neptune development, in which we own a 30 percent outside-operated working
interest, is on target for first production by early 2008. Development of the Droshky discovery, in which we own a 100 percent working interest, is expected to be sanctioned during 2008, with first production as early as 2010 dependent upon delivery
of key equipment and regulatory approvals. Rig capacity has been secured for Droshky development drilling.

 







 • 

in Norway, where our Alvheim/Vilje development will consist of an FPSO vessel with subsea infrastructure. The FPSO sailed from the shipyard in mid-February 2008 to
undergo testing, after which it will proceed offshore for connection to the subsea infrastructure. First production is expected at the end of the first quarter of 2008, weather permitting, at which time six wells will be available. Drilling
activities will continue in 2008. A peak net production rate of 75 mboepd is expected in 2008. We are the operator of the Alvheim development, which includes the Kameleon and Kneler discoveries, in which we have a 65 percent working interest, and
the Boa discovery, in which we have a 58 percent working interest. We own a 47 percent outside-operated interest in the nearby Vilje discovery. Also, the Volund discovery, a tie-back to the Alvheim FPSO continues to make progress towards first
production in 2009. We own a 65 percent interest in Volund and serve as operator;

 


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 • 

in Libya, where we continue to work with our partners to maximize the potential of this major asset. We own a 16.33 percent outside-operated interest in the
approximately 13 million acre Waha concessions;

 







 • 

in Ireland, where the Corrib natural gas development project continues and the operator expects first production in 2009. We own a 19 percent outside-operated
interest in Corrib;

 







 • 

in the Piceance Basin of Colorado, where we have two drilling rigs running, and plan to increase the rig count to four by the end of 2008, drilling 165 wells in the
region over the next two years; and

 







 • 

in the Williston Basin of North Dakota and eastern Montana (the Bakken shale formation), where we have six rigs running and plan to drill approximately 350
locations over the next four to five years.

With the Alvheim/Vilje and Neptune developments coming online, we estimate
that our 2008 liquid hydrocarbon and natural gas sales will average approximately 380 to 420 mboepd, excluding the impact of acquisitions and dispositions. Projected liquid hydrocarbon and natural gas sales are based on a number of assumptions,
including (among others) pricing, supply and demand for petroleum products, the amount of capital available for exploration and development, regulatory constraints, timing of commencing production from new wells, drilling rig availability, inability
or delay in obtaining necessary government and third-party approvals and permits, unforeseen hazards such as weather conditions, acts of war or terrorist acts and the government or military response, and other geological, operating and economic
considerations. These assumptions may prove to be inaccurate.

The above discussion includes forward-looking statements with respect to
anticipated future exploratory and development drilling, the possibility of developing Blocks 31 and 32 offshore Angola and the Droshky discovery in the Gulf of Mexico, the timing of production from the Neptune development, the Droshky discovery,
the Alvheim/Vilje development, the Volund field and the Corrib project. Some factors which could potentially affect these forward-looking statements include pricing, supply and demand for petroleum products, the amount of capital available for
exploration and development, regulatory constraints, drilling rig availability, unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response, and other geological, operating and economic
considerations. Except for the Neptune, Alvheim/Vilje and Volund developments, the foregoing forward-looking statements may be further affected by the inability to or delay in obtaining necessary government and third-party approvals and permits. The
possible developments of the Droshky discovery and Blocks 31 and 32 offshore Angola could further be affected by presently known data concerning size and character of reservoirs, economic recoverability, future drilling success and production
experience. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

SIZE="2">Oil Sands Mining

The AOSP’s Phase 1 expansion is under construction and we expect that it will be complete in
late 2010. The expansion includes construction of mining and extraction facilities at the Jackpine mine, expansion of treatment facilities at the existing Muskeg River mine and expansion of the Scotford upgrader, along with construction of common
infrastructure sized to support future mining expansions.

The Scotford upgrader returned to full operation in December 2007 after a
mid-November fire and the completion of maintenance that had originally been scheduled for the first quarter of 2008 and was completed in conjunction with the necessary repairs. We anticipate our net bitumen production will be approximately 30 mbpd
in 2008. Projected bitumen production is based upon a number of assumptions, including pricing, supply and demand for petroleum products, regulatory constraints, unforeseen hazards such as weather conditions, acts of war or terrorist acts and
government or military response thereto, and other geological, operating and economic considerations.

The above discussion includes
forward-looking statements with respect to the anticipated completion of the AOSP expansion. Factors which could affect the expansion 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.

 


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This excerpt taken from the MRO 8-K filed Jan 31, 2008.

Exploration and Production

Upstream segment income totaled $465 million in the fourth quarter of 2007, compared to $307 million in the fourth quarter of 2006, primarily as a result of higher liquid hydrocarbon realizations which were partially offset by lower liquid hydrocarbon sales volumes and increased exploration expenses. For the year, upstream segment income was $1.729 billion, compared to $2.003 billion for 2006, primarily as a result of lower liquid hydrocarbon sales volumes and natural gas realizations and increased exploration expenses, partially offset by higher liquid hydrocarbon realizations and natural gas sales volumes.

Sales volumes averaged 354,000 barrels of oil equivalent per day (boepd) for the fourth quarter of 2007 and 351,000 boepd for the full year 2007, and production available for sale averaged 352,000 boepd and 353,000 boepd in the same periods.

United States upstream income was $153 million in the fourth quarter of 2007 and $623 million for the year, compared to $167 million and $873 million in the same periods of 2006. Contributing to the decreases for both periods were increased exploration expenses and lower liquid hydrocarbon and natural gas sales volumes, partially offset by higher liquid hydrocarbon realizations. The largest sales volume declines in both periods were associated with expected production declines for Gulf of Mexico and Permian Basin properties. Exploration expenses increased $77 million in the fourth quarter of 2007 and $105 million for the year compared to the same periods of 2006, primarily as a result of expensing non-commercial wells on the Flathead prospect in the Gulf of Mexico in the fourth quarter of 2007.

International upstream income was $312 million in the fourth quarter of 2007 compared to $140 million in the same period of 2006, primarily due to higher liquid hydrocarbon realizations. International upstream income was $1.106 billion for the year, compared to $1.130 billion in 2006, primarily as a result of lower liquid hydrocarbon sales volumes and natural gas realizations, partially offset by higher liquid hydrocarbon realizations and natural gas sales volumes. The increase in Equatorial Guinea natural gas sales volumes due

 

Marathon Oil Corporation Reports Fourth Quarter and Full-Year 2007 Financial Results  page  3

to the start-up of the EG LNG Train 1 production facility in the second quarter of 2007 contributed to the decline in the average realized natural gas price for the fourth quarter and full year 2007.

 

     Quarter ended
December 31		    Year ended
December 31
      2007    2006    2007    2006

Key Production Statistics

            

Net Sales

            

United States – Liquids (mbpd)

    60    74    64    76

United States – Natural Gas (mmcfpd)

    474    522    477    532

International – Liquids (mbpd)

    130    138    133    147

International – Natural Gas (mmcfpd)

    510    352    448    315

Net Sales from Continuing Operations (mboepd)

    354    357    351    365

Discontinued Operations (mboepd)

    –    –    –    12
                   

Total Net Sales (mboepd)

    354    357    351    377

During 2007, Marathon added net proved liquid hydrocarbon and natural gas reserves of 88 million barrels of oil equivalent (mmboe), while producing 125 mmboe, resulting in a reserve replacement ratio of 70 percent. For the three-year period ended Dec. 31, 2007, Marathon added net proved liquid hydrocarbon and natural gas reserves of 516 mmboe, excluding dispositions of 46 mmboe, while producing 383 mmboe, resulting in an average reserve replacement ratio of 135 percent. (The proven bitumen reserves at the AOSP are not included in Marathon’s estimated net proved liquid hydrocarbon and natural gas reserves, but rather are reported separately in the Oil Sands Mining segment.)

First production from the Alvheim/Vilje development in Norway is expected at the end of the first quarter of 2008, weather permitting. The peak net rate of approximately 75,000 boepd is expected to be achieved in 2008. The Volund development continues to make progress towards first production in the second half of 2009 and will be tied back to the Alvheim infrastructure. Marathon has a 65 percent interest in Alvheim and Volund and a 47 percent interest in Vilje.

In the Gulf of Mexico, development of Neptune continues to progress. First oil is expected by the end of the first quarter of 2008. Marathon has a 30 percent interest in Neptune.

Marathon is currently drilling an appraisal well on the Droshky discovery in the Gulf of Mexico. The Company has secured an additional year of rig capacity in 2009 for development drilling in anticipation of a 2008 project sanction. The timing of initial production will be dependent upon delivery of key equipment and regulatory approvals, but could be as early as 2010. Marathon holds a 100 percent working interest in the Droshky prospect.

Also in the Gulf of Mexico, Marathon was high bidder on 27 blocks at the Minerals Management Service’s Central Gulf of Mexico Lease Sale No. 205 in October 2007. These high bids total almost $222 million net to Marathon.

During the fourth quarter of 2007, Marathon also completed the acquisition of more than 70,000 net leasehold acres in the Bakken Shale play in North Dakota. The acreage brings Marathon’s total Bakken Shale leasehold to more than 320,000 net acres. Marathon currently has six rigs running in its Bakken program and ended 2007 with a net production rate of 2,600 boepd.

 

Marathon Oil Corporation Reports Fourth Quarter and Full-Year 2007 Financial Results  page  4

The Company commenced its Piceance Basin activity in western Colorado and currently has two rigs running. Marathon expects to drill approximately 165 total wells in the region over the next two years.

Marathon continues to grow an inventory of future growth opportunities with eight discoveries announced during 2007 in deepwater Angola. Announced in the fourth quarter, the Alho discovery was the 11th discovery on Angola Block 32 and the 26th overall discovery in Marathon’s deepwater exploration program on Angola Blocks 31 and 32.

In addition, Marathon has been awarded two study agreements in Indonesia and farmed into additional study agreements, which could lead to the acquisition of new leaseholds at a future lease sale. The Company also signed a cooperation agreement with Naftogaz Ukrainy to study the potential of the Dnieper-Donets Basin in the Ukraine.

Marathon exited its remaining 10 percent interest in the Ash Shaer and Cherrife natural gas fields in Syria during the fourth quarter of 2007.

With the Alvheim/Vilje and Neptune developments coming online, Marathon expects 2008 production available for sale to increase to a range of between 380 and 420 boepd. (This production guidance does not include bitumen production from the AOSP, which will be reported in the Oil Sands Mining segment.) Despite the challenges encountered with major project delivery in this volatile environment, the Company continues to be on track to deliver compound average annual production growth of 6 to 9 percent from 2006 to 2010.

This excerpt taken from the MRO 10-Q filed Nov 7, 2007.

Exploration and Production (“E&P”)

 

Net liquid hydrocarbon and natural gas sales during the third quarter and first nine months of 2007 averaged 371 and 350 thousand barrels of oil equivalent per day (“mboepd”).

During the first nine months of 2007, we announced the Droshky discovery well and the results of two appraisal sidetrack wells.  The discovery is located on Green Canyon Block 244 in the Gulf of Mexico (previously named Troika Deep). The timing of initial production from Droshky will be dependent upon delivery of key equipment (i.e., drilling rig and subsea equipment) and regulatory approvals, but could be as early as 2010. We hold a 100 percent working interest in the Droshky discovery.

During the first nine months of 2007, we also announced seven exploration successes in deepwater Angola.  The Caril, Manjericao, Cominhos, Louro and Colorau discovery wells are located on Block 32, where we hold a 30 percent outside-operated interest, and the Miranda and Cordelia discovery wells are located on Block 31, where we hold a 10 percent outside-operated interest.  These discoveries move both deepwater Angola blocks closer toward establishment of commercial developments.  We have also participated in two wells that have reached total depth, the results of which will be announced upon approval of the Angola government and our partners.

 

The Neptune development in the Gulf of Mexico continues to progress and first production remains on schedule for early 2008.

 

In Norway, the commissioning of the Alvheim floating production, storage and offloading (“FPSO”) vessel continues.  All subsea infrastructure is in place, three wells are ready for production and electrical testing is underway.  The FPSO is expected to sail from Haugesund, Norway in December 2007 with first production, dependent on weather, now anticipated in the first quarter of 2008.  Difficult market conditions for skilled labor combined with additional system integration and code compliance work delayed expected first production.  These factors, together with additional drilling activity, have contributed to increased overall costs for the project.

 

We now expect 2007 production available for sale, excluding any contribution from our Canadian oil sands operations discussed below under Western Acquisition, to be approximately 350 mboepd. This is at the lower end of previous estimates due to operational interruptions at the LNG production facility in Equatorial Guinea discussed below under Integrated Gas and the delays in first production at Alvheim. Sales volumes may vary from production available for sale due to the timing of liquid hydrocarbon liftings and natural gas sales.

 

In October 2007, we were the high bidder on 27 blocks offered in the federal Outer Continental Shelf Lease Sale No. 205 conducted by the U.S. Minerals Management Service (“MMS”).  Representing a total net investment of $222 million, 13 blocks were bid 100 percent by Marathon and the remaining 14 blocks were bid in conjunction with partners.  The MMS is expected to rule on the award of these leases in 2007 or early 2008.  Our plans call for initial drilling on some of these leases in 2009 or 2010, when a new rig is scheduled for delivery.  The contract for the rig has an initial term of two years with an option to extend for an additional two years.

 

The above discussion includes forward-looking statements with respect to the possibility of developing the Droshky discovery in the Gulf of Mexico and Blocks 31 and 32 offshore Angola, the Neptune and the Alvheim/Vilje development projects, the timing and levels of our worldwide liquid hydrocarbon, natural gas, and condensate production available for sale and anticipated future exploratory drilling activity.   Some factors that could potentially affect these forward-looking statements include pricing, supply and demand for petroleum products, the amount of capital available for exploration and development, regulatory constraints, 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, and other geological, operating and economic considerations.  Except for the Alvheim/Vilje and Neptune developments, the foregoing forward-looking statements may be further affected by the inability to obtain or delay in obtaining necessary government and third-party approvals and permits. The possible developments of Droshky and Blocks 31 and 32 could further be affected by presently known data concerning size and character of reservoirs, economic recoverability, future drilling success and production experience.  Worldwide production available for sale could also be affected by the occurrence of acquisitions or dispositions of oil and gas properties.  The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

 

These excerpts taken from the MRO 8-K filed Sep 7, 2007.

Exploration and Production ("E&P")

        Net liquid hydrocarbon and natural gas sales during the first quarter of 2007 averaged 339 thousand barrels of oil equivalent per day ("mboepd"). Sales volumes may vary from production available for sale primarily due to the timing of liquid hydrocarbon liftings and natural gas sales from certain of our international operations.

        During the first quarter of 2007, we announced three exploration successes in deepwater Angola and one in the Gulf of Mexico. The Caril and Manjericao discovery wells are located on Block 32 in deepwater Angola, where we hold a 30 percent outside-operated interest, and the Miranda discovery well is located on Block 31, where we hold a 10 percent outside-operated interest. These discoveries move both deepwater Angola blocks closer toward establishment of commercial developments. The Droshky discovery well (previously named Troika Deep) in the Gulf of Mexico is located on Green Canyon Block 244. One successful appraisal sidetrack well has been drilled and a second lateral appraisal sidetrack well is being drilled, which will complete our appraisal process. This potential development would be through the Troika Unit infrastructure, which is located approximately two miles from the well. We hold a 100 percent interest in the Droshky well and a 50 percent outside-operated interest in the Troika Unit.

        Also in Angola, we have participated in five wells on Blocks 31 and 32, the results of which have not been announced. We will announce details related to those wells upon approval of the Angola government.

        In Norway, the Alvheim/Vilje development project has entered the commissioning stage, during which additional work has been identified as necessary to bring the floating production, storage and offloading vessel ("FPSO") into compliance with Norwegian codes and regulations and to fully integrate the existing ship systems with the new topside facilities. This additional work, along with intense market demand for labor in Norway and additional drilling activity, has contributed to increased costs for the project. First production is now expected in the third quarter of 2007 and a peak net rate of approximately 75 mboepd is expected in 2008.

        Our 2007 production available for sale is still expected to average between 390 and 425 mboepd, excluding the impact of acquisitions and dispositions. This wide range considered the possibilities of delays in major project delivery dates; however, it is likely that actual production available for sale for the year will be at the lower end of this range as a result of the Alvheim delay.

        The above discussion includes forward-looking statements with respect to the Alvheim/Vilje and Neptune development projects, the possibility of developing Blocks 31 and 32 offshore Angola and the timing and levels of our worldwide liquid hydrocarbon, natural gas and condensate production available for sale. Some factors that could potentially affect these forward-looking statements include pricing, supply and demand for petroleum products, the amount of capital available for exploration and development, regulatory constraints, 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, and other geological, operating and economic considerations. Except for the Alvheim/Vilje development, the foregoing forward-looking statements may be further affected by the inability to obtain or delay in obtaining necessary government and third-party approvals and permits. The possible developments on Blocks 31 and 32 could further be affected by presently known data concerning size and character of reservoirs, economic recoverability, future drilling success and production experience. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

Exploration and Production

        The seven announced discoveries in 2006 (six in deepwater Angola and one in Norway) resulted from our balanced exploration strategy which places an emphasis on near-term production opportunities, while retaining an appropriate exposure to longer-term options. Major exploration activities, which are currently underway or under evaluation, include those:

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    offshore Angola, where we have participated in 13 discoveries on Block 31, in which we hold a 10 percent outside-operated interest. In 2006, we announced the Urano, Titania and Terra discoveries, as well as an unnamed discovery. Current plans call for a potential development area in the northeastern part of Block 31, which encompasses the Plutao, Saturno, Marte, Venus and Terra discoveries. The remaining discoveries are being evaluated for potential development. We have secured rig capacity for and plan to participate in exploration wells on Block 31 during 2007;

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    offshore Angola on Block 32 in which we hold a 30 percent outside-operated interest and where we participated in five discoveries through 2006, Gindungo, Canela, Gengibre, Mostarda and Salsa, and announced two additional discoveries in 2007, Manjericao and Caril. These discoveries move Block 32 closer toward establishment of a commercial development. We have secured rig capacity for and plan to participate in exploration wells on Block 32 during 2007;

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    in Equatorial Guinea, where we are evaluating development scenarios for the Deep Luba and Gardenia discoveries on the Alba Block, one of which includes production through the Alba field infrastructure and the future LNG production facility on Bioko Island. We own a 63 percent interest in the Alba Block and serve as operator;

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    in Norway, where we now own interests in 15 licenses in the Norwegian sector of the North Sea and plan to drill one or two exploration wells during 2007; and

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    in the Gulf of Mexico, where we plan to participate in two to three exploration wells during 2007. We have secured rig capacity to drill two wells and our ability to drill the third well depends upon securing additional rig capacity.

        During 2006, we continued to make progress in advancing key development projects that will help serve as the basis for our production growth profile in the coming years. Major development and production activities currently underway or under evaluation include those:

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    in Libya, where we re-entered the Waha concessions at the end of 2005 and achieved first production in January 2006. We continue to work with our partners to maximize the potential of this major asset. We own a 16.33 percent outside-operated interest in the approximately 13 million acre Waha concessions;

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    in Norway, where our Alvheim/Vilje development will consist of a floating production, storage and offloading vessel with subsea infrastructure for five drill centers and associated flow lines. Construction on the project is nearly complete and commissioning has commenced. First production is expected during the second quarter 2007, at which time four wells will be available, and drilling activities will continue into 2008. A peak net production rate of 75 mboepd is expected in early 2008. The Alvheim development includes the Kneler, Boa

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      and Kameleon fields in which we own a 65 percent interest and serve as operator. We own a 47 percent outside-operated interest in the nearby Vilje discovery. Also, plans for development of the Volund discovery as a tie-back to the Alvheim development were approved by the Norwegian Government in early 2007. First production is expected from Volund in the second quarter of 2009. We own a 65 percent interest in Volund and serve as operator;

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    in the Gulf of Mexico, where the Neptune development is on target for first production by early 2008. We own a 30 percent outside-operated interest in Neptune;

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    in Ireland, where the Corrib natural gas development project has re-commenced and we expect first production in 2009. We own a 19 percent outside-operated interest in Corrib;

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    in the Piceance Basin where we plan to drill approximately 700 wells over the next ten years, with first production expected in late 2007; and

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    in the Bakken Shale where we plan to drill approximately 300 locations over the next five years.

        We estimate that our 2007 production available for sale will average approximately 390 to 425 mboepd, excluding the impact of acquisitions and dispositions. With the developments we have under construction, we estimate our production available for sale will grow to 465 to 520 mboepd by 2010, excluding acquisitions and dispositions. Projected liquid hydrocarbon and natural gas production available for sale is based on a number of assumptions, including (among others) pricing, supply and demand for petroleum products, the amount of capital available for exploration and development, regulatory constraints, production decline rates of mature fields, timing of commencing production from new wells, drilling rig availability, inability or delay in obtaining necessary government and third-party approvals and permits, unforeseen hazards such as weather conditions, acts of war or terrorist acts and the government or military response, and other geological, operating and economic considerations. These assumptions may prove to be inaccurate.

        In 2006, we issued a request for proposals to engage interested parties in a process that could lead to a Canadian oil sands venture. This process is intended to explore various commercial arrangements under which we would provide heavy Canadian oil sands crude oil processing capacity in exchange for an equity interest in a Canadian oil sands project through a joint venture, or other alternative business arrangements that potential partners may choose to propose.

        The above discussion includes forward-looking statements with respect to anticipated future exploratory and development drilling, the possibility of developing Blocks 31 and 32 offshore Angola, the timing of production from the Neptune development, the Piceance Basin, the combined Alvheim/Vilje development, the Volund field and the Corrib project. Some factors which could potentially affect these forward-looking statements include pricing, supply and demand for petroleum products, the amount of capital available for exploration and development, regulatory constraints, drilling rig availability, unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response, and other geological, operating and economic considerations. Except for the Alvheim/Vilje and Volund developments, the foregoing forward-looking statements may be further affected by the inability to or delay in obtaining necessary government and third-party approvals and permits. The possible developments in Blocks 31 and 32 could further be affected by presently known data concerning size and character of reservoirs, economic recoverability, future drilling success and production experience. The above discussion also contains forward-looking statements concerning a potential Canadian oil sands venture. Factors that could affect the formation of a Canadian oil sands venture include unforeseen difficulty in negotiation of definitive agreements, results of front-end engineering and design work, inability or delay in obtaining necessary government and third-party approvals, continued favorable investment climate, and other geological, operating and economic considerations. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

This excerpt taken from the MRO 10-Q filed Aug 7, 2007.

Exploration and Production (“E&P”)

Net liquid hydrocarbon and natural gas sales during the second quarter and first six months of 2007 averaged 338 and 339 thousand barrels of oil equivalent per day (“mboepd”).

During the first six months of 2007, we announced the Droshky discovery well and the results of two appraisal sidetrack wells.  The discovery is located on Green Canyon Block 244 in the Gulf of Mexico (previously named Troika Deep). The timing of initial production from Droshky will be dependent upon delivery of key equipment (i.e., drilling rig and subsea equipment) and regulatory approvals, but could be as early as 2010. We hold a 100 percent working interest in the Droshky discovery.

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During the first six months of 2007, we also announced six exploration successes in deepwater Angola.  The Caril, Manjericao, Cominhos and Louro discovery wells are located on Block 32, where we hold a 30 percent outside-operated interest, and the Miranda and Cordelia discovery wells are located on Block 31, where we hold a 10 percent outside-operated interest.  These discoveries move both deepwater Angola blocks closer toward establishment of commercial developments.  We had three dry wells in deepwater Angola during the second quarter of 2007 and we have also participated in two wells that have reached total depth, the results of which will be announced upon approval of the Angola government and our partners.

The Neptune development in the Gulf of Mexico continues to progress.  The mini-tension leg platform hull was installed and topside facilities were set in June 2007.  Subsea equipment installation, connection of surface equipment on the platform and facility commissioning are in progress.  First production is anticipated by early 2008.

In Norway, the commissioning of the Alvheim floating production, storage and offloading (“FPSO”) vessel continues. Difficult market conditions for skilled labor and additional work to bring the FPSO into compliance with Norwegian codes and regulations and to fully integrate the existing ship systems with the new topside facilities has delayed expected first production to the fourth quarter of 2007.  These factors, together with additional drilling activity, have contributed to increased costs for the project.

We now expect 2007 production available for sale to be between 350 and 375 mboepd, excluding the impact of acquisitions and dispositions, due to the delay in first production from the Alvheim/Vilje development.  Previously we had expected production available for sale in 2007 to be between 390 and 425 mboepd.  Sales volumes may vary from production available for sale due to the timing of liquid hydrocarbon liftings and natural gas sales.

The above discussion includes forward-looking statements with respect to the possibility of developing the Droshky discovery in the Gulf of Mexico and Blocks 31 and 32 offshore Angola, the Neptune and the Alvheim/Vilje development projects and the timing and levels of our worldwide liquid hydrocarbon, natural gas and condensate production available for sale.   Some factors that could potentially affect these forward-looking statements include pricing, supply and demand for petroleum products, the amount of capital available for exploration and development, regulatory constraints, 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, and other geological, operating and economic considerations.  Except for the Alvheim/Vilje and Neptune developments, the foregoing forward-looking statements may be further affected by the inability to obtain or delay in obtaining necessary government and third-party approvals and permits. The possible developments of Droshky and Blocks 31 and 32 could further be affected by presently known data concerning size and character of reservoirs, economic recoverability, future drilling success and production experience.  Worldwide production available for sale could also be affected by the occurrence of acquisitions or dispositions of oil and gas properties.  The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

This excerpt taken from the MRO 10-Q filed May 7, 2007.

Exploration and Production (“E&P”)

Net liquid hydrocarbon and natural gas sales during the first quarter of 2007 averaged 339 thousand barrels of oil equivalent per day (“mboepd”). Sales volumes may vary from production available for sale primarily due to the timing of liquid hydrocarbon liftings and natural gas sales from certain of our international operations.

During the first quarter of 2007, we announced three exploration successes in deepwater Angola and one in the Gulf of Mexico. The Caril and Manjericao discovery wells are located on Block 32 in deepwater Angola, where we hold a 30 percent outside-operated interest, and the Miranda discovery well is located on Block 31, where we hold a 10 percent outside-operated interest. These discoveries move both deepwater Angola blocks closer toward establishment of commercial developments. The Droshky discovery well (previously named Troika Deep) in the Gulf of Mexico is located on Green Canyon Block 244. One successful appraisal sidetrack well has been drilled and a second lateral appraisal sidetrack well is being drilled, which will complete our appraisal process. This potential development would be through the Troika Unit infrastructure, which is located approximately two miles from the well. We hold a 100 percent interest in the Droshky well and a 50 percent outside-operated interest in the Troika Unit.

Also in Angola, we have participated in five wells on Blocks 31 and 32, the results of which have not been announced. We will announce details related to those wells upon approval of the Angola government.

12



In Norway, the Alvheim/Vilje development project has entered the commissioning stage, during which additional work has been identified as necessary to bring the floating production, storage and offloading vessel (“FPSO”) into compliance with Norwegian codes and regulations and to fully integrate the existing ship systems with the new topside facilities. This additional work, along with intense market demand for labor in Norway and additional drilling activity, has contributed to increased costs for the project. First production is now expected in the third quarter of 2007 and a peak net rate of approximately 75 mboepd is expected in 2008.

Our 2007 production available for sale is still expected to average between 390 and 425 mboepd, excluding the impact of acquisitions and dispositions. This wide range considered the possibilities of delays in major project delivery dates; however, it is likely that actual production available for sale for the year will be at the lower end of this range as a result of the Alvheim delay.

The above discussion includes forward-looking statements with respect to the Alvheim/Vilje and Neptune development projects, the possibility of developing Blocks 31 and 32 offshore Angola and the timing and levels of our worldwide liquid hydrocarbon, natural gas and condensate production available for sale. Some factors that could potentially affect these forward-looking statements include pricing, supply and demand for petroleum products, the amount of capital available for exploration and development, regulatory constraints, 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, and other geological, operating and economic considerations. Except for the Alvheim/Vilje development, the foregoing forward-looking statements may be further affected by the inability to obtain or delay in obtaining necessary government and third-party approvals and permits. The possible developments on Blocks 31 and 32 could further be affected by presently known data concerning size and character of reservoirs, economic recoverability, future drilling success and production experience. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

EXCERPTS ON THIS PAGE:

10-K (5 sections)
Feb 27, 2009
10-K (2 sections)
Feb 29, 2008
8-K
Jan 31, 2008
10-Q
Nov 7, 2007
8-K (2 sections)
Sep 7, 2007
10-Q
Aug 7, 2007
10-Q
May 7, 2007

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