Marathon Oil (MRO)

F-39

Guarantees  –  Marathon has issued the following guarantees:

^(a)

Marathon holds interests in an offshore oil port, LOOP LLC ("LOOP"), and a crude oil pipeline system, LOCAP LLC ("LOCAP"). Both LOOP and LOCAP have secured various project financings with throughput and deficiency agreements. Under the agreements, Marathon is required to advance funds if the investees are unable to service debt. Any such advances are considered prepayments of future transportation charges. The terms of the agreements vary but tend to follow the terms of the underlying debt. Included in the underlying debt are a LOOP revolving credit facility of $25 million and a LOCAP revolving credit facility of $23 million.

^(b)

Marathon holds an interest in a refined products pipeline, Centennial Pipeline LLC ("Centennial"), and has guaranteed the repayment of Centennial's outstanding balance under a Master Shelf Agreement, which expires in 2024, and a Credit Agreement, which expires in 2007. The guarantees arose in order to obtain adequate financing. Prior to expiration of the Master Shelf Agreement, Marathon could be relinquished from responsibility under the guarantee should Centennial meet certain financial tests.

^(c)

In conjunction with the sale of its Russian businesses as discussed in Note 7, Marathon guaranteed the purchaser with regard to unknown obligations and inaccuracies in representations, warranties, covenants and agreements by Marathon. These indemnifications are part of the normal course of selling assets. Under the agreement, the maximum potential amount of future payments associated with these guarantees is equivalent to the proceeds from the sale.

^(d)

In 2003, Marathon sold its interest in the Yates field and gathering system. In accordance with this transaction, Marathon indemnified the purchaser from inaccuracies in Marathon's representations, warranties, covenants and agreements.

^(e)

In conjunction with the sale of certain Canadian assets during 2003, Marathon guaranteed the purchaser with regards to unknown environmental obligations and inaccuracies in Marathon's representations, warranties, covenants and agreements.

^(f)

Marathon entered into certain performance and general guarantees and environmental and general indemnifications in connection with certain asset sales.

^(g)

United States Steel is the sole general partner of Clairton 1314B Partnership, L.P., which owns certain cokemaking facilities formerly owned by United States Steel. Marathon has guaranteed to the limited partners all obligations of United States Steel under the partnership documents. In addition to the commitment to fund operating cash shortfalls of the partnership discussed in Note 3, United States Steel, under certain circumstances, is required to indemnify the limited partners if the partnership's product sales fail to qualify for the credit under Section 29 of the Internal Revenue Code. United States Steel has estimated the maximum potential amount of this indemnity obligation, including interest and tax gross-up, was approximately $680 million. Furthermore, United States Steel under certain circumstances has indemnified the partnership for environmental obligations.

^(h)

The agreement between Centennial and its members allows each member to contribute cash in lieu of Centennial procuring separate insurance in the event of third-party liability arising from a catastrophic event. Each member is to contribute cash in proportion to its ownership interest.

⁽ⁱ⁾

Marathon is a party to a long-term transportation services agreement with Alliance Pipeline L.P. ("Alliance"). The agreement requires Marathon to pay minimum annual charges of approximately $7 million through 2015. The payments are required even if the transportation facility is not utilized. This contract has been used by Alliance to secure its financing. As a result of the Canadian asset sale discussed above, Husky has indemnified Marathon for any claims related to these guarantees.

^(j)

Marathon is an equity investor in Kenai Kachemak Pipeline LLC ("KKPL"), holding a 60 percent, noncontrolling interest. In April 2003, Marathon guaranteed KKPL's performance to properly construct, operate, maintain and abandon the pipeline in accordance with the Alaska Pipeline Act and the Right of Way Lease Agreement with the State of Alaska. The major obligations covered under the guarantee include maintaining the right-of-way, satisfying any liabilities caused by operation of the pipeline, and providing for the abandonment costs. Obligations that could arise under the guarantee would vary according to the circumstances triggering payment.

^(k)

Marathon has entered into leases of corporate assets containing general lease indemnities and guaranteed residual value clauses.

Contract commitments  –  At December 31, 2006 and 2005, Marathon's contract commitments to acquire property, plant and equipment totaled $1.703 billion and $668 million. The $1.035 billion increase is primarily due to commitments related to the Garyville refinery expansion.

F-39

Guarantees  –  Marathon has issued the following guarantees:

^(a)

Marathon holds interests in an offshore oil port, LOOP LLC ("LOOP"), and a crude oil pipeline system, LOCAP LLC ("LOCAP"). Both LOOP and LOCAP have secured various project financings with throughput and deficiency agreements. Under the agreements, Marathon is required to advance funds if the investees are unable to service debt. Any such advances are considered prepayments of future transportation charges. The terms of the agreements vary but tend to follow the terms of the underlying debt. Included in the underlying debt are a LOOP revolving credit facility of $25 million and a LOCAP revolving credit facility of $23 million.

^(b)

Marathon holds an interest in a refined products pipeline, Centennial Pipeline LLC ("Centennial"), and has guaranteed the repayment of Centennial's outstanding balance under a Master Shelf Agreement, which expires in 2024, and a Credit Agreement, which expires in 2007. The guarantees arose in order to obtain adequate financing. Prior to expiration of the Master Shelf Agreement, Marathon could be relinquished from responsibility under the guarantee should Centennial meet certain financial tests.

^(c)

In conjunction with the sale of its Russian businesses as discussed in Note 7, Marathon guaranteed the purchaser with regard to unknown obligations and inaccuracies in representations, warranties, covenants and agreements by Marathon. These indemnifications are part of the normal course of selling assets. Under the agreement, the maximum potential amount of future payments associated with these guarantees is equivalent to the proceeds from the sale.

^(d)

In 2003, Marathon sold its interest in the Yates field and gathering system. In accordance with this transaction, Marathon indemnified the purchaser from inaccuracies in Marathon's representations, warranties, covenants and agreements.

^(e)

In conjunction with the sale of certain Canadian assets during 2003, Marathon guaranteed the purchaser with regards to unknown environmental obligations and inaccuracies in Marathon's representations, warranties, covenants and agreements.

^(f)

Marathon entered into certain performance and general guarantees and environmental and general indemnifications in connection with certain asset sales.

^(g)

United States Steel is the sole general partner of Clairton 1314B Partnership, L.P., which owns certain cokemaking facilities formerly owned by United States Steel. Marathon has guaranteed to the limited partners all obligations of United States Steel under the partnership documents. In addition to the commitment to fund operating cash shortfalls of the partnership discussed in Note 3, United States Steel, under certain circumstances, is required to indemnify the limited partners if the partnership's product sales fail to qualify for the credit under Section 29 of the Internal Revenue Code. United States Steel has estimated the maximum potential amount of this indemnity obligation, including interest and tax gross-up, was approximately $680 million. Furthermore, United States Steel under certain circumstances has indemnified the partnership for environmental obligations.

^(h)

The agreement between Centennial and its members allows each member to contribute cash in lieu of Centennial procuring separate insurance in the event of third-party liability arising from a catastrophic event. Each member is to contribute cash in proportion to its ownership interest.

⁽ⁱ⁾

Marathon is a party to a long-term transportation services agreement with Alliance Pipeline L.P. ("Alliance"). The agreement requires Marathon to pay minimum annual charges of approximately $7 million through 2015. The payments are required even if the transportation facility is not utilized. This contract has been used by Alliance to secure its financing. As a result of the Canadian asset sale discussed above, Husky has indemnified Marathon for any claims related to these guarantees.

^(j)

Marathon is an equity investor in Kenai Kachemak Pipeline LLC ("KKPL"), holding a 60 percent, noncontrolling interest. In April 2003, Marathon guaranteed KKPL's performance to properly construct, operate, maintain and abandon the pipeline in accordance with the Alaska Pipeline Act and the Right of Way Lease Agreement with the State of Alaska. The major obligations covered under the guarantee include maintaining the right-of-way, satisfying any liabilities caused by operation of the pipeline, and providing for the abandonment costs. Obligations that could arise under the guarantee would vary according to the circumstances triggering payment.

^(k)

Marathon has entered into leases of corporate assets containing general lease indemnities and guaranteed residual value clauses.

Contract commitments  –  At December 31, 2006 and 2005, Marathon's contract commitments to acquire property, plant and equipment totaled $1.703 billion and $668 million. The $1.035 billion increase is primarily due to commitments related to the Garyville refinery expansion.

F-39

        Of the total capitalized costs for exploratory wells, approximately $78 million and $9 million at December 31, 2003 and 2002 related to wells for which costs had been suspended for more than one year following the completion of drilling and for which additional exploratory wells are not underway or firmly planned. There were none at December 31, 2004. For each of these wells, sufficient progress is being made assessing the reserves and the economic and operating viability of these projects to justify continued capitalization of the costs. The following table presents information relating to these wells:

^(a)

A plan of development for the Corrib Field was submitted to the Petroleum Affairs Division of the Department of Communications Marine and Natural Resources in November 2000. Awards of major contracts for a terminal, subsea facilities, and an onshore pipeline were made between March and August 2001. Design of the facilities was commenced and material was procured. Planning approval for the terminal construction was received from the Mayo County Council (the "local authority") in August 2001 but this approval was appealed to the National Planning Appeals Board ("ABP") in September 2001. As a result of the expected delay, due to the appeal to ABP, a revised plan of development was submitted in November 2001 and a Petroleum Lease was awarded to the Corrib joint venture participants in the same month. In 2001, Marathon recognized proved undeveloped reserves due to Marathon's record of obtaining necessary permits and approvals in Ireland. In May 2002, ABP approved the revised plan of development. In April 2003, following a lengthy appeals process, ABP refused planning permission for the terminal due to concerns over the long term stability of stripped peat that was to be stored on the site. Marathon reclassified approximately 14 million barrels of oil equivalent from proved undeveloped reserves to unproved reserves in 2003 due to continuing delays in receiving the necessary approval for the terminal. In December 2003, a new planning application was submitted to the local authority for the terminal which addressed ABP's concerns over peat stability. The local authority granted planning permission for the revised application in April 2004; however this was subsequently appealed to ABP. In October 2004, ABP upheld the local authority's decision to grant planning permission for the natural gas terminal. This decision is a major step forward in the Corrib Project and has allowed development activities to proceed. Marathon recognized proved reserves for Corrib at the end of 2004.

^(b)

In 2001 a successful discovery well was drilled on the Ozona prospect. In 2002, two sidetrack wells were drilled. One was successful while the other was written off to exploratory dry well expense in the amount of $14 million. An integrated project team was formed in 2003 to formulate a development plan. Marathon is currently negotiating commercial terms of a production handling agreement with a nearby operator and is also in the process of reviewing seismic data to obtain a better understanding of the complex salt formations in the area and to optimize the location of the next well. As of December 31, 2004, drilling operations for the next well were firmly planned and are expected to be completed in July 2005. The results of this well will determine when proved reserves will be recognized.

^(c)

Future plans are to re-enter and sidetrack this well. All costs below 16,000 feet, which totaled $18 million, were written off to exploratory dry well expense in 2001 and 2002. Marathon entered into a joint venture agreement on August 5, 2003, for a technical evaluation of the prospect. In addition, Marathon is in the process of reviewing seismic data for another drilling prospect. As of December 31, 2004, a well was firmly planned for 2005. If a discovery is made, plans are to utilize the initial wellbore to sidetrack as an appraisal well. The earliest that proved reserves could potentially be recognized would be at project sanction, estimated in 2007. If the 2005 well is not successful, the initial well will be written off in 2005.