Marathon Oil (MRO)

Net cash used in investing activities totaled $5,435 million in 2008, compared with $8,102 million in 2007 and $2,955 million in 2006. 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.

Capital expenditures for multiple years are impacted by the following projects. In our E&P segment, development and completion of the Alvheim/Vilje project affected our capital expenditures in 2006, 2007 and to a lesser extent in 2008. Similarly, our Angola exploration and development projects impacted all three years. In our RM&T segment, the expansion of our Garyville, Louisiana refinery commenced with front-end engineering and design (“FEED”) in 2006 followed by construction in 2007 and 2008. Also in RM&T, the expansion and upgrading

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of our Detroit, Michigan refinery commenced with FEED in 2007 and construction in 2008. Integrated gas spending in 2006 and through May 2007 reflects the completion of the LNG production facility in Equatorial Guinea.

New capital spending in 2008 was primarily related to the ongoing AOSP Expansion 1 in the OSM segment, and in U.S. exploration and development projects primarily in the Gulf of Mexico.

Acquisitions in 2007 consist primarily of the $3,907 million cash portion of the Western acquisition purchase price, net of the $44 million of cash acquired. See Note 6 to the consolidated financial statements for more information about the Western acquisition. In 2006, acquisitions primarily included cash payments of $718 million associated with our re-entry into Libya.

Disposal of assets totaled $999 million, $137 million and $134 million in 2008, 2007 and 2006. In 2008, disposal of assets included proceeds from the sale of our outside-operated interests and related undeveloped acreage in Norway and our share of PTC. Disposal of assets included proceeds from the sale of our interests in two LNG tankers in Alaska in 2007 and proceeds from the sale of 90 percent of our interest in Syrian natural gas fields in 2006. Disposals for all years included proceeds from the sale of various domestic producing properties and SSA stores.

Disposal of discontinued operations of $832 million in 2006 related to the sale of our Russian exploration and production businesses in June 2006. See Note 8 to the consolidated financial statements.

Net cash used in financing activities totaled $1,193 million in 2008, compared with net cash provided by financing activities of $184 million in 2007 and cash used in financing activities of $2,581 million in 2006. Sources of cash in 2008 included the issuance of $1.0 billion in senior notes. Sources of cash in 2007 included the issuance of $1.5 billion in senior notes and borrowings of $578 million from the Norwegian export credit agency. Significant uses of cash in financing activities in all years were common stock repurchases under our share repurchase plan, dividend payments and debt repayments.

Significant noncash transactions during 2007 included the issuance of $1.0 billion of 5.125 percent Fixed Rate Revenue Bonds (Marathon Oil Corporation Project) Series 2007A, with a maturity date of June 1, 2037. The proceeds from the bonds, along with interest income, are held in trust to be disbursed to us upon our request for reimbursement of expenditures related to our Garyville, Louisiana refinery expansion. Through December 31, 2008, such reimbursements have totaled $1,032 million. The $1.0 billion obligation is reflected as long-term debt and the remaining $16 million of trusteed funds, including interest income earned to date, is reflected as other noncurrent assets in the consolidated balance sheet as of December 31, 2008.

Net cash used in investing activities totaled $5,435 million in 2008, compared with $8,102 million in 2007 and $2,955 million in 2006. 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.

Capital expenditures for multiple years are impacted by the following projects. In our E&P segment, development and completion of the Alvheim/Vilje project affected our capital expenditures in 2006, 2007 and to a lesser extent in 2008. Similarly, our Angola exploration and development projects impacted all three years. In our RM&T segment, the expansion of our Garyville, Louisiana refinery commenced with front-end engineering and design (“FEED”) in 2006 followed by construction in 2007 and 2008. Also in RM&T, the expansion and upgrading

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Table of Contents

Index to Financial Statements

of our Detroit, Michigan refinery commenced with FEED in 2007 and construction in 2008. Integrated gas spending in 2006 and through May 2007 reflects the completion of the LNG production facility in Equatorial Guinea.

New capital spending in 2008 was primarily related to the ongoing AOSP Expansion 1 in the OSM segment, and in U.S. exploration and development projects primarily in the Gulf of Mexico.

Acquisitions in 2007 consist primarily of the $3,907 million cash portion of the Western acquisition purchase price, net of the $44 million of cash acquired. See Note 6 to the consolidated financial statements for more information about the Western acquisition. In 2006, acquisitions primarily included cash payments of $718 million associated with our re-entry into Libya.

Disposal of assets totaled $999 million, $137 million and $134 million in 2008, 2007 and 2006. In 2008, disposal of assets included proceeds from the sale of our outside-operated interests and related undeveloped acreage in Norway and our share of PTC. Disposal of assets included proceeds from the sale of our interests in two LNG tankers in Alaska in 2007 and proceeds from the sale of 90 percent of our interest in Syrian natural gas fields in 2006. Disposals for all years included proceeds from the sale of various domestic producing properties and SSA stores.

Disposal of discontinued operations of $832 million in 2006 related to the sale of our Russian exploration and production businesses in June 2006. See Note 8 to the consolidated financial statements.

Net cash used in financing activities totaled $1,193 million in 2008, compared with net cash provided by financing activities of $184 million in 2007 and cash used in financing activities of $2,581 million in 2006. Sources of cash in 2008 included the issuance of $1.0 billion in senior notes. Sources of cash in 2007 included the issuance of $1.5 billion in senior notes and borrowings of $578 million from the Norwegian export credit agency. Significant uses of cash in financing activities in all years were common stock repurchases under our share repurchase plan, dividend payments and debt repayments.

Significant noncash transactions during 2007 included the issuance of $1.0 billion of 5.125 percent Fixed Rate Revenue Bonds (Marathon Oil Corporation Project) Series 2007A, with a maturity date of June 1, 2037. The proceeds from the bonds, along with interest income, are held in trust to be disbursed to us upon our request for reimbursement of expenditures related to our Garyville, Louisiana refinery expansion. Through December 31, 2008, such reimbursements have totaled $1,032 million. The $1.0 billion obligation is reflected as long-term debt and the remaining $16 million of trusteed funds, including interest income earned to date, is reflected as other noncurrent assets in the consolidated balance sheet as of December 31, 2008.

Net cash used in investing activities totaled $5,435 million in 2008, compared with $8,102
million in 2007 and $2,955 million in 2006. Significant investing activities include capital expenditures, acquisitions of businesses and asset disposals.

FACE="Times New Roman" SIZE="2">Capital expenditures by segment for continuing operations for each of the last three years are summarized in the following table.