Marathon Oil (MRO)

Obligations Associated with the Separation of United States Steel

We remain obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the USX Separation. United States Steel’s obligations to us are general unsecured obligations that rank equal to United States Steel’s accounts payable and other general unsecured obligations. If United States Steel fails to satisfy these obligations, we would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from us, including all rights related to purchase options, prepayments or the grant or release of security interests. However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of the assumed leases.

As of December 31, 2008, we have identified the following obligations that have been assumed by United States Steel:

Of the total $513 million, obligations of $492 million and corresponding receivables from United States Steel were recorded on our consolidated balance sheet as of December 31, 2008, (current portion – $23 million; long-term portion – $469 million). The remaining $21 million was related to off-balance sheet arrangements and contingent liabilities of United States Steel.

United States Steel has restrictive covenants related to its indebtedness that could have an adverse effect on its financial position and liquidity. In its Form 10-K for the year ended December 31, 2008, United States Steel reported that it was in compliance with all debt covenants, but that the current global recession may affect its

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Index to Financial Statements

ability to comply with those covenant and conditions in the future. Such circumstances could trigger a need for United States Steel to modify or replace credit agreements on less favorable terms that could adversely affect its flexibility, cash flow and profitability.

Obligations Associated with the Separation of United States Steel

We remain obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the USX Separation. United States Steel’s obligations to us are general unsecured obligations that rank equal to United States Steel’s accounts payable and other general unsecured obligations. If United States Steel fails to satisfy these obligations, we would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from us, including all rights related to purchase options, prepayments or the grant or release of security interests. However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of the assumed leases.

As of December 31, 2008, we have identified the following obligations that have been assumed by United States Steel:

Of the total $513 million, obligations of $492 million and corresponding receivables from United States Steel were recorded on our consolidated balance sheet as of December 31, 2008, (current portion – $23 million; long-term portion – $469 million). The remaining $21 million was related to off-balance sheet arrangements and contingent liabilities of United States Steel.

United States Steel has restrictive covenants related to its indebtedness that could have an adverse effect on its financial position and liquidity. In its Form 10-K for the year ended December 31, 2008, United States Steel reported that it was in compliance with all debt covenants, but that the current global recession may affect its

56

Table of Contents

Index to Financial Statements

ability to comply with those covenant and conditions in the future. Such circumstances could trigger a need for United States Steel to modify or replace credit agreements on less favorable terms that could adversely affect its flexibility, cash flow and profitability.

Obligations Associated with the Separation of United States Steel

We remain obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel
has assumed responsibility for repayment under the terms of the USX Separation. United States Steel’s obligations to us are general unsecured obligations that rank equal to United States Steel’s accounts payable and other general unsecured
obligations. If United States Steel fails to satisfy these obligations, we would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from
us, including all rights related to purchase options, prepayments or the grant or release of security interests. However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than
extensions set forth in the terms of the assumed leases.

As of December 31, 2008, we have identified the following obligations that
have been assumed by United States Steel:

Of the total $513 million, obligations of $492 million and corresponding
receivables from United States Steel were recorded on our consolidated balance sheet as of December 31, 2008, (current portion – $23 million; long-term portion – $469 million). The remaining $21 million was related to off-balance
sheet arrangements and contingent liabilities of United States Steel.

United States Steel has restrictive covenants related to its
indebtedness that could have an adverse effect on its financial position and liquidity. In its Form 10-K for the year ended December 31, 2008, United States Steel reported that it was in compliance with all debt covenants, but that the current
global recession may affect its

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Table of Contents

Index to Financial Statements

ability to comply with those covenant and conditions in the future. Such circumstances could trigger a need for United States Steel to modify or replace
credit agreements on less favorable terms that could adversely affect its flexibility, cash flow and profitability.

Obligations Associated with the Separation of United States Steel

We remain obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the Separation. United States Steel’s obligations to us are general unsecured obligations that rank equal to United States Steel’s accounts payable and other general unsecured obligations. If United States Steel fails to satisfy these obligations, we would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from us, including all rights related to purchase options, prepayments or the grant or release of security interests. However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of the assumed leases.

As of December 31, 2007, we have identified the following obligations that have been assumed by United States Steel:

Of the total $533 million, obligations of $507 million and corresponding receivables from United States Steel were recorded on our consolidated balance sheet as of December 31, 2007 (current portion—$22 million; long-term portion—$485 million). The remaining $26 million was related to off-balance sheet arrangements and contingent liabilities of United States Steel.

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Table of Contents

Index to Financial Statements

The table below provides aggregated information on the portion of our consolidated obligations to make future cash payments under existing contracts that have been assumed by United States Steel as of December 31, 2007.

We remain obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the Separation. (See the discussion of the Separation in our 2006 Annual Report on Form 10-K.)  United States Steel’s obligations to Marathon are general unsecured obligations that rank equal to United States Steel’s accounts payable and other general unsecured obligations.  If United States Steel fails to satisfy these obligations, we would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from Marathon, including all rights related to purchase options, prepayments or the grant or release of security interests.  However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of the assumed leases.

        As of September 30, 2007, we have obligations totaling $546 million that have been assumed by United States Steel.  Of this amount, obligations of $520 million and corresponding receivables from United States Steel were recorded on our consolidated balance sheet (current portion - $35 million; long-term portion - $485 million). The remaining $26 million was related to off-balance sheet arrangements and contingent liabilities of United States Steel.

Obligations Associated with the Separation of United States Steel

        We remain obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the Separation. (See the discussion of the Separation in our 2006 Annual Report on Form 10-K.) United States Steel's obligations to Marathon are general unsecured obligations that rank equal to United States Steel's accounts payable and other general unsecured obligations. If United States Steel fails to satisfy these obligations, we would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from Marathon, including all rights related to purchase options, prepayments or the grant or release of security interests. However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of the assumed leases.

        As of March 31, 2007, we have obligations totaling $556 million that have been assumed by United States Steel. Of this amount, obligations of $525 million and corresponding receivables from United States Steel were recorded on our consolidated balance sheet (current portion – $30 million; long-term portion – $495 million). The remaining $31 million was related to off-balance sheet arrangements and contingent liabilities of United States Steel.

Obligations Associated with the Separation of United States Steel

        On December 31, 2001, we disposed of our steel business through a tax-free distribution of the common stock of our wholly owned subsidiary, United States Steel, to holders of our USX – U. S. Steel Group class of common stock in exchange for all outstanding shares of Steel Stock on a one-for-one basis.

        We remain obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the Separation. United States Steel's obligations to Marathon are general unsecured obligations that rank equal to United States Steel's accounts payable and other general unsecured obligations. If United States Steel fails to satisfy these obligations, we would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from Marathon, including all rights related to purchase options, prepayments or the grant or release of security interests. However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of the assumed leases.

        As of December 31, 2006, we have identified the following obligations totaling $564 million that have been assumed by United States Steel:

•

$415 million of industrial revenue bonds related to environmental improvement projects for current and former United States Steel facilities, with maturities ranging from 2009 through 2033. Accrued interest payable on these bonds was $11 million at December 31, 2006.



•

$60 million of sale-leaseback financing under a lease for equipment at United States Steel's Fairfield Works, with a term extending to 2012, subject to extensions. There was no accrued interest payable on this financing at December 31, 2006.



•

$44 million of obligations under a lease for equipment at United States Steel's Clairton coke-making facility, with a term extending to 2012. There was no accrued interest payable on this financing at December 31, 2006.



•

$34 million of operating lease obligations, $31 million of which was in turn assumed by purchasers of major equipment used in plants and operations divested by United States Steel.



•

A guarantee of all obligations of United States Steel as general partner of Clairton 1314B Partnership, L.P. to the limited partners. United States Steel has reported that it currently has no unpaid outstanding obligations to the limited partners. For further discussion of the Clairton 1314B guarantee, see Note 3 to the consolidated financial statements.

        Of the total $564 million, obligations of $530 million and corresponding receivables from United States Steel were recorded on our consolidated balance sheet as of December 31, 2006 (current portion – $32 million; long-term portion – $498 million). The remaining $34 million was related to off-balance sheet arrangements and contingent liabilities of United States Steel.

17

        The table below provides aggregated information on the portion of our obligations to make future payments under existing contracts that have been assumed by United States Steel as of December 31, 2006:

Summary of Contractual Cash Obligations Assumed by United States Steel

^(a)

We anticipate cash payments for interest of $23 million for 2007, $46 million for 2008-2009, $45 million for 2010-2011 and $239 million for the later years to be assumed by United States Steel.

        Marathon and United States Steel have entered into a tax sharing agreement that allocates tax liabilities relating to taxable periods ended on or before December 31, 2001. In 2006 and 2005, in accordance with the terms of the tax sharing agreement, we paid $35 million and $6 million to United States Steel in connection with the settlement with the Internal Revenue Service of the consolidated federal income tax returns of USX Corporation for the years 1995 through 2001. The final payment of $13 million to United States Steel related to U.S. federal income tax returns under the tax sharing agreement was made in January 2007.

        United States Steel reported in its Form 10-K for the year ended December 31, 2006, that it has significant restrictive covenants related to its indebtedness including cross-default and cross-acceleration clauses on selected debt that could have an adverse effect on its financial position and liquidity. However, United States Steel management believes that its liquidity will be adequate to satisfy its obligations for the foreseeable future.

Obligations Associated with the Separation of United States Steel

We remain obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the Separation. (See the discussion of the Separation in our 2006 Annual Report on Form 10-K.)  United States Steel’s obligations to Marathon are general unsecured obligations that rank equal to United States Steel’s accounts payable and other general unsecured obligations.  If United States Steel fails to satisfy these obligations, we would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from Marathon, including all rights related to purchase options, prepayments or the grant or release of security interests.  However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of the assumed leases.

As of June 30, 2007, we have obligations totaling $549 million that have been assumed by United States Steel.  Of this amount, obligations of $519 million and corresponding receivables from United States Steel were recorded on our consolidated balance sheet (current portion - $31 million; long-term portion - $488 million). The remaining $30 million was related to off-balance sheet arrangements and contingent liabilities of United States Steel.

Obligations Associated with the Separation of United States Steel

We remain obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the Separation. (See the discussion of the Separation in our 2006 Annual Report on Form 10-K.) United States Steel’s obligations to Marathon are general unsecured obligations that rank equal to United States Steel’s accounts payable and other general unsecured obligations. If United States Steel fails to satisfy these obligations, we would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from Marathon, including all rights related to purchase options, prepayments or the grant or release of security interests. However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of the assumed leases.

As of March 31, 2007, we have obligations totaling $556 million that have been assumed by United States Steel. Of this amount, obligations of $525 million and corresponding receivables from United States Steel were recorded on our consolidated balance sheet (current portion - $30 million; long-term portion - $495 million). The remaining $31 million was related to off-balance sheet arrangements and contingent liabilities of United States Steel.

Obligations Associated with the Separation of United States Steel

        On December 31, 2001, we disposed of our steel business through a tax-free distribution of the common stock of our wholly owned subsidiary, United States Steel, to holders of our USX – U. S. Steel Group class of common stock in exchange for all outstanding shares of Steel Stock on a one-for-one basis.

        We remain obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the Separation. United States Steel's obligations to Marathon are general unsecured obligations that rank equal to United States Steel's accounts payable and other general unsecured obligations. If United States Steel fails to satisfy these obligations, we would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from Marathon, including all rights related to purchase options, prepayments or the grant or release of security interests. However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of the assumed leases.

        As of December 31, 2006, we have identified the following obligations totaling $564 million that have been assumed by United States Steel:

•

$415 million of industrial revenue bonds related to environmental improvement projects for current and former United States Steel facilities, with maturities ranging from 2009 through 2033. Accrued interest payable on these bonds was $11 million at December 31, 2006.



•

$60 million of sale-leaseback financing under a lease for equipment at United States Steel's Fairfield Works, with a term extending to 2012, subject to extensions. There was no accrued interest payable on this financing at December 31, 2006.



•

$44 million of obligations under a lease for equipment at United States Steel's Clairton coke-making facility, with a term extending to 2012. There was no accrued interest payable on this financing at December 31, 2006.



•

$34 million of operating lease obligations, $31 million of which was in turn assumed by purchasers of major equipment used in plants and operations divested by United States Steel.



•

A guarantee of all obligations of United States Steel as general partner of Clairton 1314B Partnership, L.P. to the limited partners. United States Steel has reported that it currently has no unpaid outstanding obligations to the limited partners. For further discussion of the Clairton 1314B guarantee, see Note 3 to the consolidated financial statements.

        Of the total $564 million, obligations of $530 million and corresponding receivables from United States Steel were recorded on our consolidated balance sheet as of December 31, 2006 (current portion – $32 million; long-term portion – $498 million). The remaining $34 million was related to off-balance sheet arrangements and contingent liabilities of United States Steel.

49

        The table below provides aggregated information on the portion of our obligations to make future payments under existing contracts that have been assumed by United States Steel as of December 31, 2006:

Summary of Contractual Cash Obligations Assumed by United States Steel

^(a)

We anticipate cash payments for interest of $23 million for 2007, $46 million for 2008-2009, $45 million for 2010-2011 and $239 million for the later years to be assumed by United States Steel.

        Marathon and United States Steel have entered into a tax sharing agreement that allocates tax liabilities relating to taxable periods ended on or before December 31, 2001. In 2006 and 2005, in accordance with the terms of the tax sharing agreement, we paid $35 million and $6 million to United States Steel in connection with the settlement with the Internal Revenue Service of the consolidated federal income tax returns of USX Corporation for the years 1995 through 2001. The final payment of $13 million to United States Steel related to U.S. federal income tax returns under the tax sharing agreement was made in January 2007.

        United States Steel reported in its Form 10-K for the year ended December 31, 2006, that it has significant restrictive covenants related to its indebtedness including cross-default and cross-acceleration clauses on selected debt that could have an adverse effect on its financial position and liquidity. However, United States Steel management believes that its liquidity will be adequate to satisfy its obligations for the foreseeable future.

Obligations Associated with the Separation of United States Steel

We remain obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the Separation.  United States Steel’s obligations to Marathon are general unsecured obligations that rank equal to United States Steel’s accounts payable and other general unsecured obligations.  If United States Steel fails to satisfy these obligations, we would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from Marathon, including all rights related to purchase options, prepayments or the grant or release of security interests.  However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of the assumed leases.

As of September 30, 2005, we have obligations totaling $643 million that have been assumed by United States Steel.  Of the total $643 million, obligations of $597 million and corresponding receivables from United States Steel were recorded on our consolidated balance sheet (current portion - $21 million; long-term portion - $576 million). The remaining $46 million was related to operating lease obligations of United States Steel.

26

Obligations Associated with the Separation of United States Steel

We remain obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the Separation.  United States Steel’s obligations to Marathon are general unsecured obligations that rank equal to United States Steel’s accounts payable and other general unsecured obligations.  If United States Steel fails to satisfy these obligations, we would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from Marathon, including all rights related to purchase options, prepayments or the grant or release of security interests.  However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of the assumed leases.

As of June 30, 2005, we have obligations totaling $661 million that have been assumed by United States Steel.  Of the total $661 million, obligations of $598 million and corresponding receivables from United States Steel were recorded on our consolidated balance sheet (current portion - $19 million; long-term portion - $579 million). The remaining $63 million was related to off-balance sheet arrangements and contingent liabilities of United States Steel.

Obligations Associated with the Separation of United States Steel

We remain obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the Separation.  United States Steel’s obligations to Marathon are general unsecured obligations that rank equal to United States Steel’s accounts payable and other general unsecured obligations.  If United States Steel fails to satisfy these obligations, we would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from Marathon, including all rights related to purchase options, prepayments or the grant or release of security interests.  However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of the assumed leases.

As of March 31, 2005, we have obligations totaling $669 million that have been assumed by United States Steel.  Of the total $669 million, obligations of $604 million and corresponding receivables from United States Steel were recorded on our consolidated balance sheet (current portion - $19 million; long-term portion - $585 million). The remaining $65 million was related to off-balance sheet arrangements and contingent liabilities of United States Steel.

Obligations Associated with the Separation of United States Steel

        On December 31, 2001, we disposed of our steel business through a tax-free distribution of the common stock of our wholly owned subsidiary, United States Steel, to holders of its USX – U. S. Steel Group class of common stock ("Steel Stock") in exchange for all outstanding shares of Steel Stock on a one-for-one basis (the "Separation").

        We remain obligated (primarily or contingently) for certain debt and other financial arrangements for which United States Steel has assumed responsibility for repayment under the terms of the Separation. United States Steel's obligations to Marathon are general unsecured obligations that rank equal to United States Steel's accounts payable and other general unsecured obligations. If United States Steel fails to satisfy these obligations, we would become responsible for repayment. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed from Marathon, including all rights related to purchase options, prepayments or the grant or release of security interests. However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of the assumed leases.

        As of December 31, 2004, we have identified the following obligations totaling $671 million that have been assumed by United States Steel:

•

$472 million of industrial revenue bonds related to environmental improvement projects for current and former United States Steel facilities, with maturities ranging from 2009 through 2033. Accrued interest payable on these bonds was $8 million at December 31, 2004.



•

$71 million of sale-leaseback financing under a lease for equipment at United States Steel's Fairfield Works, with a term extending to 2012, subject to extensions. There was no accrued interest payable on this financing at December 31, 2004.



•

$51 million of obligations under a lease for equipment at United States Steel's Clairton cokemaking facility, with a term extending to 2012. There was no accrued interest payable on this financing at December 31, 2004.



•

$55 million of operating lease obligations, of which $42 million was in turn assumed by purchasers of major equipment used in plants and operations divested by United States Steel.



•

A guarantee of United States Steel's $14 million contingent obligation to repay certain distributions from its 50 percent owned joint venture PRO-TEC Coating Company.



•

A guarantee of all obligations of United States Steel as general partner of Clairton 1314B Partnership, L.P. to the limited partners. United States Steel has reported that it currently has no unpaid outstanding obligations to the limited partners. For further discussion of the Clairton 1314B guarantee, see Note 3 to the Consolidated Financial Statements.

        Of the total $671 million, obligations of $602 million and corresponding receivables from United States Steel were recorded on our consolidated balance sheet (current portion – $15 million; long-term portion – $587 million). The remaining $69 million was related to off-balance sheet arrangements and contingent liabilities of United States Steel.

        The table below provides aggregated information on the portion of our obligations to make future payments under existing contracts that have been assumed by United States Steel as of December 31, 2004:

Summary of Contractual Cash Obligations Assumed by United States Steel

^(a)

We anticipate cash payments for interest of $27 million for 2005, $53 million for 2006-2007, $53 million for 2008-2009 and $53 million for the later years to be assumed by United States Steel.

        Each of Marathon and United States Steel, as members of the same consolidated tax reporting group during taxable periods ended on or before December 31, 2001, is jointly and severally liable for the federal income tax liability of the entire consolidated tax reporting group for those periods. Marathon and United States Steel have entered into a tax sharing agreement that allocates tax liabilities relating to taxable periods ended on or before December 31, 2001.

43

The agreement includes indemnification provisions to address the possibility that the taxing authorities may seek to collect a tax liability from one party where the tax sharing agreement allocates that liability to the other party. In 2003, in accordance with the terms of the tax sharing agreement, we paid $16 million to United States Steel in connection with the settlement with the Internal Revenue Service of the consolidated federal income tax returns of USX Corporation for the years 1992 through 1994.

        United States Steel reported in its Form 10-K for the year ended December 31, 2004, that it has significant restrictive covenants related to its indebtedness including cross-default and cross-acceleration clauses on selected debt that could have an adverse effect on its financial position and liquidity. However, United States Steel management believes that its liquidity will be adequate to satisfy its obligations for the foreseeable future. During periods of weakness in the manufacturing sector of the U.S. economy, United States Steel believes that it can maintain adequate liquidity through a combination of deferral of nonessential capital spending, sale of non-strategic assets and other cash conservation measures.