Marathon Oil (MRO)

Other Matters

During the first quarter of 2008, we relinquished our interest in an exploration and production license in Sudan, and as a result, we no longer have any interests in Sudan.

We ceased efforts to pursue exploration opportunities in Ukraine and closed our Kiev office in the third quarter of 2008.

The above discussion of the E&P segment includes forward-looking statements with respect to anticipated future exploratory and development drilling, Blocks 31 and 32 offshore Angola, the Equatorial Guinea discoveries, the timing of production from the Woodford Shale resource play, the Droshky and Ozona developments in the Gulf of Mexico, the Volund development, the sale of a subsidiary which owns producing properties in Ireland 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 Volund 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 offshore Angola, and the Equatorial Guinea discoveries could further be affected by presently known data concerning size and character of reservoirs, economic recoverability, future drilling success and production experience. Factors that could affect the sale of the subsidiary include customary closing conditions. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

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Table of Contents

Index to Financial Statements

Other Matters

During the first quarter of 2008, we relinquished our interest in an exploration and production license in Sudan, and as a result, we no longer have any interests in Sudan.

We ceased efforts to pursue exploration opportunities in Ukraine and closed our Kiev office in the third quarter of 2008.

The above discussion of the E&P segment includes forward-looking statements with respect to anticipated future exploratory and development drilling, Blocks 31 and 32 offshore Angola, the Equatorial Guinea discoveries, the timing of production from the Woodford Shale resource play, the Droshky and Ozona developments in the Gulf of Mexico, the Volund development, the sale of a subsidiary which owns producing properties in Ireland 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 Volund 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 offshore Angola, and the Equatorial Guinea discoveries could further be affected by presently known data concerning size and character of reservoirs, economic recoverability, future drilling success and production experience. Factors that could affect the sale of the subsidiary include customary closing conditions. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

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Table of Contents

Index to Financial Statements

Other Matters

Other Matters

In 2007, the U.S. Congress passed the Energy Independence and Security Act (“EISA”), which, among other things, sets a target of 35 miles per gallon for the combined fleet of cars and light trucks in the United States by model year 2020, and contains a multiple-part Renewable Fuel Standard (“RFS”). The RFS was 9.0 billion gallons of renewable fuel in 2008, and is 11.1 billion gallons in 2009, increasing to 36.0 billion gallons by 2022. In the near term, the RFS will be satisfied primarily with fuel ethanol blended into gasoline. The RFS presents production and logistic challenges for both the fuel ethanol and petroleum refining industries. The RFS has required, and may in the future continue to require, additional capital expenditures or expenses by us to accommodate increased fuel ethanol use. Within the overall 36.0 billion gallon RFS, EISA establishes an advanced biofuel RFS that begins with 0.6 billion gallons in 2009 and increases to 21.0 billion gallons by 2022. Subsets within the advanced biofuel RFS include 0.5 billion gallons of biomass-based diesel in 2009, increasing to 1.0 billion gallons in 2012, and 0.1 billion gallons of cellulosic biofuel in 2010, increasing to 16.0 gallons by 2022. The advanced biofuels programs will present specific challenges in that we may have to enter into arrangements with other parties to meet our obligations to use advanced biofuels, including biomass-based diesel and cellulosic biofuel, with potentially uncertain supplies of these new fuels. There will be compliance costs and uncertainties regarding how we will comply with the various requirements contained in this law and related regulations. We may experience a decrease in demand for refined petroleum products due to an increase in combined fleet mileage or due to refined petroleum products being replaced by renewable fuels.

Other Matters

In 2007, the U.S. Congress passed the Energy Independence and Security Act (“EISA”), which, among other things, sets a target of 35 miles per gallon for the combined fleet of cars and light trucks in the United States by model year 2020, and contains a multiple-part Renewable Fuel Standard (“RFS”). The RFS was 9.0 billion gallons of renewable fuel in 2008, and is 11.1 billion gallons in 2009, increasing to 36.0 billion gallons by 2022. In the near term, the RFS will be satisfied primarily with fuel ethanol blended into gasoline. The RFS presents production and logistic challenges for both the fuel ethanol and petroleum refining industries. The RFS has required, and may in the future continue to require, additional capital expenditures or expenses by us to accommodate increased fuel ethanol use. Within the overall 36.0 billion gallon RFS, EISA establishes an advanced biofuel RFS that begins with 0.6 billion gallons in 2009 and increases to 21.0 billion gallons by 2022. Subsets within the advanced biofuel RFS include 0.5 billion gallons of biomass-based diesel in 2009, increasing to 1.0 billion gallons in 2012, and 0.1 billion gallons of cellulosic biofuel in 2010, increasing to 16.0 gallons by 2022. The advanced biofuels programs will present specific challenges in that we may have to enter into arrangements with other parties to meet our obligations to use advanced biofuels, including biomass-based diesel and cellulosic biofuel, with potentially uncertain supplies of these new fuels. There will be compliance costs and uncertainties regarding how we will comply with the various requirements contained in this law and related regulations. We may experience a decrease in demand for refined petroleum products due to an increase in combined fleet mileage or due to refined petroleum products being replaced by renewable fuels.

Other Matters

Other Matters

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Other Matters

The Energy Policy Act of 2005 established a Renewable Fuel Standard (“RFS”) providing that all gasoline sold in the United States contain a minimum of 4.0 billion gallons of renewable fuel in 2006. The RFS increases gradually each year until 2012, when the RFS will be 7.5 billion gallons of renewable fuel. The EPA issued a final rule in May 2007 and the program went into effect on September 1, 2007. We have put the necessary systems in place to track and report our compliance with these requirements.

The recently-passed Energy Independence and Security Act of 2007 contains multiple RFSs. The overall requirement starts with 9.0 billion gallons of renewable fuel required in 2008 and ramps up to 36.0 billion gallons in 2022. Inside of the overall requirement is an advanced biofuels mandate which begins in 2009 and increases to 21.0 billion gallons by 2022. Subsets within the advanced biofuels requirements require 1.0 billion gallons of biomass-based diesel fuel by 2012 and 16.0 billion gallons of cellulosic ethanol by 2022. The EPA has not yet issued a proposal and a final rule to implement this program. This program presents specific challenges in that a refiner like us may have to enter into arrangements with other parties to meet its obligations to use advanced biofuels and cellulosic ethanol if it cannot produce these fuels itself. We may also experience a decrease in demand of our current refinery-produced petroleum products to the extent they are replaced by advanced biofuels and cellulosic

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Table of Contents

Index to Financial Statements

ethanol and overall demand does not increase to replace this loss. There will be compliance costs and uncertainties regarding how we will comply with the mandates contained in this law and rule, but the extent and magnitude of impact cannot be reliably or accurately estimated due to the uncertainty of these measures at this time. We are and will be developing potential strategies for compliance with such requirements.

Other Matters

Other Matters

Some of the provisions of Marathon’s restated certificate of incorporation and by-laws discussed below may have the effect, either alone or in combination with the provisions of its restated certificate of incorporation discussed above and Section 203 of the Delaware General Corporation Law, of making more difficult or discouraging a tender offer, proxy contest, merger or other takeover attempt that Marathon’s board of directors opposes but that a stockholder might consider to be in its best interest.

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Marathon’s restated certificate of incorporation provides that its stockholders may act only at an annual or special meeting of stockholders and may not act by written consent. Marathon’s by-laws provide that only its board of directors may call a special meeting of its stockholders.

Marathon’s restated certificate of incorporation provides that the number of directors will be fixed from time to time by, or in the manner provided in, its by-laws, but will not be less than three.

Marathon’s by-laws contain advance-notice and other procedural requirements that apply to stockholder nominations of persons for election to the board of directors at any annual meeting of stockholders and to stockholder proposals that stockholders take any other action at any annual meeting. A stockholder proposing to nominate a person for election to the board of directors or proposing that any other action be taken at an annual meeting of stockholders must give Marathon’s corporate secretary written notice of the proposal not less than 45 days and not more than 75 days before the first anniversary of the date on which Marathon first mailed its proxy materials for the immediately preceding year’s annual meeting of stockholders. These stockholder proposal deadlines are subject to exceptions if the pending annual meeting date is more than 30 days prior to or more than 30 days after the first anniversary of the immediately preceding year’s annual meeting. Marathon’s by-laws prescribe specific information that any such stockholder notice must contain. These advance-notice provisions may have the effect of precluding a contest for the election of directors or the consideration of stockholder proposals if the proper procedures are not followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its own proposal, without regard to whether consideration of those nominees or proposals might be harmful or beneficial to Marathon and its stockholders.

Marathon’s restated certificate of incorporation provides that its stockholders may adopt, amend and repeal its by-laws at any regular or special meeting of stockholders by an affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on that action, provided the notice of intention to adopt, amend or repeal the by-laws has been included in the notice of that meeting.

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Other Matters

        We hold an interest in an exploration and production license in Sudan. We suspended all operations in Sudan in 1985 due to civil unrest. We have had no employees in the country and have derived no economic benefit from those interests since that time. The U.S. government imposed sanctions against Sudan in 1997 and we have not made any payments related to Sudan since then. We have abided and will continue to abide by all U.S. sanctions related to Sudan and will not consider resuming any activity regarding our interests there until such time as it is permitted under U.S. law. Our intention is to exit this license in 2007.

        We discovered the Ash Shaer and Cherrife gas fields in Syria in the 1980s. We have recognized no revenues in any period from activities in Syria and we impaired our entire investment in Syria in 1998. In July 2006, the new production sharing contract awarded by the Syrian government was signed into law. This contract gave us the right to assign all or part of our interest in these fields to a third party, subject to the consent of the Syrian government, and also resolved the previous disputes between us, the Syrian Petroleum Company and the Syrian government over our interest in these fields. In October 2006, the Syrian government approved the assignment of 90 percent of our interest in the Ash Shaer and Cherrife natural gas fields to a non-U.S. company. We closed the transaction on November 1, 2006, and received cash proceeds of $46 million. While we continue to hold a 10 percent outside-operated interest, we continue to comply with all U.S. sanctions related to Syria. We expect to sell the remaining 10 percent interest in 2007.

        The above discussion of the E&P segment includes forward-looking statements with respect to anticipated future exploratory and development drilling, the possibility of developing the Gudrun field offshore Norway and Blocks 31 and 32 offshore Angola, the timing of production from the Neptune development, the Piceance Basin, 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

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economic considerations. Except for the Alvheim/Vilje and Volund 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 on the Gudrun field 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. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements.

Other Matters

We suspended operations in Sudan in 1985, but continue to hold an interest in an exploration and production sharing agreement.  We have derived no economic benefit from our Sudan interests.  We have and will continue to abide by all U.S. sanctions related to Sudan and will not resume any activity regarding our interests there until such time as it is permitted under U.S. law.

We discovered the Ash Shaer and Cherrife gas fields in Syria in the 1980’s.  We submitted four plans of development to the Syrian Petroleum Company in the 1990’s, but none were approved.  The Syrian government subsequently claimed that the production sharing contract for these fields had expired.  We have been involved in an ongoing dispute with the Syrian Petroleum Company and Syrian government over our interest in these fields, and are currently discussing a settlement under which a new production sharing contract would be executed, and we would have the right to sell all or a significant portion of our interest to a third party.  We have and will continue to comply with all U.S. sanctions related to Syria.

We are continuing to work with our partners and the Libyan government to finalize the terms of the group’s reentry agreement.  We also opened an office in Tripoli during the second quarter of 2005.

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Other Matters

We suspended operations in Sudan in 1985, but continue to hold an interest in an exploration and production sharing agreement.  We have derived no economic benefit from our Sudan interests.  We have and will continue to abide by all U.S. sanctions related to Sudan and will not resume any activity regarding our interests there until such time as it is permitted under U.S. law.

We discovered the Ash Shaer and Cherrife gas fields in Syria in the 1980’s.  We submitted four plans of development to the Syrian Petroleum Company in the 1990’s, but none were approved.  The Syrian government subsequently claimed that the production sharing contract for these fields had expired.  We have been involved in an ongoing dispute with the Syrian Petroleum Company and Syrian government over our interest in these fields, and are currently discussing a settlement under which a new production sharing contract would be executed, and we would have the right to sell all or a significant portion of our interest to a third party.  We have and will continue to comply with all U.S. sanctions related to Syria.

We are continuing to work with our partners and the Libyan government to finalize the terms of the group’s reentry agreement.  We also opened an office in Tripoli.

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