Marathon Oil (MRO)

Production

During 2008, several of our development projects were completed and began producing. We have approved new development projects, are evaluating others and will continue working on ongoing projects in 2009.

Angola – In 2008 we received approval to proceed with this first deepwater PSVM development project. The development is comprised of the Plutao, Saturno, Venus and Marte discoveries. Key contracts were awarded and construction work commenced in the second half of 2008. A total of 48 production and injection wells are planned for the PSVM development. First production is targeted for 2012 with a design capacity of about 150,000 gross bpd

Norway – Tie back of the Volund field offshore Norway to the Alvheim/Vilje production facility continues with first production expected in late 2009. We own a 65 percent interest in Volund and serve as operator. In addition, we hold a 28 percent outside-operated interest in the Gudrun field, located 120 miles off the coast of Norway, where a successful appraisal well was drilled in 2006. In January 2009, the operator announced a development concept that includes a fixed processing platform with seven production wells that would be tied to existing facilities on the Sleipner field. A final investment decision is expected in 2009.

Gulf of Mexico – The Droshky and Ozona developments in deepwater Gulf of Mexico were approved in 2008. Rig capacity has been secured for Droshky development drilling which is expected to begin in February 2009 with first production targeted for 2010. The project will consist of four development wells which will be tied back to the nearby third-party owned and operated Bullwinkle platform. We own a 100 percent working interest in Droshky. Ozona development on Garden Banks Block 515 will begin in 2009, with first production expected in 2011. We hold a 68 percent working interest in Ozona.

U.S. onshore – We continue drilling on resource plays in the Piceance Basin of Colorado and the Williston Basin of North Dakota and eastern Montana (the Bakken shale resource play). In the Piceance Basin, drilling and production commenced in late 2007. Plans are to drill 150 wells during the next five years. More than 100 operated wells have already been drilled with plans to drill approximately 225 additional wells during the next five years.

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.

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Table of Contents

Index to Financial Statements

Production

During 2008, several of our development projects were completed and began producing. We have approved new development projects, are evaluating others and will continue working on ongoing projects in 2009.

Angola – In 2008 we received approval to proceed with this first deepwater PSVM development project. The development is comprised of the Plutao, Saturno, Venus and Marte discoveries. Key contracts were awarded and construction work commenced in the second half of 2008. A total of 48 production and injection wells are planned for the PSVM development. First production is targeted for 2012 with a design capacity of about 150,000 gross bpd

Norway – Tie back of the Volund field offshore Norway to the Alvheim/Vilje production facility continues with first production expected in late 2009. We own a 65 percent interest in Volund and serve as operator. In addition, we hold a 28 percent outside-operated interest in the Gudrun field, located 120 miles off the coast of Norway, where a successful appraisal well was drilled in 2006. In January 2009, the operator announced a development concept that includes a fixed processing platform with seven production wells that would be tied to existing facilities on the Sleipner field. A final investment decision is expected in 2009.

Gulf of Mexico – The Droshky and Ozona developments in deepwater Gulf of Mexico were approved in 2008. Rig capacity has been secured for Droshky development drilling which is expected to begin in February 2009 with first production targeted for 2010. The project will consist of four development wells which will be tied back to the nearby third-party owned and operated Bullwinkle platform. We own a 100 percent working interest in Droshky. Ozona development on Garden Banks Block 515 will begin in 2009, with first production expected in 2011. We hold a 68 percent working interest in Ozona.

U.S. onshore – We continue drilling on resource plays in the Piceance Basin of Colorado and the Williston Basin of North Dakota and eastern Montana (the Bakken shale resource play). In the Piceance Basin, drilling and production commenced in late 2007. Plans are to drill 150 wells during the next five years. More than 100 operated wells have already been drilled with plans to drill approximately 225 additional wells during the next five years.

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.

58

Table of Contents

Index to Financial Statements

Production