Marathon Sets 2010 Capital, Investment and Exploration Budget
$5.1 BILLION BUDGET REPRESENTS 17 PERCENT REDUCTION FROM 2009 SPENDING
HOUSTON, Feb. 1 /PRNewswire-FirstCall/ -- Marathon Oil Corporation (NYSE: MRO) today announced a $5.1 billion capital, investment and exploration budget for 2010, a 17 percent decrease from 2009 capital spending.
"Marathon's 2010 capital program will focus on Upstream activity, with an emphasis on the development of sanctioned projects, potentially significant exploration wells and advancing our growing resource plays," said Clarence P. Cazalot, Jr., Marathon president and CEO.
"With the completion of our Garyville, La., refinery major expansion, our spending in the Downstream is budgeted to be 53 percent lower in 2010 compared to 2009," Cazalot said. "We are very proud of the effort of so many individuals across the Company in bringing the Garyville Major Expansion to completion on time. Starting in the second quarter of this year, after the major turnaround of the base facility, we anticipate this world-class, 436,000-barrel-per-day refinery will be a major earnings and cash flow contributor to Marathon.
"As previously stated, we intend to link our spending levels to cash flow and to maintain our financial flexibility. Our disciplined approach to investing is designed to create the appropriate diversification and scale for all our business segments and deliver strong returns for our shareholders," he said.
Marathon continues to expect an Upstream production compound annual growth rate of approximately 4 percent, including Oil Sands Mining, for the period 2008-2011, excluding additional asset acquisitions, divestitures or future exploration successes. This growth rate remains unchanged despite completed asset sales estimated to reduce previously projected 2011 production by approximately 12,000 barrels of oil equivalent per day (boepd).
Exploration and Production
Marathon's 2010 worldwide exploration and production budget of approximately $2.9 billion reflects an increase of 24 percent over 2009 capital spending.
An active global exploration drilling program accounts for the majority of the increase. The 2010 worldwide exploration and exploitation budget is $1 billion, nearly 30 percent above 2009 spending. A primary focus in 2010 is the deepwater Gulf of Mexico, where Marathon plans to drill three or four significant wells and has more than doubled its 2009 exploration budget to $370 million. The Company also has targeted spending for Indonesia, where it plans to drill two potentially high-reward, but also high-risk, deepwater wells in 2010. The Company anticipates drilling or participating in approximately 20 to 30 wells in emerging North American resource plays – the Marcellus Shale in Pennsylvania/West Virginia, the Woodford Shale in Oklahoma and the Haynesville/Bossier play in Texas – and approximately 10 to 15 onshore conventional wells in the Lower 48 in 2010.
Worldwide production capital spending is projected to be $1.8 billion, a 21 percent increase from 2009 spending. More than 40 percent of this year's production funding is concentrated on three key oil projects: North Dakota's Bakken oil play, where Marathon plans to drill or participate in approximately 75 wells; offshore Norway, where further work is planned for satellite fields surrounding the Alvheim/Vilje development; and Angola, where advancement of the deepwater PSVM development in offshore Block 31 is under way. Additionally, in the Gulf of Mexico, Marathon is winding down spending on the Droshky development, with first production targeted for mid-2010 and where the Company owns a 100 percent working interest, while continuing work on the Ozona development. Initial production from Ozona, where Marathon holds a 68 percent working interest, is expected in late 2011. The Company also plans to drill or participate in approximately 100 conventional development wells onshore U.S. in 2010.
Marathon estimates 2010 production available for sale will be between 390,000 and 410,000 boepd, excluding the effect of any future acquisitions, dispositions or exploration success.
Oil Sands Mining
Marathon has budgeted approximately $670 million for its Oil Sands Mining segment, down 32 percent from 2009 as Expansion 1 of the Athabasca Oil Sands Project (AOSP) approaches completion. The project is on track and anticipated to begin mining operations in the second half of 2010, with a phased start-up of upgrader operations to follow in late 2010 or early 2011.
Expansion 1 includes construction of mining and extraction facilities at the Jackpine mine, expansion of treatment facilities at the existing Muskeg River mine, expansion of the Scotford upgrader and development of associated infrastructure. Marathon holds a 20 percent interest in the AOSP, a long-life project with a stable production profile.
Under revised Securities and Exchange Commission regulations, Marathon will begin reporting Oil Sands Mining production and reserves in terms of synthetic crude production, which is bitumen after upgrading excluding blendstocks. Net synthetic crude production for 2010 is expected to be between 22,000 and 28,000 barrels per day (bpd). The 2010 forecast takes into account a planned turnaround at the existing AOSP mine and upgrader facilities beginning late in the first quarter of this year and continuing into the second quarter. Production is expected to be curtailed for approximately 60 to 70 days and completely shutdown for two-thirds of that time.
Refining, Marketing and Transportation
The 2010 budget for the Refining, Marketing and Transportation segment will decrease by more than half to $1.1 billion, largely because of the on-time completion of the Garyville Major Expansion project in the fourth quarter of 2009. With the expansion, the refinery's crude oil throughput capacity has grown from 256,000 bpd to 436,000 bpd, making it among the largest refineries in the U.S. The entire facility (base and expansion) is expected to reach full refining capacity by the second quarter of 2010 following the planned maintenance activities currently under way at the base refinery.
The 2010 Downstream budget is allocated as follows: approximately $400 million for continuation of the Detroit Heavy Oil Upgrading Project, which is targeted for start-up in the second half of 2012; approximately $300 million to address the Mobile Source Air Toxics II regulations that go into effect starting Jan. 1, 2011; and approximately $400 million for the remainder of the Company's Refining, Marketing and Transportation operations.
Corporate
During 2010, corporate spending is expected to total approximately $500 million, of which about $450 million represents capitalized interest on assets under construction.
Tables detailing Marathon's 2010 planned capital, investment and exploration budget, 2009 preliminary spending and 2008 actual spending are attached.
The Company will conduct a conference call and webcast on Tuesday, Feb. 2, 2010, at 2 p.m. EST during which it will discuss fourth quarter and full year 2009 results, the 2010 capital budget, as well as future prospects. To listen to the webcast of the conference call and view the slides, visit the Marathon Web site at http://www.marathon.com. Replays of the webcast will be available through Feb. 16, 2010. Quarterly financial and operational information is also provided on Marathon's Web site at http://ir.marathon.com in the Quarterly Investor Packet.
Marathon is an integrated international energy company engaged in exploration and production; oil sands mining; integrated gas; and refining, marketing and transportation operations. Marathon, which is based in Houston, Texas, has principal operations in the United States, Angola, Canada, Equatorial Guinea, Indonesia, Libya, Norway, Poland and the United Kingdom. Marathon is the fourth largest United States-based integrated oil company and the nation's fifth largest refiner.
Note to investors: Marathon's capital, investment and exploration budget includes items that will not be reported as capital expenditures under generally accepted accounting principles. See the table at the end of this release for a reconciliation of forecasted capital expenditures to the capital, investment and exploration budget. In the above discussion, segment amounts do not include capitalized interest. Capitalized interest for all capital projects is budgeted in total as part of the Company's corporate capital spending budget.
This release contains forward-looking statements with respect to expected capital, investment and exploration spending, exploration and drilling plans, investments in new resource plays and development projects, the Athabasca Oil Sands Project Expansion 1, the Detroit refinery heavy oil upgrading and expansion project, the timing and levels of the Company's worldwide liquid hydrocarbon and natural gas production, synthetic crude production, the Droshky development, the Angola Block 31 development and other development projects. The capital, investment and exploration spending budget is based on current expectations, estimates and projections and is not a guarantee of future performance. Some factors that could cause actual results to differ materially include prices of and demand for crude oil, natural gas and refined products, actions of competitors, disruptions or interruptions of our production or refining operations due to the shortage of skilled labor and unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response, and other operating and economic considerations. Some factors that could potentially affect the timing and levels of liquid hydrocarbon and natural gas production, synthetic crude production, the Droshky, Angola and other developments, exploration and drilling activities, and investments in new resource plays and development projects include pricing, supply and demand for petroleum products, amount of capital available for exploration and development, occurrence of acquisitions or dispositions of oil and natural gas properties, regulatory constraints, inability or delay in obtaining government and third-party approvals and permits, timing of commencing production from new wells, drilling rig availability, unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response thereto, and other geological, operating and economic considerations. Factors that could affect the Athabasca Oil Sands Project Expansion 1 and the Detroit refinery heavy oil upgrading and expansion projects include transportation logistics, availability of materials and labor, unforeseen hazards such as weather conditions, delays in obtaining or conditions imposed by necessary government and third-party approvals and other risks customarily associated with construction projects. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements. In accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Marathon Oil Corporation has included in its Annual Report on Form 10-K for the year ended December 31, 2008, and subsequent Forms 10-Q and 8-K, cautionary language identifying other important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements.
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2010 Capital, Investment and Exploration (non-capital) Spending
(dollars in millions)
Percent Increase/ 2009 Percent Percent
2010 Of (Decrease) Prelim- Of 2008 Of
Budget Total over 2009 inary Total Actual Total
------ ----- --------- ----- ----- ------ -----
Worldwide
Exploration and
Production (E&P)
Production
U.S. $979 19% $26 $953 15% $1,097 15%
International 866 17% 299 567 9% 697 9%
--- --- --- --- --- --- ---
Total Production 1,845 36% 325 1,520 24% 1,794 24%
Exploration/
Exploitation
U.S. 677 13% 142 535 9% 1,090 14%
International 346 7% 92 254 4% 317 4%
--- --- --- --- --- --- ---
Total
Exploration/
Exploitation 1,023 20% 234 789 13% 1,407 18%
Total U.S. E&P 1,656 32% 168 1,488 24% 2,187 29%
Total International
E&P 1,212 24% 391 821 13% 1,014 13%
----- --- --- --- --- ----- ---
Total Worldwide
E&P 2,868 56% 559 2,309 37% 3,201 42%
Oil Sands Mining 668 13% (319) 987 16% 959 13%
Integrated Gas – 0% – – 0% 27 0%
--- --- --- --- --- --- ---
Total Upstream 3,536 69% 240 3,296 53% 4,187 55%
Refining, Marketing
and Transportation
(RM&T)
Refining* 1,044 20% (1,256) 2,300 37% 2,833 38%
Retail Marketing 70 1% 21 49 1% 61 1%
--- --- --- --- --- --- ---
Total Downstream 1,114 21% (1,235) 2,349 38% 2,894 39%
Other
Discontinued
Operations** – 0% (81) 81 1% 142 2%
Corporate 46 1% 4 42 1% 37 0%
Capitalized Interest 452 9% 12 440 7% 305 4%
--- --- --- --- --- --- ---
Total Other 498 10% (65) 563 9% 484 6%
--- --- --- --- --- --- ---
Total Capital,
Investment and
Exploration
Spending $5,148 100% $(1,060) $6,208 100% $7,565 100%
------ --- ------- ------ --- ------ ---
* Includes spending on transportation and marketing (brand and wholesale)
activities.
** Relates to Marathon's businesses in Ireland and Gabon that were sold
in 2009.
Capital, investment and exploration spending includes capital
expenditures, cash investments in equity method investees, exploration
costs that are expensed as incurred rather than capitalized, such as
geological and geophysical costs and certain staff costs, and other
miscellaneous investment expenditures. The components of capital,
investment and exploration spending are as follows:
2010 2009 2008
Budget Preliminary Actual
------ ----------- ------
Capital Expenditures* $4,863 $5,972 $7,146
Investments in Equity Method
Investees and Other 8 5 89
Exploration Costs other than Well
Costs 277 231 330
--------------------------------- --- --- ---
Capital, Investment and Exploration
Spending $5,148 $6,208 $7,565
----------------------------------- ------ ------ ------
*Includes accruals.
The 2009 amounts contained in the foregoing tables are preliminary and unaudited. Actual results may differ materially from the estimates given in this update. In accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Marathon Oil Corporation has included in its Annual Report on Form 10-K for the year ended December 31, 2008, and subsequent Forms 10-Q and 8-K, cautionary language identifying important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in these forward-looking statements.
SOURCE Marathon Oil Corporation
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