Marathon Oil Company

Capex

Marathon Oil Corporation has announced an $8 billion capital, investment and exploration budget for 2008, which represents a 67 percent increase over 2007 spending of $4.8 billion.

The increase is primarily due to activity related to the Garyville, La. refinery expansion, the Athabasca Oil Sands Project (AOSP) in Alberta, Canada, and the associated Detroit refinery heavy oil upgrading and expansion project.

Exploration and Production

Marathon's 2008 worldwide exploration and production budget of $3.2 billion reflects an increase of 23 percent over 2007 spending of $2.6 billion.

The Company's 2008 worldwide exploration and exploitation budget is just over $1 billion, nearly the same as in 2007. About half of this amount is for exploration activity, including funds to drill six to 10 significant exploration and appraisal wells. It also includes $150 million related to Marathon's high bids on leases from the October 2007 Gulf of Mexico lease sale which should be awarded in 2008. Exploitation comprises the remainder of this budget. It is focused primarily on stepout activity within or adjacent to the Company's onshore producing properties in the United States. In 2008, budgeted exploitation expenditures also include appraisal drilling and pre-FEED (front- end engineering and design) costs in Angola, and the evaluation drilling and feasibility studies of the in-situ projects obtained as a part of the Western Oil Sands Inc. acquisition.

Worldwide production capital spending in 2008 is projected to be $2.1 billion, an increase of approximately 37 percent over 2007. The majority of the increase can be attributed to the U.S. where Marathon continues to expand investments in its onshore resource plays and plans to begin development activities for the Droshky project in the Gulf of Mexico. International expenditures are slightly higher due to a planned development in deepwater Angola and the continued development of the Volund project in Norway, partially offset by reduced spending with the completion of the Alvheim and Vilje projects in Norway.

Oil Sands Mining

For 2008, Marathon has budgeted $910 million for its Oil Sands Mining segment, most of which is related to the Phase 1 Expansion of the AOSP -- a world-class project with a long-life, stable production profile. Phase 1 Expansion 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.

The Company's 2007 Oil Sands Mining spending of $155 million reflects expenditures subsequent to the acquisition of Western Oil Sands Inc.

Refining, Marketing and Transportation

Refining, marketing and transportation spending is expected to total $3.5 billion in 2008, up significantly from the $1.7 billion expended in 2007. Investments in the Garyville refinery expansion and the Detroit refinery heavy oil upgrading and expansion project comprise the vast majority of this downstream budget.

The 2008 budget also includes increased investments in transportation, logistics and marketing assets to allow the Company to leverage and strengthen its position as a leading provider of transportation fuels, particularly with the growing importance of ultra-low sulfur diesel and the renewable fuels standards.

Integrated Gas

Marathon has budgeted $20 million for integrated gas capital spending during 2008 for continued FEED work for a potential liquefied natural gas (LNG) Train 2 project in Equatorial Guinea. This represents a decrease from 2007 expenditures of $83 million, which included spending associated with the construction of the Equatorial Guinea LNG Train 1 production facility, which began operations in May 2007.

Corporate

During 2008, corporate spending is expected to total approximately $346 million, of which $308 million represents interest capitalized to assets under construction. The increase of $75 million from 2007 reflects the overall increase in capital spending.

Future Plans

In March 2008, the company detailed its five-year operational and financial targets for upstream and oil sands mining, excluding acquisitions and divestitures, which include:
• Maintaining competitive cash and income per BOE
• Compound average production growth, upstream plus oil sands mining, of 7 percent (2007 - 2012)
• Capital and exploration spending of about $18.5 billion (2008 - 2012)
• Average annual reserve replacement, including oil sands, of more than 150 percent (2008 - 2012)
• Drilling 8 - 13 significant exploration wells per year with average annual resource additions of 150 million BOE at a finding cost of less than $3 per BOE.

For 2008, the Company said it expects worldwide net upstream production will be in the range of 380,000 - 420,000 BOE per day, excluding sales and acquisitions. Additionally, net bitumen production from the Canadian oil sands is expected to be about 30,000 barrels per day.

First production from three major development projects is targeted for 2008. Those include Neptune in the Gulf of Mexico, and Alvheim and Vilje in Norway. Two projects slated for sanction in 2008 are: the Droshky development project in the Gulf of Mexico, with first production targeted for the 2010 - 2011 timeframe; and the Angola Block 31 Northeast development, with first production targeted for 2012.

Marathon said its 2007 - 2012 upstream production growth is driven by high confidence in its base asset performance, greater certainty in the contributions from U.S. resource plays, and major development projects that are either already producing or will commence production in 2008.

Production

Sales volumes averaged 354,000 barrels of oil equivalent per day (boepd) for the fourth quarter of 2007 and 351,000 boepd for the full year 2007, and production available for sale averaged 352,000 boepd and 353,000 boepd in the same periods.

Reported sales volumes for the fourth quarter of 2006 averaged 357,000 barrels of oil equivalent per day (boepd) and production available for sale averaged 363,000 boepd. The difference between the sales volume and production available for sale was primarily a result of the Company producing, and injecting into storage, natural gas contracted for future sale in Ireland. Reported sales volumes from continuing operations averaged 365,000 boepd for 2006, representing growth of 14 percent over 2005. Production available for sale from continuing operations for 2006 also averaged 365,000 boepd. The largest sales volume increase in both periods was in Libya, where first crude oil sales occurred in the first quarter of 2006.

Reserves

Marathon  announced that during 2007, the Company added net proved liquid hydrocarbon and natural gas reserves of 88 million barrels of oil equivalent (mmboe) while producing 125 mmboe, for a reserve replacement of 70 percent. For the three-year period ended Dec. 31, 2007, Marathon added net proved liquid hydrocarbon and natural gas reserves of 516 mmboe, excluding dispositions of 46 mmboe, while producing 383 mmboe, resulting in an average reserve replacement of 135 percent. Both the one-year and three-year additions exclude the Company's 421 mmboe of proved bitumen reserves in its Canadian oil sands business acquired in 2007, which are reported separately.

Estimated Net Proved Reserves of Liquid Hydrocarbons & Natural Gas* (Millions of barrels of oil equivalent)

As of December 31, 2006
U.S: 350
Europe: 182
Africa: 730
Total: 1,262

Extensions, discoveries & other additions
U.S: 30
Europe: 13
Africa: 31
Total: 74

Improved recovery
U.S: 8
Europe: -
Africa: -
Total: 8

Revisions of previous estimates
U.S: (4)
Europe: 6
Africa: 2
Total: 4

Purchases of reserves in place
U.S: 2
Europe: -
Africa: -
Total: 2

Production
U.S: (52)
Europe: (22)
Africa: (51)
Total: (125)

As of December 31, 2007
U.S: 334
Europe: 179
Africa: 712
Total: 1,225

*Note: Bitumen reserves are not included.

At year-end 2007, Marathon had estimated net proved liquid hydrocarbon and natural gas reserves of 1.2 billion boe, of which 53 percent were liquid hydrocarbons and 47 percent were natural gas. Marathon's 2007 proved reserve additions were primarily in Libya, Norway and Colorado's Piceance Basin. Proved developed reserves represented 72 percent of total proved reserves at year end 2007, as compared to 68 percent the previous year.

Property acquisition, exploration and development costs incurred for oil and gas producing activities during 2007 were $3 billion. For the three-year period ended Dec. 31, 2007, costs incurred for oil and gas producing activities were $8 billion.

In 2006, Marathon added 143 million boe in proved reserves (107 percent of 2006 production) through discoveries, extensions, improved recovery and revisions of previous estimates, principally in Libya and Equatorial Guinea. In addition, 3 million boe were added through acquisitions. At year-end 2006, Marathon had estimated proved reserves of 1.262 billion boe with a reserve life of 9.7 years, based upon 2006 production from continuing operations.

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