Marathon Oil Corporation today provided investors with a comprehensive report on the Company's global operations, including a review of strategic plans that will enable Marathon to deliver growth across each of its segments.
"We have in hand today the assets and plans through our integrated business model to fulfill our mission of providing shareholders with long-term sustainable value growth," said Clarence P. Cazalot, Jr., Marathon President and CEO.
Cazalot highlighted a number of factors that will contribute to Marathon's future success:
• A resource base of 6.6 billion barrels of oil equivalent (BOE) - the largest in company history
• Top-quartile production growth, including upstream and oil sands mining, through 2012*
• Year-end 2012 proved reserves, including oil sands, projected to be approximately 15 percent higher than year-end 2007*
• A growing portfolio of upstream growth opportunities beyond 2012
• Strengthened refining and midstream asset base
• Integrated long-lived asset base
• Sound financial position to fund growth
• Global asset portfolio review which is underway to enhance shareholder value.
*Excluding acquisitions and divestitures.
At year-end 2001, Marathon had a resource base of 2.1 billion BOE and by year-end 2007, the Company had more than tripled this to 6.6 billion BOE, which includes liquid hydrocarbons, natural gas and bitumen.
"Resource growth drives future reserve additions," Cazalot said, "and we intend to further increase our resource base and convert barrels into proved reserves and production. A major contributor will be our oil sands mining business, which will be ramping up production significantly in the coming years. We're also making strategic investments in our downstream business that will lower feedstock costs as well as increase efficiency and flexibility, so we can continue providing competitive returns in an increasingly challenging market. And, importantly, we will continue to maintain financial discipline and flexibility to fund our profitable growth.
"Across all of our business segments, we will access and deploy critical technologies to differentiate Marathon from our competition. We will strive to attain top-quartile execution on major projects and employ operational excellence to ensure safe, environmentally responsible and highly reliable operations.
"Further enhancing our ability to execute our plans, we have contracts in place for most of our major projects and we have and will continue to increase technical human resources in order to meet future needs," he said.
Projecting forward to 2012, 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.
Marathon's refining, marketing and transportation segment achieved record crude and total refinery throughputs in 2007; and the Company said it is positioned for strong performance across industry cycles. Key strategies outlined for the downstream businesses are:
• Feedstock flexibility
• Scale efficiency
• Operational excellence
• Commercial advantage.
Pointing to an example of increasing scale and feedstock flexibility, Marathon said its projected $3.2 billion Garyville, La. refinery expansion project is progressing on time and on budget. With 700 tons of structural steel erected and more than 20,000 cubic yards of concrete poured, the refinery expansion is about 38 percent complete.
Additionally, Marathon expects to more than double its coking capacity by 2011, which will lead to lower feedstock costs and increased margins. There is also emphasis on growing distillate production which will increase by more than 50 percent by 2011, expanding E-10 ethanol market penetration, and leveraging the Company's midstream infrastructure.
The strategic value of the Company's integrated business model is illustrated in the potential sourcing of Canadian bitumen production to the Company's U.S. refineries, in particular the Detroit refinery. The Detroit heavy oil upgrading project will provide a valuable commercial solution for the growing volumes of Canadian production.
Technology was highlighted as a critical element of value creation for Marathon. The Company's three-pronged technology strategy is to:
• Deliver technology solutions to maximize the value of existing assets
• Create technology differentiation in key areas important for access to new resources
• Monitor and selectively invest in emerging technologies such as: renewable/alternative fuels, energy efficiency, and carbon capture and storage.
Offered as an example of technology differentiation, Marathon's proprietary Gas-to-Fuels(TM) technology would convert natural gas directly into clean transportation fuels such as high-octane gasoline and diesel, and could potentially be used to monetize stranded natural gas resources around the world. The Company has proven the technology in the laboratory, and a 10- barrel-per-day demonstration plant is currently under construction in Texas. A commerciality decision is expected to be made in 2008.