UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
~~[X]~~☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended ~~March 31,~~	September 30, 2019



~~[ ]~~☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____ to _____

Commission file number ~~1-5153~~1-1513

Marathon Oil Corporation

(Exact name of registrant as specified in its charter)



Delaware		25-0996816
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5555 San Felipe Street, Houston, TX Texas

77056-2723

(Address of principal executive offices)

(713) 629-6600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $1.00	MRO	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	þ	Accelerated filer		~~Accelerated filer~~o	Non-accelerated filer		oo
Smaller reporting companyo		☐	Emerging growth companyo			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No þ

There were ~~817,916,151~~799,928,541 shares of Marathon Oil Corporation common stock outstanding as of ~~April 30,~~October 31, 2019.

MARATHON OIL CORPORATION

Unless the context otherwise indicates, references to “Marathon Oil,” “we,” “our,” or “us” in this Form 10-Q are references to Marathon Oil Corporation, including its wholly owned and majority-owned subsidiaries, and its ownership interests in equity method investees (corporate entities, partnerships, limited liability companies and other ventures over which Marathon Oil exerts significant influence by virtue of its ownership interest).

For certain industry specific terms used in this Form 10-Q, please see “Definitions” in our 2018 Annual Report on Form 10-K.

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

MARATHON OIL CORPORATION

Consolidated Statements of Income (Unaudited)


	Three Months Ended						Three Months Ended						Nine Months Ended
	March 31,						September 30,						September 30,
(In millions, except per share data)	2019			2018			2019			2018			2019			2018
Revenues and other income:
Revenues from contracts with customers	$	1,200		$	1,537		$	1,249		$	1,538		$	3,830		$	4,522
Net loss on commodity derivatives	(91		)	(102		)
Net gain (loss) on commodity derivatives							47			(70		)	(28		)	(324		)
Income from equity method investments	11			37			21			64			63			161
Net gain on disposal of assets	42			257			22			16			56			323
Other income	35			4			6			119			54			135
Total revenues and other income	1,197			1,733			1,345			1,667			3,975			4,817
Costs and expenses:
Production	187			217			163			215			543			637
Shipping, handling and other operating	154			130			138			152			462			408
Exploration	59			52			22			56			107			173
Depreciation, depletion and amortization	554			590			622			626			1,781			1,828
Impairments	6			8			—			8			24			50
Taxes other than income	72			64			81			86			232			215
General and administrative	94			100			82			101			263			306
Total costs and expenses	1,126			1,161			1,108			1,244			3,412			3,617
Income from operations	71			572			237			423			563			1,200
Net interest and other	(49		)	(45		)	(64		)	(58		)	(177		)	(168		)
Other net periodic benefit costs	5			(3		)	2			(8		)	9			(11		)
Income before income taxes	27			524			175			357			395			1,021
Provision (benefit) for income taxes	(147		)	168			10			103			(105		)	315
Net income	$	174		$	356		$	165		$	254		$	500		$	706
Net income per share:
Basic	$	0.21		$	0.42		$	0.21		$	0.30		$	0.62		$	0.83
Diluted	$	0.21		$	0.42		$	0.21		$	0.30		$	0.62		$	0.83
Weighted average common shares outstanding:
Basic	819			851			802			848			813			852
Diluted	820			852			803			849			813			853

The accompanying notes are an integral part of these consolidated financial statements.

MARATHON OIL CORPORATION

Consolidated Statements of Comprehensive Income (Unaudited)


	Three Months Ended					Three Months Ended					Nine Months Ended
	March 31,					September 30,					September 30,
(In millions)	2019			2018		2019			2018		2019			2018
Net income	$	174		$	356	$	165		$	254	$	500		$	706
Other comprehensive income (loss), net of tax
Change in actuarial loss in postretirement and postemployment plans	(4		)	4
Other comprehensive income (loss)	(4		)	4
Postretirement and postemployment plans:
Change in actuarial gain (loss) in postretirement and postemployment plans						77			20		64			37
Income tax provision						(39		)	—		(39		)	—
Postretirement and postemployment plans, net of tax						38			20		25			37
Foreign currency translation:
Foreign currency translation adjustment related to sale of U.K. business						30			—		30			—
Income tax provision						(7		)	—		(7		)	—
Foreign currency translation, net of tax						23			—		23			—
Other, net of tax						1			—		1			4
Other comprehensive income						62			20		49			41
Comprehensive income	$	170		$	360	$	227		$	274	$	549		$	747

The accompanying notes are an integral part of these consolidated financial statements.

MARATHON OIL CORPORATION

Consolidated Balance Sheets (Unaudited)


	March 31,			December 31,			September 30,			December 31,
(In millions, except par value and share amounts)	2019			2018			2019			2018
Assets
Current assets:
Cash and cash equivalents	$	1,019		$	1,462		$	1,165		$	1,462
Receivables, less reserve of $12 and $11	1,086			1,079			1,148			1,079
Inventories	83			96			71			96
Other current assets	160			257			136			257
Current assets held for sale	428			27			—			27
Total current assets	2,776			2,921			2,520			2,921
Equity method investments	719			745			667			745
Property, plant and equipment, less accumulated depreciation, depletion and amortization of $17,669 and $21,830	16,714			16,804
Property, plant and equipment, less accumulated depreciation, depletion and amortization of $17,366 and $21,830							16,717			16,804
Goodwill	97			97			95			97
Other noncurrent assets	440			723			374			723
Noncurrent assets held for sale	664			31			—			31
Total assets	$	21,410		$	21,321		$	20,373		$	21,321
Liabilities
Current liabilities:
Accounts payable	$	1,310		$	1,320		$	1,374		$	1,320
Payroll and benefits payable	76			154			92			154
Accrued taxes	149			181			86			181
Other current liabilities	220			170			227			170
Long-term debt due within one year							600			—
Current liabilities held for sale	103			7			—			7
Total current liabilities	1,858			1,832			2,379			1,832
Long-term debt	5,501			5,499			4,903			5,499
Deferred tax liabilities	192			199			183			199
Defined benefit postretirement plan obligations	179			195			174			195
Asset retirement obligations	192			1,081			198			1,081
Deferred credits and other liabilities	317			279			265			279
Noncurrent liabilities held for sale	963			108			—			108
Total liabilities	9,202			9,193			8,102			9,193
Commitments and contingencies
Stockholders’ Equity
Preferred stock – no shares issued or outstanding (no par value, 26 million shares authorized)	$	—		$	—
Preferred stock - no shares issued or outstanding (no par value, 26 million shares authorized)							$	—		$	—
Common stock:
Issued – 937 million shares and 937 million shares (par value $1 per share, 1.925 billion shares authorized at March 31, 2019 and 1.925 billion shares authorized at December 31, 2018)	937			937
Held in treasury, at cost – 117 million shares and 118 million shares	(3,745		)	(3,816		)
Issued – 937 million shares (par value $1 per share, 1.925 billion shares authorized at September 30, 2019 and December 31, 2018)							937			937
Held in treasury, at cost – 136 million shares and 118 million shares							(4,028		)	(3,816		)
Additional paid-in capital	7,149			7,238			7,197			7,238
Retained earnings	7,808			7,706			8,053			7,706
Accumulated other comprehensive income	59			63			112			63
Total stockholders' equity	12,208			12,128
Total liabilities and stockholders' equity	$	21,410		$	21,321
Total stockholders’ equity							12,271			12,128
Total liabilities and stockholders’ equity							$	20,373		$	21,321

The accompanying notes are an integral part of these consolidated financial statements.

MARATHON OIL CORPORATION

Consolidated Statements of Cash Flows (Unaudited)


	Three Months Ended						Nine Months Ended
	March 31,						September 30,
(In millions)	2019			2018			2019			2018
Increase (decrease) in cash and cash equivalents
Operating activities:
Net income	$	174		$	356		$	500		$	706
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	554			590			1,781			1,828
Impairments	6			8			24			50
Exploratory dry well costs and unproved property impairments	49			42			85			144
Net gain on disposal of assets	(42		)	(257		)	(56		)	(323		)
Deferred income taxes	(31		)	(31		)	(34		)	62
Net loss on derivative instruments	91			102			28			324
Net settlements of derivative instruments	22			(59		)	41			(255		)
Pension and other post retirement benefits, net	(25		)	(34		)	(51		)	(60		)
Stock-based compensation	14			14			45			44
Equity method investments, net	14			32			26			42
Changes in:
Current receivables	(73		)	(130		)	(99		)	(389		)
Inventories	4			(9		)	4			(11		)
Current accounts payable and accrued liabilities	(102		)	81			(164		)	334
Other current assets and liabilities	14			(25		)	108			—
All other operating, net	(154		)	(31		)	(189		)	(117		)
Net cash provided by operating activities	515			649			2,049			2,379
Investing activities:
Additions to property, plant and equipment	(615		)	(662		)	(1,934		)	(2,069		)
Additions to other assets	14			(72		)	41			(135		)
Acquisitions, net of cash acquired	—			(4		)	—			(25		)
Disposal of assets, net of cash transferred to the buyer	13			1,180			(84		)	1,249
Equity method investments - return of capital	12			9			51			48
All other investing, net	12			(2		)	2			11
Net cash provided by (used in) investing activities	(564		)	449
Net cash used in investing activities							(1,924		)	(921		)
Financing activities:
Purchases of common stock	(30		)	(9		)	(296		)	(349		)
Dividends paid	(41		)	(42		)	(122		)	(128		)
All other financing, net	(1		)	2			(4		)	22
Net cash used in financing activities	(72		)	(49		)	(422		)	(455		)
Effect of exchange rate on cash and cash equivalents	1			1			—			(2		)
Net increase (decrease) in cash and cash equivalents	(120		)	1,050			(297		)	1,001
Cash and cash equivalents at beginning of period	1,462			563			1,462			563
Cash and cash equivalents at end of period	$	1,342		$	1,613		$	1,165		$	1,564

Reconciliation of cash and cash equivalents
Cash and cash equivalents	$	1,019		$	1,613
Cash and cash equivalents included in current assets held for sale	323			—
Total cash and cash equivalents	$	1,342		$	1,613

The accompanying notes are an integral part of these consolidated financial statements.

MARATHON OIL CORPORATION

Consolidated Statements of Stockholders’ Equity (Unaudited)


	Total Equity of Marathon Oil Stockholders																			Total Equity of Marathon Oil Stockholders
(In millions)	Preferred Stock		Common Stock		Treasury Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Equity			Preferred Stock		Common Stock		Treasury Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Equity
Three Months Ended March 31, 2018
Nine Months Ended September 30, 2018
December 31, 2017 Balance	$	—	$	937	$	(3,325	)	$	7,379		$	6,779		$	(62	)	$	11,708		$	—	$	937	$	(3,325	)	$	7,379		$	6,779		$	(62	)	11,708
Shares issued - stock-based compensation	—		—		158			(93		)	—			—			65			—		—		158			(93		)	—			—			65
Shares repurchased	—		—		(8		)	—			—			—			(8		)	—		—		(8		)	—			—			—			(8		)
Stock-based compensation	—		—		—			(49		)	—			—			(49		)	—		—		—			(49		)	—			—			(49		)
Net income	—		—		—			—			356			—			356			—		—		—			—			356			—			356
Other comprehensive income (loss)	—		—		—			—			—			4			4			—		—		—			—			—			4			4
Dividends paid (per share amount of $0.05)	—		—		—			—			(42		)	—			(42		)	—		—		—			—			(42		)	—			(42		)
March 31, 2018 Balance	$	—	$	937	$	(3,175	)	$	7,237		$	7,093		$	(58	)	$	12,034		$	—	$	937	$	(3,175	)	$	7,237		$	7,093		$	(58	)	$	12,034

Three Months Ended March 31, 2019
December 31, 2018 Balance	$	—	$	937	$	(3,816	)	$	7,238		$	7,706		$	63		$	12,128
Cumulative-effect adjustment (Note 2)	—		—		—			—			(31		)	—			(31		)
Shares issued - stock-based compensation	—		—		101			(39		)	—			—			62			—		—		40			(15		)	—			—			25
Shares repurchased	—		—		(30		)	—			—			—			(30		)	—		—		(2		)	—			—			—			(2		)
Stock-based compensation	—		—		—			(50		)	—			—			(50		)	—		—		—			5			—			—			5
Net income	—		—		—			—			174			—			174			—		—		—			—			96			—			96
Other comprehensive income (loss)	—		—		—			—			—			(4		)	(4		)	—		—		—			—			—			17			17
Dividends paid (per share amount of $0.05)	—		—		—			—			(41		)	—			(41		)	—		—		—			—			(43		)	—			(43		)
March 31, 2019 Balance	$	—	$	937	$	(3,745	)	$	7,149		$	7,808		$	59		$	12,208
June 30, 2018 Balance																				$	—	$	937	$	(3,137	)	$	7,227		$	7,146		$	(41	)	$	12,132
Shares issued - stock-based compensation																				—		—		21			(7		)	—			—			14
Shares repurchased																				—		—		(339		)	—			—			—			(339		)
Stock-based compensation																				—		—		—			6			—			—			6
Net income																				—		—		—			—			254			—			254
Other comprehensive income (loss)																				—		—		—			—			—			20			20
Dividends paid (per share amount of $0.05)																				—		—		—			—			(43		)	—			(43		)
September 30, 2018 Balance																				$	—	$	937	$	(3,455	)	$	7,226		$	7,357		$	(21	)	$	12,044

The accompanying notes are an integral part of these consolidated financial statements.

MARATHON OIL CORPORATION

Consolidated Statements of Stockholders’ Equity (Unaudited)



	Total Equity of Marathon Oil Stockholders
(In millions)	Preferred Stock		Common Stock		Treasury Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Equity
Nine Months Ended September 30, 2019
December 31, 2018 Balance	$	—	$	937	$	(3,816	)	$	7,238		$	7,706		$	63		12,128
Cumulative-effect adjustment (Note 2)	—		—		—			—			(31		)	—			(31		)
Shares issued - stock based compensation	—		—		101			(39		)	—			—			62
Shares repurchased	—		—		(30		)	—			—			—			(30		)
Stock-based compensation	—		—		—			(50		)	—			—			(50		)
Net income (loss)	—		—		—			—			174			—			174
Other comprehensive income (loss)	—		—		—			—			—			(4		)	(4		)
Dividends paid (per share amount of $0.05)	—		—		—			—			(41		)	—			(41		)
March 31, 2019 Balance	$	—	$	937	$	(3,745	)	$	7,149		$	7,808		$	59		$	12,208
Shares issued - stock-based compensation	—		—		(3		)	5			—			—			2
Shares repurchased	—		—		(236		)	—			—			—			(236		)
Stock-based compensation	—		—		—			16			—			—			16
Net income	—		—		—			—			161			—			161
Other comprehensive income (loss)	—		—		—			—			—			(9		)	(9		)
Dividends paid (per share amount of $0.05)	—		—		—			—			(41		)	—			(41		)
June 30, 2019 Balance	$	—	$	937	$	(3,984	)	$	7,170		$	7,928		$	50		$	12,101
Shares issued - stock-based compensation	—		—		(14		)	9			—			—			(5		)
Shares repurchased	—		—		(30		)	—			—			—			(30		)
Stock-based compensation	—		—		—			18			—			—			18
Net income	—		—		—			—			165			—			165
Other comprehensive income (loss)	—		—		—			—			—			62			62
Dividends paid (per share amount of $0.05)	—		—		—			—			(40		)	—			(40		)
September 30, 2019 Balance	$	—	$	937	$	(4,028	)	$	7,197		$	8,053		$	112		$	12,271

The accompanying notes are an integral part of these consolidated financial statements.

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)


1.	Basis of Presentation

These consolidated financial statements are unaudited; however, in the opinion of management, these statements reflect all adjustments necessary for a fair statement of the results for the periods reported. All such adjustments are of a normal recurring nature unless disclosed otherwise. These consolidated financial statements, including notes, have been prepared in accordance with the applicable rules of the SEC and do not include all of the information and disclosures required by U.S. GAAP for complete financial statements.

These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2018 Annual Report on Form 10-K. The results of operations for the third quarter and first ~~quarter~~nine months of 2019 are not necessarily indicative of the results to be expected for the full year.

As a result of the announcement to sell our U.K. business in the first quarter of 2019, we have reflected these assets and liabilities as held for sale at March 31, 2019 in the consolidated balance sheet and the consolidated statement of cash flows. The related disclosures in this report exclude these held for sale amounts, unless otherwise noted. This divestiture is discussed in further detail in ~~Note 4~~.

Reclassifications

We have reclassified certain prior year amounts ~~between~~in the consolidated statements of cash flows within the operating ~~cash flow~~activities section to present it on a basis comparable with the current ~~year's~~year’s presentation with no impact onto net cash provided by operating activities.

2. Accounting Standards

Not Yet Adopted

~~Goodwill standard~~

In January 2017, the FASB issued a new accounting standards update that eliminates the requirement to calculate the implied fair value of the goodwill (Step 2 of goodwill impairment test under the current guidance) to measure a goodwill impairment charge. We anticipate the standard to require entities to record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (measure the charge based on Step 1 under the current guidance). This standard is effective for us in the first quarter of 2020 and shall be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We plan to adopt the standard on a prospective basis, and do not expect a material impact on our consolidated results of operations, financial position or cash flows for prior periods.

Financial instruments – credit losses

In June 2016, the FASB issued a new accounting standards update that changes the impairment model for trade receivables, net investments in leases, debt securities, loans and certain other instruments. The standard requires the use of a forward-looking “expected loss” model as opposed to the current “incurred loss” model. This standard is effective for us in the first quarter of 2020 and will be adopted on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the adoption period. ~~Early adoption is permitted starting January 2019.~~ We ~~are evaluating~~continue to evaluate the provisions of this accounting standards update and ~~assessing the~~do not expect a material impact ~~if any, it may have~~ on our consolidated results of operations, financial position orand cash flows.

Recently Adopted

Lease accounting standard

In February 2016, the FASB issued a new leasing accounting standard, which modified the definition of a lease and established comprehensive accounting and financial reporting requirements for leasing arrangements. It requires lessees to recognize a lease liability and a right-of-use ~~("ROU"~~(“ROU”) asset for all leases, including operating leases, with a term of greater than 12 months on the balance sheet. On January 1, 2019, we adopted the new lease accounting standard using the modified retrospective method and applied to all leases that existed as of that date. It does not apply to leases to explore for or use minerals, oil, natural gas and similar non-regenerative resources, including the intangible right to explore for those natural resources and rights to use the land in which those natural resources are contained.

~~MARATHON OIL CORPORATION~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

The new lease standard requires certain accounting policy decisions while also providing a number of optional practical expedients for transition accounting. Our accounting policies and the practical expedients utilized are summarized below:

Implemented an accounting policy to not recognize any right-of-use assets and lease liabilities related to short-term leases on the balance sheet.

Implemented an accounting policy to not separate the lease and nonlease components for all asset classes, except for vessels.

Elected the package of practical expedients which allows us to not reassess our prior conclusions regarding the lease identification and lease classification for contracts that commenced or expired prior to the effective date.

Elected the practical expedient pertaining to land easements which allows us to continue accounting for existing agreements under the previous accounting policies as nonlease transactions. Any modifications of existing contracts or new agreements will be assessed under the new lease accounting guidance and may become leases in the future.

As a result of the adoption, we recorded ~~approximately $156 million of ROU assets and $160 million of lease liabilities on our consolidated balance sheet and~~ a cumulative-effect adjustment to ~~stockholders'~~stockholders’ equity on the date of adoption of ~~$31 million. As of March 31, 2019, we have approximately $254 million of lease liabilities and $247 million of ROU assets on our consolidated balance sheet related to long-term leases further discussed in~~ ~~Note 12. The increase in ROU assets and liabilities during the quarter is due to new contracts signed in the first quarter of 2019.~~$31 million. We continue presenting all prior comparative periods without any restatements.

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

Hedge accounting standard

In August 2017, the FASB issued a new accounting standards update that amends the hedge accounting model to enable entities to hedge certain financial and nonfinancial risk attributes previously not allowed. The amendment also reduces the overall complexity of documenting, assessing and measuring hedge effectiveness. This standard was effective for us in the first quarter of 2019. Adoption of this standard did not have a significant impact on our consolidated results of operations, financial position or cash flows.


3.	~~Income and Dividends per Common Share~~

3. Income and Dividends per Common Share

Basic income ~~(loss)~~ per share is based on the weighted average number of common shares outstanding. Diluted income per share assumes exercise of stock options in all periods, provided the effect is not antidilutive. The per share calculations below exclude 56 million and 85 million of stock options for the three and nine months ended ~~March 31,~~September 30, 2019, and 5 million and 6 million of stock options for the three and nine months ended September 30, 2018, that were antidilutive.


	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2019		2018		2019		2018		2019		2018
Net income	$	174	$	356	$	165	$	254	$	500	$	706

Weighted average common shares outstanding	819		851		802		848		813		852
Effect of dilutive securities	1		1		1		1		—		1
Weighted average common shares, diluted	820		852		803		849		813		853
Net income per share:
Basic	$	0.21	$	0.42	$	0.21	$	0.30	$	0.62	$	0.83
Diluted	$	0.21	$	0.42	$	0.21	$	0.30	$	0.62	$	0.83

Dividends per share	$	0.05	$	0.05	$	0.05	$	0.05	$	0.15	$	0.15


4.	~~Dispositions~~

~~International Segment~~4. Acquisitions

In the ~~first~~fourth quarter of 2019, we entered into agreements to acquire approximately 40,000 net acres in a Texas Delaware oil play in West Texas for $106 million, subject to closing adjustments. These transactions are expected to close later this year.

During the fourth quarter of 2019, we entered into an agreement to purchase approximately 18,000 net acres in the Eagle Ford for $185 million, subject to closing adjustments. This transaction is expected to close early 2020.

5. Dispositions

United States Segment

In the second quarter of 2018, we entered into separate agreements to sell non-core, non-operated conventional properties, primarily in the Gulf of Mexico. These transactions closed during the third quarter of 2018.

International Segment

On July 1, 2019, we closed on the sale of our U.K. business ~~Marathon~~(Marathon Oil U.K. LLC ~~("MOUK")~~ and Marathon Oil West of Shetlands ~~Limited ("MOWOS"). Subject to customary adjustments, the closing consideration payable to us will be approximately $140~~Limited), for proceeds of $95 million which reflects the assumption by ~~the buyer~~RockRose Energy PLC (“RockRose”) of the U.K. business’ working capital and cash equivalent ~~balance and working capital balance, which was~~balances of approximately ~~$350~~$345 million aton December 31, 2018. ~~These properties are classified as held~~During the third quarter of 2019, we recognized a pre-tax gain of $14 million. As of September 30, 2019, we continue to have surety bonds outstanding that guarantee our decommissioning liabilities related to the Marathon Oil U.K. LLC (“MOUK”) assets and recognized a liability and corresponding expense of approximately $6 million related to the estimated fair value of our exposure to these surety bonds (see Note 23 for ~~sale in the consolidated balance sheet at March 31, 2019, with total assets of $947 million and total liabilities of $997 million, including an asset retirement obligation of $960 million. For~~further detail). Income before taxes relating to our U.K. business for the three months ended ~~March 31,~~September 30, 2019 and 2018, ~~we had approximately $13~~was NaN and $132 million; and for the nine months ended September 30, 2019 and 2018, was $37 million and ~~$52 million in income before income taxes relating to our U.K business. Though there are certain contractual~~$239 million.

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

~~requirements that must be satisfied, the transaction is expected to close in~~In the second ~~half~~quarter of 2019, ~~with an effective date~~we closed on the sale of ~~January 1, 2019.~~

~~In the fourth quarter of 2018, we entered into an agreement to sell our subsidiary, Marathon Oil KDV B.V., which holds~~ our 15% non-operated interest in the Atrush block in Kurdistan for proceeds of $63 million, before closing adjustments. This property iswas classified as held for sale in the consolidated balance sheet at ~~March 31, 2019 and~~ December 31, 2018, with total assets of ~~$145 million and~~ $58 million and total liabilities of ~~$69 million and~~ $17 million. ~~We expect the transaction to close in the second quarter of 2019.~~

In the first quarter of 2018, we closed on the sale of our subsidiary, Marathon Oil Libya Limited, which held our 16.33% non-operated interest in the Waha concessions in Libya, to a subsidiary of Total S.A. (Elf Aquitaine SAS) for proceeds of approximately $450 million, excluding closing adjustments, and recognized a pre-tax gain of $255 million.


5.	~~Revenues~~

6. Revenues

The majority of our revenues are derived from the sale of crude oil and condensate, NGLs and natural gas under spot and term agreements with our customers in the United States and various international locations.

The following tables present our revenues from contracts with customers disaggregated by product type and geographic areas.

Three Months Ended March 31, 2019
United States Northern
(In millions) Eagle Ford Bakken Oklahoma Delaware Other U.S. Total
Crude oil and condensate $ 318
$ 372
$ 77
$ 64
$ 28
$ 859
Natural gas liquids 35
10
22
8
2
77
Natural gas 34
12
45
6
6
103
Other 2
—
—
—
21
23
Revenues from contracts with customers $ 389
$ 394
$ 144
$ 78
$ 57
$ 1,062
United States


	Three Months Ended March 31, 2019								Three Months Ended September 30, 2019
International					Other
(In millions)	E.G.		U.K.		International		Total		Eagle Ford		Bakken		Oklahoma		Northern Delaware		Other U.S.		Total
Crude oil and condensate	$	47	$	56	$	10	$	113	$	336	$	452	$	116	$	88	$	25	$	1,017
Natural gas liquids	1		1		—		2		23		6		28		5		2		64
Natural gas	7		8		—		15		28		8		37		3		5		81
Other	—		8		—		8		1		—		—		—		9		10
Revenues from contracts with customers	$	55	$	73	$	10	$	138	$	388	$	466	$	181	$	96	$	41	$	1,172


	Three Months Ended March 31, 2018												Three Months Ended September 30, 2018
United States							Northern
(In millions)	Eagle Ford		Bakken		Oklahoma		Delaware		Other U.S.		Total		Eagle Ford		Bakken		Oklahoma		Northern Delaware		Other U.S.		Total
Crude oil and condensate	$	366	$	330	$	115	$	55	$	53	$	919	$	436	$	447	$	114	$	59	$	34	$	1,090
Natural gas liquids	42		15		37		6		3		103		70		19		48		12		3		152
Natural gas	33		10		43		5		7		98		36		9		46		6		5		102
Other	2		—		—		—		3		5		—		—		—		—		3		3
Revenues from contracts with customers	$	443	$	355	$	195	$	66	$	66	$	1,125	$	542	$	475	$	208	$	77	$	45	$	1,347



	Nine Months Ended September 30, 2019
(In millions)	Eagle Ford		Bakken		Oklahoma		Northern Delaware		Other U.S.		Total
Crude oil and condensate	$	1,004	$	1,277	$	304	$	229	$	83	$	2,897
Natural gas liquids	88		31		81		20		5		225
Natural gas	94		26		118		10		15		263
Other	4		—		—		—		45		49
Revenues from contracts with customers	$	1,190	$	1,334	$	503	$	259	$	148	$	3,434

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2018
International Other
(In millions) E.G. U.K. Libya International Total
Crude oil and condensate $ 71
$ 95
$ 187
$ 23
$ 376
Natural gas liquids 1
—
—
—
1
Natural gas 9
8
9
—
26
Other —
9
—
—
9
Revenues from contracts with customers $ 81
$ 112
$ 196
$ 23
$ 412



	Nine Months Ended September 30, 2018
(In millions)	Eagle Ford		Bakken		Oklahoma		Northern Delaware		Other U.S.		Total
Crude oil and condensate	$	1,196	$	1,182	$	340	$	173	$	131	$	3,022
Natural gas liquids	157		51		130		24		8		370
Natural gas	102		27		127		13		17		286
Other	3		—		—		—		12		15
Revenues from contracts with customers	$	1,458	$	1,260	$	597	$	210	$	168	$	3,693

International



	Three Months Ended September 30, 2019
(In millions)	E.G.		U.K.		Other International		Total
Crude oil and condensate	$	67	$	—	$	—	$	67
Natural gas liquids	1		—		—		1
Natural gas	8		—		—		8
Revenues from contracts with customers	$	77	$	—	$	—	$	77



	Three Months Ended September 30, 2018
(In millions)	E.G.		U.K.		Other International		Total
Crude oil and condensate	$	100	$	41	$	20	$	161
Natural gas liquids	1		1		—		2
Natural gas	9		11		—		20
Other	—		8		—		8
Revenues from contracts with customers	$	110	$	61	$	20	$	191



	Nine Months Ended September 30, 2019
(In millions)	E.G.		U.K.		Other International		Total
Crude oil and condensate	$	215	$	107	$	19	$	341
Natural gas liquids	3		1		—		4
Natural gas	24		12		—		36
Other	1		14		—		15
Revenues from contracts with customers	$	243	$	134	$	19	$	396



	Nine Months Ended September 30, 2018
(In millions)	E.G.		U.K.		Libya		Other International		Total
Crude oil and condensate	$	271	$	207	$	187	$	65	$	730
Natural gas liquids	3		4		—		—		7
Natural gas	28		31		9		—		68
Other	—		24		—		—		24
Revenues from contracts with customers	$	302	$	266	$	196	$	65	$	829

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

Contract receivables and liabilities

The following table provides information about receivables and contract assets (liabilities) from contracts with customers.


(In millions)	March 31, 2019		January 1, 2019			September 30, 2019		January 1, 2019
Receivables from contracts with customers, included in receivables, less reserves	$	751	$	714		$	822	$	714
Contract asset (liability)	$	—	$	(1	)	$	—	$	(1	)

The contract liability balance on January 1, 2019 primarily relates to the advance consideration received from customers for crude oil sales and processing services in the U.K. A contract asset would represent crude oil delivered in the U.K. to a customer for which payment will be collected over time as it becomes due under the pricing terms stipulated in the sales agreement. As a practical expedient, when the balance of this U.K. customer is a contract asset, we do not adjust revenue for the effects of a significant financing element as the period between when crude oil is deliveredSubsequent to the ~~customer and when payment is expected~~sale of our U.K. business, we no longer hold this contract liability.

MARATHON OIL CORPORATION

Notes to ~~be received is one year or less at contract inception.~~Consolidated Financial Statements (Unaudited)

Changes in the contract asset (liability) balance during the period are as follows.


	Three Months Ended
(In millions)	March 31, 2019			Nine Months Ended September 30, 2019
Contract asset (liability) balance as of January 1, 2019	$	(1	)	$	(1	)
Revenue recognized as performance obligations are satisfied	24			74
Amounts invoiced to customers	(23		)	(52		)
Contract asset (liability) balance as of March 31, 2019	$	—
Contract asset (liability) transferred to buyer^(a)				(21		)
Contract asset (liability) balance as of September 30, 2019				$	—


6. ^(a)	~~Segment Information~~ Refer to Note 5 for further information on the sale of our U.K. business.

7. Segment Information

We have ~~two~~2 reportable operating segments. Both of these segments are organized and managed based upon geographic location and the nature of the products and services offered.


•	United States ("(“U.S."”) – explores for, produces and markets crude oil and condensate, NGLs and natural gas in the United States


•	International ~~("Int’l"~~(“Int’l”) – explores for, produces and markets crude oil and condensate, NGLs and natural gas outside of the United States ~~and~~as well as produces and markets products manufactured from natural gas, such as LNG and methanol, in Equatorial Guinea (“E.G.”)

Information regarding assets by segment is not presented because it is not reviewed by the chief operating decision maker (“CODM”). Segment income represents income which excludes certain items not allocated to our operating segments, net of income taxes. A portion of our corporate and operations general and administrative support costs are not allocated to the operating segments. These unallocated costs primarily consist of employment costs (including pension effects), professional services, facilities and other costs associated with corporate and operations support activities. Additionally, items which affect comparability such as: gains or losses on dispositions, ~~proved~~certain property impairments, ~~change in tax associated with a tax legislation change,~~ unrealized gains or losses on commodity derivative instruments, pension settlement losses or other items (as determined by the CODM) are not allocated to operating segments.



	Three Months Ended September 30, 2019
(In millions)	U.S.		Int’l		Not Allocated to Segments				Total
Revenues from contracts with customers	$	1,172	$	77	$	—			$	1,249
Net gain (loss) on commodity derivatives	14		—		33			^(b)	47
Income from equity method investments	—		21		—				21
Net gain on disposal of assets	—		—		22			^(c)	22
Other income	3		2		1				6
Less costs and expenses:
Production	147		16		—				163
Shipping, handling and other operating	137		1		—				138
Exploration	22		—		—				22
Depreciation, depletion and amortization	589		25		8				622
Taxes other than income	80		—		1				81
General and administrative	34		5		43				82
Net interest and other	—		—		64				64
Other net periodic benefit costs	—		—		(2		)		(2		)
Income tax provision	—		10		—				10
Segment income (loss)	$	180	$	43	$	(58	)		$	165
Capital expenditures^(a)	$	667	$	1	$	7			$	675


^(a)	Includes accruals.


^(b)	Unrealized gain on commodity derivative instruments (See Note 14).


^(c)	Primarily related to the sale of our U.K. business (See Note 5).

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)



	Three Months Ended September 30, 2018
(In millions)	U.S.			Int’l			Not Allocated to Segments				Total
Revenues from contracts with customers	$	1,347		$	191		$	—			$	1,538
Net gain (loss) on commodity derivatives	(89		)	—			19			^(b)	(70		)
Income from equity method investments	—			64			—				64
Net gain on disposal of assets	—			—			16			^(c)	16
Other income	2			4			113			^(d)	119
Less costs and expenses:
Production	172			43			—				215
Shipping, handling and other operating	136			16			—				152
Exploration	55			1			—				56
Depreciation, depletion and amortization	571			49			6				626
Impairments	—			—			8			^(e)	8
Taxes other than income	86			—			—				86
General and administrative	37			7			57				101
Net interest and other	—			—			58				58
Other net periodic benefit costs	—			(3		)	11			^(f)	8
Income tax provision	2			30			71				103
Segment income (loss)	$	201		$	116		$	(63	)		$	254
Capital expenditures^(a)	$	691		$	6		$	7			$	704


^(a)	Includes accruals.


^(b)	Unrealized gain on commodity derivative instruments (See Note 14).


^(c)	Sales of certain non-core proved properties in our International and United States segments.


^(d)	Reduction of our asset retirement obligation in our International segment(See Note 12).


^(e)	Due to the anticipated sale of non-core property in our International segment (See Note 11).


^(f)	Includes pension settlement loss of $10 million (See Note 19).

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

Three Months Ended March 31, 2019
Not Allocated
(In millions) U.S. Int'l to Segments Total
Revenues from contracts with customers $ 1,062
$ 138
$ —
$ 1,200
Net gain (loss) on commodity derivatives 22
—
(113 )
^(b)
(91 )
Income from equity method investments —
11
—
11
Net gain on disposal of assets —
—
42
^(c)
42
Other income 1
3
31
^(d)
35
Less costs and expenses:

Production 139
50
(2 ) 187
Shipping, handling and other operating 140
13
1
154
Exploration 59
—
—
59
Depreciation, depletion and amortization 514
34
6

554
Impairments —
—
6
^(e)
6
Taxes other than income 74
—
(2 ) 72
General and administrative 29
7
58
94
Net interest and other —
—
49
49
Other net periodic benefit costs —
(2 ) (3 )
(5 )
Income tax benefit (2 ) (11 ) (134 )
^(f)
(147 )
Segment income $ 132
$ 61
$ (19 ) $ 174
Capital expenditures^(a)
$ 606
$ 5
$ 3
$ 614



	Nine Months Ended September 30, 2019
(In millions)	U.S.		Int’l			Not Allocated to Segments				Total
Revenues from contracts with customers	$	3,434	$	396		$	—			$	3,830
Net gain (loss) on commodity derivatives	41		—			(69		)	^(b)	(28		)
Income from equity method investments	—		63			—				63
Net gain on disposal of assets	—		—			56			^(c)	56
Other income	8		7			39			^(d)	54
Less costs and expenses:
Production	433		112			(2		)		543
Shipping, handling and other operating	424		24			14				462
Exploration	107		—			—				107
Depreciation, depletion and amortization	1,664		97			20				1,781
Impairments	—		—			24			^(e)	24
Taxes other than income	233		—			(1		)		232
General and administrative	94		20			149				263
Net interest and other	—		—			177				177
Other net periodic benefit costs	—		(3		)	(6		)		(9		)
Income tax provision (benefit)	1		16			(122		)	^(f)	(105		)
Segment income (loss)	$	527	$	200		$	(227	)		$	500
Capital expenditures^(a)	$	1,959	$	16		$	15			$	1,990


^(a)	Includes accruals.


^(b)	Unrealized loss on commodity derivative instruments (See Note 1314).


^(c)	Primarily related to the sale of our working interest in the Droshky field (Gulf of Mexico)~~, which closed during~~ and the ~~first quarter~~sale of ~~2019.~~our U.K. business (See Note 5).


^(d)	Primarily related to the indemnification of certain tax liabilities in connection with the 2010-2011 Federal Tax Audit ~~with the IRS~~ (See Note 78).


^(e)	~~Due to the~~Primarily a result of anticipated ~~sale~~sales of non-core proved properties in our ~~non-operated interest in the Atrush block in Kurdistan~~International and United States segments (See Note 1011).


^(f)	Primarily relates to the settlement of the 2010-2011 Federal Tax Audit ~~with the IRS~~ (See Note 78).

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)


	Three Months Ended March 31, 2018
							Not Allocated							Nine Months Ended September 30, 2018
(In millions)	U.S.			Int'l			to Segments				Total			U.S.			Int’l			Not Allocated to Segments				Total
Revenue from contracts with customers	$	1,125		$	412		$	—			$	1,537		$	3,693		$	829		$	—			$	4,522
Net loss on commodity derivatives	(59		)	—			(43		)	^(b)	(102		)
Net gain (loss) on commodity derivatives														(255		)	—			(69		)	^(b)	(324		)
Income from equity method investments	—			37			—				37			—			161			—				161
Net gain on disposal of assets	—			—			257			^(c)	257			—			—			323			^(c)	323
Other income	3			1			—				4			7			7			121			^(d)	135
Less costs and expenses:
Production	151			67			(1		)		217			476			162			(1		)		637
Shipping, handling and other operating	111			19			—				130			364			45			(1		)		408
Exploration	51			1			—				52			170			3			—				173
Depreciation, depletion and amortization	528			54			8				590			1,655			153			20				1,828
Impairments	—			—			8				8			—			—			50			^(e)	50
Taxes other than income	64			—			—				64			218			—			(3		)		215
General and administrative	36			9			55				100			108			25			173				306
Net interest and other	—			—			45				45			—			—			168				168
Other net periodic benefit costs	—			(2		)	5			^(d)	3			—			(7		)	18			^(f)	11
Income tax provision (benefit)	3			170			(5		)		168
Segment income	$	125		$	132		$	99			$	356
Income tax provision														5			226			84				315
Segment income (loss)														$	449		$	390		$	(133	)		$	706
Capital expenditures^(a)	$	611		$	6		$	5			$	622		$	1,943		$	28		$	17			$	1,988


^(a)	Includes accruals.


^(b)	Unrealized loss on commodity derivative instruments (See Note 1314).


^(c)	Primarily related to the gain on ~~the~~ sale of our Libya subsidiary (See Note 45).


^(d)	Reduction of our asset retirement obligation in our International segment(See Note 12).


^(e)	Due to the anticipated sales of certain non-core proved properties in our International and United States segments (See Note 11).


^(f)	Includes pension settlement loss of $4$16 million (See Note 1819).

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

7.8. Income Taxes

Effective Tax Rate

The effective income tax rate is influenced by a variety of factors including the geographic and functional sources of income and the relative magnitude of these sources of income. The difference between the total provision and the sum of the amounts allocated to segments is reported in the “Not Allocated to Segments” column of the tables in Note 67.

For the three and nine months ended ~~March 31,~~September 30, 2019 and 2018, our effective income tax rates were as follows:

Three Months Ended March 31,
2019 2018
Effective income tax expense (benefit) rate^(a)
(544 )% 32 %



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Effective income tax expense (benefit) rate^(a)	6	%	29	%	(27	)%	31	%


^(a)	In all periods presented, we maintained our valuation allowance on our net federal deferred tax assets in the U.S.

The following items caused the effective income tax rates to be different from our U.S. statutory tax rate of 21% for 2019 and 2018:

~~During~~Income taxes for the ~~three~~third quarter of 2019 were impacted by the income mix between domestic and international operations. Income taxes for the nine months ended ~~March 31,~~September 30, 2019 ~~we settled~~were impacted by the settlement of the 2010-2011 U.S. Federal Tax Audit ("(“IRS ~~Audit"~~Audit”) in the first quarter of 2019, resulting in a tax benefit of $126 million. Additionally, in the first quarter of 2019, we recorded a non-cash deferred tax benefit of $18 million in the U.K. related to an internal restructuring. These two items are discrete to the first ~~quarter~~nine months of 2019. Excluding these discrete adjustments, the effective income tax rate for the ~~quarter~~first nine months of 2019 was ~~a benefit~~an expense of 8%10%.

Income taxes for the third quarter of 2018 were impacted by deferred tax expense in the U.K. During the ~~three~~nine months ended ~~March 31,~~September 30, 2018, ~~we incurred~~income taxes were impacted by the tax expense in Libya of $162 million. ~~Excluding Libya, the effective income tax rate for the three months ended March 31, 2018, was an expense of 2%.~~

As a result of the IRS Audit settlement in the first quarter of 2019, the uncertain tax positions previously established are now effectively settled. The release of the accrued uncertain tax positions resulted in a $126 million tax benefit, primarily related to the additional alternative minimum tax (“AMT”) credits, see Note 2223 for further detail.

Pursuant to the Tax Sharing Agreement we entered into with Marathon Petroleum Corporation (“MPC”) in connection with the 2011 spin-off transaction, MPC agreed to indemnify us for certain liabilities. In addition to the benefit from the settlement of the IRS Audit in the first quarter of 2019, we recorded a current receivable and other income of $42 million for indemnity payments due from MPC for tax expense and interest we had previously recognized. The indemnity relates to tax and interest allocable to MPC as a result of the IRS Audit. During the second quarter of 2019, we paid the IRS and were subsequently reimbursed by MPC ~~which settled~~for settlement of their indemnity obligation.

During the ~~three months ended March 31,~~first quarter of 2019, we withdrew our appeal related to the Brae area decommissioning costs in the ~~U.K,~~U.K., thus the uncertain tax positions previously established are now considered effectively settled with no tax expense or benefit ~~impact in the first quarter of 2019.~~

impact.

8.9. Inventories

Crude oil and natural gas are recorded at weighted average cost and carried at the lower of cost or net realizable value. Supplies and other items consist principally of tubular goods and equipment which are valued at weighted average cost and reviewed periodically for obsolescence or impairment when market conditions indicate.


	March 31,		December 31,
(In millions)	2019		2018		September 30, 2019		December 31, 2018
Crude oil and natural gas	$	12	$	11	$	9	$	11
Supplies and other items	71		85		62		85
Inventories	$	83	$	96	$	71	$	96

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

9.10. Property, Plant and Equipment


	March 31,		December 31,
(In millions)	2019		2018		September 30, 2019		December 31, 2018
United States	$	16,068	$	16,011	$	16,127	$	16,011
International	566		710		512		710
Corporate	80		83		78		83
Net property, plant and equipment	$	16,714	$	16,804	$	16,717	$	16,804

We had no0 exploratory well costs capitalized greater than one year as of ~~March 31,~~September 30, 2019 and December 31, 2018.

~~10.~~11. Impairments

The following table summarizes impairment charges of proved properties. Additionally, it presents the values of assets, by major category, measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition.



	Three Months Ended March 31,								Three Months Ended September 30,
	2019				2018				2019				2018
(In millions)	Fair Value		Impairment		Fair Value		Impairment		Fair Value		Impairment		Fair Value		Impairment
Long-lived assets held for use	$	37	$	6	$	50	$	8	$	—	$	—	$	39	$	8



	Nine Months Ended September 30,
	2019				2018
(In millions)	Fair Value		Impairment		Fair Value		Impairment
Long-lived assets held for use	$	56	$	24	$	108	$	50

•

2019 – During the ~~three~~nine months ended ~~March 31,~~September 30, 2019, we recorded apre-tax non-cash proved property ~~impairment charge~~impairments of $6$24 million, primarily as a result of anticipated sales for certain non-core proved properties in our United States segment and the ~~anticipated~~ sale of our ~~subsidiary, Marathon Oil KDV B.V.,~~non-operated interest in the Atrush block (Kurdistan) in our International ~~segment to a fair value of $37 million.~~segment. The related fair value was measured using the market approach, based upon anticipated sales proceeds less costs to sell which resulted in a Level 2 classification. See Note 45 for ~~discussion of the divestiture in~~ further detail.

•

2018 – During the ~~three~~nine months ended ~~March 31,~~September 30, 2018, we recorded apre-tax non-cash proved property ~~impairment~~impairments of $8$50 million, to a fair value of ~~$50~~$108 million, primarily as a result of anticipated sales ~~proceeds in our non-operated Sarsang block in Kurdistan. The Sarsang block is included~~for certain non-core proved properties in our International ~~segment.~~and United States segments. The related fair value ~~was measured using~~measurement utilized the market approach, based upon anticipated sales proceeds less costs to sell which resulted in a Level 2 classification.

~~The following table summarizes impairment charges of unproved properties included as a component of exploration expense:~~

Three Months Ended March 31,
(In millions) 2019 2018
Exploration Expenses
Unproved property impairments $ 44
$ 40
Dry well costs 5
2
Geological and geophysical 6
6
Other 4
4
Total exploration expenses $ 59
$ 52

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

~~11.~~12. Asset Retirement Obligations

Asset retirement obligations primarily consist of estimated costs to remove, dismantle and restore land or seabed at the end of oil and gas production operations. Changes in asset retirement obligations for the ~~three~~nine months ended were as follows:



	March 31,						September 30,
(In millions)	2019			2018			2019			2018
Beginning balance	$	1,145		$	1,483		$	1,145		$	1,483
Incurred liabilities, including acquisitions	12			4			25			10
Settled liabilities, including dispositions	(109		)	(8		)	(1,106		)	(105		)
Accretion expense (included in depreciation, depletion and amortization)	13			18			29			53
Revisions of estimates	11			—			15			(130		)
Held for sale	(862		)	—			108			(10		)
Ending balance	$	210		$	1,497		$	216		$	1,301

~~March 31,~~September 30, 2019


•	Settled liabilities is primarily ~~related~~relates to the sale of our ~~working interest in the Droshky field (Gulf of Mexico),~~U.K. business, which closed during the ~~first~~third quarter of 2019.

•

Held for sale ~~include the asset retirement obligations associated with the sale of our U.K. business, which was partially offset by~~reflects a transfer to settled liabilities ~~for dispositions~~during 2019. This transfer was primarily related to the Droshky field (Gulf of Mexico), which was considered held for sale at year-end 2018 and closed in the first quarter of 2019. ~~See~~ ~~Note 4for discussion of the divestitures in further detail.~~


•	Ending balance includes $18 million classified as short-term at ~~March 31,~~September 30, 2019.

~~March 31,~~September 30, 2018


•	Settled liabilities primarily relate to the sale of non-core, non-operated conventional properties in the Gulf of Mexico as well as retirements in the U.K. See Note 5for discussion of these divestitures in further detail.


•	Revisions of estimates were primarily due to the acceleration of U.K. abandonment activities to capture favorable market conditions and lower estimated abandonment costs.


•	Ending balance includes ~~$52~~$58 million classified as short-term at ~~March 31,~~September 30, 2018.

~~12.~~13. Leases

Supplemental balance sheet information related to leases was as follows:


(In millions)		March 31, 2019			September 30, 2019
Operating Leases:	Balance Sheet Location:			Balance Sheet Location:
ROU asset	Other noncurrent assets	$	247	Other noncurrent assets	$	226
Current portion of long-term lease liability	Other current liabilities	$	92	Other current liabilities	$	104
Long-term lease liability	Deferred credits and other liabilities	$	162	Deferred credits and other liabilities	$	127

In determining our ROU assets and long-term lease liabilities, the new lease standard requires certain accounting policy decisions, while also providing a number of optional practical expedients for transition accounting. Our accounting policies and the practical expedients utilized are summarized below:

Implemented an accounting policy to not recognize any right-of-use assets and lease liabilities related to short-term leases on the balance sheet.

Implemented an accounting policy to not separate the lease and nonlease components for all asset classes, except for vessels.

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

We enter into various lease agreements to support our operations including drilling rigs, well fracturing equipment, compressors, buildings, aircraft, vessels, vehicles and miscellaneous field equipment. We primarily act as a lessee in these transactions and all of our existing leases are classified as either short-term or long-term operating leases.

The majority of the drilling rig agreements and all of fracturing equipment agreements are classified as short-term leases based on the noncancellable period for which we have the right to use the equipment and assessment of options present in each agreement. We also incur variable lease costs under these agreements primarily related to chemicals and sand used in fracturing operations or various additional on-demand equipment and labor. The lease costs associated with the drilling rigs and fracturing equipment are primarily capitalized as part of the well costs.

Our long-term leases are comprised of compressors, buildings, drilling rigs, aircraft, vessels, vehicles and miscellaneous field equipment. Our lease agreements may require both fixed and variable payments; none of the variable payments are rate or index-based, therefore only fixed payments were considered for recognizing lease liabilities and ROU assets related to long-term leases. Also, based on our election not to separate the lease and nonlease components, fixed payments related to equipment, crew and other nonlease components are included in the initial measurement of lease liabilities and ROU assets for all asset classes, except for vessels. For vessels, the contractual consideration was allocated between lease and nonlease components based on estimates provided by service providers.

Our leased assets may be used in joint oil and gas operations with other working interest owners. We recognize lease liabilities and ROU assets only when we are the signatory to a contract as an operator of joint properties. Such lease liabilities and ROU assets are determined based on gross contractual obligations. As we use the leased assets for joint operations, we have the contractual right to recover the other working interest owners’ share of lease costs. As a result, our lease costs are presented on a net basis, reduced for any costs recoverable from other working interest owners. The table below presents our net lease costs as of ~~March 31,~~September 30, 2019 with the majority of operating lease costs expensed as incurred, while the majority of the short-term and variable term lease costs are capitalized into property, plant and equipment.


(In millions)	Three Months Ended March 31, 2019		Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Lease costs:
Operating lease costs^(a)	$	21	$	21	$	61
Short-term lease costs^(b)	81		94		251
Variable lease costs^(c)	60		24		96
Total lease costs	$	162	$	139	$	408

Other information:
Cash paid for amounts included in the measurement of operating lease liabilities			Cash paid for amounts included in the measurement of operating lease liabilities		$	71
ROU assets obtained in exchange for new operating lease liabilities^(d)	$	268			296


^(a)	Represents our net share of the ROU asset amortization and the interest expense.


^(b)	Represents our net share of lease costs arising from leases of less than 1one year but longer than one month that were not included in the lease liability.


^(c)	Represents our net share of variable lease payments that were not included in the lease liability.


^(d)	Represents the cumulative value of ROU assets recognized at lease inception during the ~~quarter.~~first nine months of 2019. This amount is then amortized as we utilize the ROU asset, the net effect of which is the ending ROU asset of ~~$247~~$226 million (first table above).

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

We use our periodic ~~internal~~incremental borrowing rate to discount future contractual payments to their present values. The weighted average lease term and the discount rate relevant to long-term leases were three years and 4% as of ~~March 31,~~September 30, 2019. The remaining annual undiscounted cash flows associated with long-term leases and the reconciliation of these cash flows to the lease liabilities recognized on the consolidated balance sheet is summarized below.


(In millions)	Operating Lease Obligations		Operating Lease Obligations
2019	$	80	$	35
2020	94		107
2021	57		62
2022	34		34
2023	4		4
Thereafter	1		1
Total undiscounted lease payments	$	270	$	243
Less: Amount representing interest	16
Less: amount representing interest			12
Total operating lease liabilities	$	254	$	231
Current portion of long-term lease liability as of March 31, 2019	$	92
Long-term lease liability as of March 31, 2019	$	162
Less: current portion of long-term lease liability as of September 30, 2019			104
Long-term lease liability as of September 30, 2019			$	127

~~MARATHON OIL CORPORATION~~At December 31, 2018, future minimum commitments under the previous accounting standard, ASC 840, for operating lease obligations having noncancellable lease terms in excess of one year were as follows:

~~Notes to Consolidated Financial Statements (Unaudited)~~



(In millions)	Operating Lease Obligations
2019	$	62
2020	54
2021	35
2022	12
2023	5
Thereafter	49
Sublease rentals	—
Total minimum lease payments	$	217

^*Future minimum commitments for capital lease obligations were NaN as of December 31, 2018.

Our wholly-owned subsidiary, Marathon E.G. Production Limited, is a lessor for residential housing in Equatorial Guinea, which is occupied by EGHoldings, a related party equity method investee – see Note 2122. The lease was classified as an operating lease and expires in 2024, with a lessee option to extend through 2034. Lease payments are fixed for the entire duration of the agreement at approximately $6 million per year. Our lease income is reported in other income in our consolidated statements of income for all periods presented. The undiscounted cash flows to be received under this lease agreement are summarized below.


(In millions)	Operating Lease Future Cash Receipts		Operating Lease Future Cash Receipts
2019	$	5	$	2
2020	6		6
2021	6		6
2022	6		6
2023	6		6
Thereafter	66		67
Total undiscounted cash flows	$	95	$	93

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

In 2018, we signed an agreement with an owner/lessor to construct and lease a new build-to-suit office building in Houston, Texas. The new Houston office location is expected to be completed in 2021. The lessor and other participants are providing financing for up to $380 million, to fund the estimated project costs. As of ~~March 31,~~September 30, 2019, project costs incurred totaled ~~$47~~approximately $54 million, primarily for land acquisition and initial design costs. The initial lease term is five years and will commence once construction is substantially complete and the new Houston office is ready for occupancy. At the end of the initial lease term, we can negotiate to extend the lease term for an additional five years, subject to the approval of the participants; purchase the property subject to certain terms and conditions; or remarket the property to an unrelated third party. The lease contains a residual value guarantee of approximately 89% of the total acquisition and construction costs.

~~13.~~14. Derivatives

For further information regarding the fair value measurement of derivative instruments, see Note 1415. All of our commodity derivatives are subject to enforceable master netting arrangements or similar agreements under which we report net amounts. The following tables present the gross fair values of derivative instruments and the reported net amounts along with where they appear on the consolidated balance sheets.


	March 31, 2019								September 30, 2019
(In millions)	Asset		Liability		Net Asset (Liability)			Balance Sheet Location	Asset		Liability		Net Asset (Liability)			Balance Sheet Location
Not Designated as Hedges
Commodity	$	18	$	—	$	18		Other current assets	$	58	$	5	$	53		Other current assets
Commodity	1		—		1			Other noncurrent assets	6		—		6			Other noncurrent assets
Commodity	—		1		(1		)	Other current liabilities	—		1		(1		)	Deferred credits and other liabilities
Commodity	—		4		(4		)	Deferred credits and other liabilities
Total Not Designated as Hedges	$	19	$	5	$	14			$	64	$	6	$	58

Cash Flow Hedges
Interest Rate									$	—	$	1	$	(1	)	Deferred credits and other liabilities
Total Designated Hedges									$	—	$	1	$	(1	)
Total									$	64	$	7	$	57


	December 31, 2018								December 31, 2018
(In millions)	Asset		Liability		Net Asset (Liability)			Balance Sheet Location	Asset		Liability		Net Asset (Liability)			Balance Sheet Location
Not Designated as Hedges
Commodity	$	131	$	—	$	131		Other current assets	$	131	$	—	$	131		Other current assets
Commodity	—		4		(4		)	Deferred credits and other liabilities	—		4		(4		)	Deferred credits and other liabilities
Total Not Designated as Hedges	$	131	$	4	$	127			$	131	$	4	$	127

Derivatives Not Designated as Hedges

~~MARATHON OIL CORPORATION~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~Commodity Derivatives~~

We have entered into multiple crude oil derivatives indexed to the respective indices as noted in the table below, related to a portion of our forecasted United States sales through ~~2021~~.2021. These derivatives consist of three-way collars, basis swaps and NYMEX roll basis swaps. Three-way collars consist of a sold call (ceiling), a purchased put (floor) and a sold put. The ceiling price is the maximum we will receive for the contract volumes; the floor is the minimum price we will receive, unless the market price falls below the sold put strike price. In this case, we receive the NYMEX WTI price plus the difference between the floor and the sold put price. These ~~commodity~~crude oil derivatives were not designated as hedges.

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

The following table sets forth outstanding derivative contracts as of ~~March 31,~~September 30, 2019, and the weighted average prices for those contracts:


	2019									2020			2021			2019			2020			2021
Crude Oil	Second Quarter			Third Quarter			Fourth Quarter			Full Year			First Quarter			Fourth Quarter			Full Year			Full Year
NYMEX WTI Three-Way Collars ^(a)
Volume (Bbls/day)	70,000			50,000			50,000			—			—			80,000			42,945			—
Weighted average price per Bbl:
Ceiling	$	71.21		$	75.88		$	75.88		—			—			$	74.19		$	65.58		$	—
Floor	$	55.86		$	57.80		$	57.80		—			—			$	56.75		$	55.00		$	—
Sold put	$	48.71		$	50.80		$	50.80		—			—			$	49.50		$	47.77		$	—
Basis Swaps - Argus WTI Midland ^(b)(a)
Volume (Bbls/day)	10,000			15,000			15,000			15,000			—			15,000			15,000			—
Weighted average price per Bbl	$	(0.82	)	$	(1.40	)	$	(1.40	)	$	(0.94	)	—			$	(1.40	)	$	(0.94	)	$	—
Basis Swaps - Net Energy Clearbrook ^(c)(b)
Volume (Bbls/day)	1,000			1,000			1,000			—			—			2,000			—			—
Weighted average price per Bbl	$	(3.50	)	$	(3.50	)	$	(3.50	)	—			—			$	(3.33	)	$	—		$	—
Basis Swaps - NYMEX WTI / ICE Brent ^(d)(c)
Volume (Bbls/day)	5,000			5,000			5,000			5,000			3,278			5,000			5,000			808
Weighted average price per Bbl	$	(7.24	)	$	(7.24	)	$	(7.24	)	$	(7.24	)	$	(7.24	)	$	(7.24	)	$	(7.24	)	$	(7.24	)
Basis Swaps - Argus WTI Houston ^(d)
Volume (Bbls/day)																10,000			—			—
Weighted average price per Bbl																$	5.51		$	—		$	—
NYMEX Roll Basis Swaps
Volume (Bbls/day)	60,000			60,000			60,000			—			—			60,000			—			—
Weighted average price per Bbl	$	0.38		$	0.38		$	0.38		—			—			$	0.38		$	—		$	—


^(a)	~~Between April 1, 2019 and April 29, 2019, we entered into 20,000Bbls/dayand~~20,000 Bbls/day of three-way collars for July - December 2019 and January - June 2020, with a ceiling of $70.00, a sold put of $47.00, and a floor of $55.00. We also entered into 10,000 Bbls/day of three-way collars for July - December 2019 with a ceiling of $74.09, a sold put of $48.00, and a floor of $55.00.


^(b)	The basis differential price is indexed against Argus WTI Midland.


^(c)(b)	The basis differential price is indexed against Net Energy Canada Bakken SW at Clearbrook ~~("UHC"~~(“UHC”).


^(c)	The basis differential price is indexed against International Commodity Exchange (“ICE”) Brent and NYMEX WTI.


^(d)	The basis differential price is indexed against ~~International Commodity Exchange ("ICE") Brent and NYMEX WTI.~~Argus WTI Houston.

Between October 1, 2019 and November 5, 2019, we entered into 100,000 MMBtu/day of three-way collars for January - March 2020 with a ceiling price of $3.32, a floor price of $2.75 and a sold put price of $2.25.

The mark-to-market impact and settlement of ~~these~~the commodity derivative instruments as of September 30, 2019 appears in the table below and is reflected in net gain (loss) on commodity derivatives in ~~our~~the consolidated statements of income. ~~The mark-to-market impact for~~



	Three Months Ended September 30,					Nine Months Ended September 30,
(In millions)	2019		2018			2019			2018
Mark-to-market gain (loss)	$	33	$	19		$	(69	)	$	(69	)
Net settlements of commodity derivative instruments	$	14	$	(89	)	$	41		$	(255	)

Derivatives Designated as Cash Flow Hedges

In September 2019, we entered into forward starting interest rate swaps with a total notional amount of $160 million to hedge variations in cash flows related to the ~~three months ended March 31, 2019 was a loss~~1-month London Interbank Offered Rate (“LIBOR”) component of ~~$113 million compared to a loss~~future lease payments of ~~$43 million for~~our future Houston office. These swaps will settle monthly on the same day the lease payment is made with the first swap settlement occurring in January 2022. We expect the first lease payment to commence sometime in the period ~~in 2018. Net settlements~~from December 2021 to May 2022. The last swap will mature on September 9, 2026. See Note 13for further details regarding the lease of ~~commodity derivative instruments for~~ the ~~three months ended March 31, 2019 was a gain of $22 million compared to a loss of $59 million for the same period in 2018.~~

new Houston office.

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

~~14.~~The following table presents information about our interest rate swap agreements, including the weighted average LIBOR-based, fixed rate.



	September 30, 2019				December 31, 2018
(In millions, except fixed rates)	Aggregate Notional Amount		Weighted Average, LIBOR		Aggregate Notional Amount		Weighted Average, LIBOR
Interest rate swaps	$	160	1.50	%	$	—	—	%

At September 30, 2019, accumulated other comprehensive income included deferred losses of $1 million related to forward starting interest rate swaps. No amounts related to these swaps are expected to impact the consolidated statements of income in the next 12 months.

15. Fair Value Measurements

Fair Values – Recurring

The following tables present assets and liabilities accounted for at fair value on a recurring basis as of ~~March 31,~~September 30, 2019 and December 31, 2018 by hierarchy level.


	March 31, 2019										September 30, 2019
(In millions)	Level 1			Level 2		Level 3		Total			Level 1			Level 2			Level 3		Total
Derivative instruments, assets
Commodity^(a)	$	—		$	16	$	—	$	16		$	—		$	61		$	—	$	61
Derivative instruments, assets	$	—		$	16	$	—	$	16		$	—		$	61		$	—	$	61
Derivative instruments, liabilities
Commodity^(a)	$	(2	)	$	—	$	—	$	(2	)	$	(3	)	$	—		$	—	$	(3	)
Interest rate											$	—		$	(1	)	$	—	$	(1	)
Derivative instruments, liabilities	$	(2	)	$	—	$	—	$	(2	)	$	(3	)	$	(1	)	$	—	$	(4	)


^(a)	Derivative instruments are recorded on a net basis in our consolidated balance sheet. See Note 1314.



	December 31, 2018
(In millions)	Level 1		Level 2		Level 3		Total
Derivative instruments, assets
Commodity^(a)	$	21	$	106	$	—	$	127
Derivative instruments, assets	$	21	$	106	$	—	$	127
Derivative instruments, liabilities
Derivative instruments, liabilities	$	—	$	—	$	—	$	—


^(a)	Derivative instruments are recorded on a net basis in our consolidated balance sheet. See Note 1314.

Commodity derivatives include three-way collars, basis swaps and NYMEX roll basis swaps. These instruments are measured at fair value using either a Black-Scholes or a modified Black-Scholes Model. For basis swaps and NYMEX roll basis swaps, inputs to the models include only commodity prices and interest rates and are categorized as Level 1 because all assumptions and inputs are observable in active markets throughout the term of the instruments. For three-way collars, inputs to the models include commodity prices, and implied volatility and are categorized as Level 2 because predominantly all assumptions and inputs are observable in active markets throughout the term of the instruments.

The forward starting interest rate swaps are measured at fair value with a market approach using actionable broker quotes, which are Level 2 inputs. See Note 14 for detail on the forward starting interest rate swaps.

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

Fair Value Estimates - Goodwill

As of September 30, 2019, our consolidated balance sheet included goodwill of $95 million. Goodwill is tested for impairment on an annual basis, or between annual tests when events or changes in circumstances indicate the fair value may have been reduced below its carrying value. Goodwill is tested for impairment at the reporting unit level. Our reporting units are the same as our reporting segments, of which only the International reporting unit includes goodwill. Our policy is to first assess the qualitative factors in order to determine whether the fair value of our International reporting unit is more likely than not less than its carrying amount. Certain qualitative factors used in our evaluation include, among other things, the results of the most recent quantitative assessment of goodwill (second quarter of 2017); macroeconomic conditions; industry and market conditions (including commodity prices and cost factors); overall financial performance; and other relevant entity-specific events. If, after considering these events and circumstances we determine that it is more likely than not the fair value of the International reporting unit is less than its carrying amount, the quantitative goodwill test is performed.

During the second quarter of 2019, we performed our annual impairment test of goodwill using the qualitative assessment. Our qualitative assessment considered the significant excess fair value over carrying value in our most recent step one test and noted there are more positive/neutral indicators than negative. After assessing the totality of these qualitative factors, our assessment did not indicate that it is more likely than not that the fair value is less than its carrying value. As a result, we concluded that no impairment to goodwill was required for our International reporting unit.

Fair Values – Nonrecurring

~~See~~ ~~Note 4~~ ~~and~~ ~~Note 10for~~For detail on our fair values for nonrecurring items ~~such as~~see Note 5 , for detail related to an outstanding guarantee related to our U.K. disposition and Note 11for detail related to impairments.

Fair Values – Financial Instruments

Our current assets and liabilities include financial instruments, the most significant of which are receivables, the current portion of our long-term debt and payables. We believe the carrying values of our receivables and payables approximate fair value. Our fair value assessment incorporates a variety of considerations, including (1) the short-term duration of the instruments, (2) our credit rating and (3) our historical incurrence of and expected future insignificant bad debt expense, which includes an evaluation of counterparty credit risk.

~~MARATHON OIL CORPORATION~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

The following table summarizes financial instruments, excluding receivables, payables and derivative financial instruments, and their reported fair values by individual balance sheet line item at ~~March 31,~~September 30, 2019 and December 31, 2018.


	March 31, 2019				December 31, 2018				September 30, 2019				December 31, 2018
(In millions)	Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount
Financial assets
Current assets	$	4	$	3	$	3	$	3	$	4	$	4	$	3	$	3
Other noncurrent assets	25		32		76		81		29		35		76		81
Total financial assets	$	29	$	35	$	79	$	84	$	33	$	39	$	79	$	84
Financial liabilities
Other current liabilities	$	42	$	58	$	37	$	58	$	75	$	103	$	37	$	58
Long-term debt, including current portion^(a)	5,875		5,528		5,469		5,528		6,018		5,529		5,469		5,528
Deferred credits and other liabilities	86		111		93		88		108		96		93		88
Total financial liabilities	$	6,003	$	5,697	$	5,599	$	5,674	$	6,201	$	5,728	$	5,599	$	5,674


^(a)	Excludes ~~capital leases and~~ debt issuance costs.

Fair values of our financial assets included in other noncurrent assets, and of our financial liabilities included in other current liabilities and deferred credits and other liabilities, are measured using an income approach and most inputs are internally generated, which results in a Level 3 classification. Estimated future cash flows are discounted using a rate deemed appropriate to obtain the fair value.

All of our long-term debt instruments are publicly traded. A market approach, based upon quotes from major financial institutions, which are Level 2 inputs, is used to measure the fair value of our debt.

~~15.~~

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

16. Debt

Revolving Credit Facility

~~As of March 31,~~In September 2019, we ~~had no borrowings against~~entered into a fourth amendment to our ~~$3.4 billion~~unsecured revolving credit facility (the “Credit Facility”), to reduce the maximum borrowing from $3.4 billion to $3.0 billion and extended the maturity date by one year to May 28, 2023. As of September 30, 2019, we had 0 borrowings against our $3.0 billion Credit Facility, as described ~~below.~~below or under our U.S. commercial paper program that is backed by the Credit Facility.

The Credit Facility includes a covenant requiring ~~that~~ our debt-to-capitalization ratio ~~of total debt~~not to ~~total capitalization not~~ exceed 65% as of the last day of each fiscal quarter. ~~If an~~In the event of a default, ~~occurs,~~ the lenders holding more than half of the commitments may terminate the commitments under the Credit Facility and require the immediate repayment of all outstanding borrowings and the cash collateralization of all outstanding letters of credit under the Credit Facility. As of ~~March 31,~~September 30, 2019, we were in compliance with this covenant with a debt-to-capitalization ratio of 31%.

Long-term debt

~~As of March 31,~~At September 30, 2019, we had $5.5 billion ~~in long-term~~of total debt outstanding, ~~with~~of which $600 million was due June 2020. On October 3, 2019, we redeemed our $600 million 2.7% senior unsecured notes due June 2020. After considering this debt redemption, our next debt maturity inis the ~~amount of~~$1.0 billion 2.8% senior unsecured notes due 2022.

Debt Issuance

On October 1, 2019, we closed a $600 million ~~due~~remarketing to investors of sub-series A bonds which are part of the $1.0 billion St. John the Baptist, State of Louisiana revenue refunding bonds originally issued and purchased in ~~June 2020.~~December 2017. The $600 million in proceeds from the conversion and remarketing were used to pay the purchase price of our converted 2017 bonds on the closing date. We continue to own the remaining $400 million of the revenue refunding bonds and have the right to convert and remarket them to investors at any time up to the 2037 maturity date.

The following table further summarizes this transaction.



Sub-Series A Bonds	Par Amount	Interest Rate	Mandatory Purchase Date	Maturity Date
Sub-series A-1 Bonds	$200 million	2.00%	April 1, 2023	June 1, 2037
Sub-series A-2 Bonds	$200 million	2.10%	July 1, 2024	June 1, 2037
Sub-series A-3 Bonds	$200 million	2.20%	July 1, 2026	June 1, 2037

~~16. Stockholders'~~17. Stockholders’ Equity

On July 31, 2019, the Board of Directors authorized an extension of the share repurchase program, which increased the remaining share repurchase authorization to $1.5 billion. In the ~~first quarter of~~nine months ended September 30, 2019, we acquired approximately 119 million common shares at a cost of ~~$14~~$280 million, which were held as treasury stock. Including these repurchases, the total remaining ~~in our~~ share repurchase authorization was ~~$786 million~~$1.5 billion at ~~March 31,~~September 30, 2019. Purchases under the program are made at our discretion and may be in either open market transactions, including block purchases, or in privately negotiated transactions using cash on hand, cash generated from operations or proceeds from potential asset sales. This program may be changed based upon our financial condition or changes in market conditions and is subject to termination prior to completion.

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

~~17.~~18. Incentive Based Compensation

Stock options, restricted stock awards and restricted stock units

The following table presents a summary of activity for the first ~~three~~nine months of 2019:


	Stock Options					Restricted Stock Awards & Units				Stock Options					Restricted Stock Awards & Units
	Number of Shares			Weighted Average Exercise Price		Awards		Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Exercise Price		Awards		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2018	6,180,007			$	24.39	8,504,946		$	14.04	6,180,007			$	24.39	8,504,946		$	14.04
Granted	648,526		^(a)	$	16.79	3,824,208		$	16.98	648,526		^(a)	$	16.79	3,910,971		$	16.90
Exercised/Vested	(10,470	)		$	14.92	(3,519,699	)	$	12.37	(11,470	)		$	14.25	(3,608,790	)	$	12.45
Canceled	(151,412	)		$	27.15	(157,302	)	$	14.58	(925,010	)		$	25.33	(1,504,665	)	$	15.76
Outstanding at March 31, 2019	6,666,651			$	23.60	8,652,153		$	16.01
Outstanding at September 30, 2019										5,892,053			$	23.42	7,302,462		$	16.00

^(a)The weighted average grant date fair value of stock option awards granted was $6.62 per share.

Stock-based performance unit awards

During the first ~~three~~nine months of 2019, we granted 656,636 stock-based performance units to certain officers to be settled in shares. The grant date fair value per unit was $20.66, as calculated using a Monte Carlo valuation model. At the grant date, each unit represents the value of one share of our common stock. These units are settled in shares, and the number of shares of our common stock to be paid is based on the vesting percentage, which can be from ~~zero~~0 to 200% based on performance achieved over a three-year performance period ending December 31, 2021, and as determined by the Compensation Committee of the Board of Directors. The performance goals are tied to our total shareholder return (“TSR”) as compared to TSR for a group of peer companies determined by the Compensation Committee of our Board of Directors. Dividend equivalents may accrue during the performance period and would be paid in cash at the end of the performance period based on the amount of dividends credited generally over the performance period on shares of our common stock that represent the number of the units granted multiplied by the vesting percentage.

~~18.~~19. Defined Benefit Postretirement Plans

The following summarizes the components of net periodic benefit cost:


	Pension Benefits						Other Benefits						Three Months Ended September 30,
	Three Months Ended March 31,												Pension Benefits						Other Benefits
(In millions)	2019			2018			2019			2018			2019			2018			2019			2018
Service cost	$	4		$	4		$	—		$	1		$	5		$	4		$	—		$	—
Interest cost	7			7			1			2			3			7			1			2
Expected return on plan assets	(8		)	(9		)	—			—			(3		)	(9		)	—			—
Amortization:
– prior service credit	(2		)	(2		)	(4		)	(2		)
– prior service cost (credit)													(1		)	(2		)	(5		)	(2		)
– actuarial loss	2			3			—			—			2			3			1			—
Net settlement loss^(a)	—			4			—			—			—			10			—			—
Net periodic benefit cost^(b)	$	3		$	7		$	(3	)	$	1		$	6		$	13		$	(3	)	$	—

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)



	Nine Months Ended September 30,
	Pension Benefits						Other Benefits
(In millions)	2019			2018			2019			2018
Service cost	$	14		$	13		$	—		$	1
Interest cost	17			20			3			6
Expected return on plan assets	(19		)	(26		)	—			—
Amortization:
– prior service credit	(5		)	(7		)	(14		)	(6		)
– actuarial loss	6			9			1			1
Net settlement loss^(a)	2			16			—			—
Net periodic benefit cost^(b)	$	15		$	25		$	(10	)	$	2


^(a)	Settlements are recognized as they occur, once it is probable that lump sum payments from a plan for a given year will exceed the plan’s total service and interest cost for that year.


^(b)	Net periodic benefit cost reflects a calculated market-related value of plan assets which recognizes changes in fair value over three years.

During the first ~~three~~nine months of 2019, we made contributions of ~~$18~~$35 million to our funded pension plans and we expect to make additional contributions up to an estimated ~~$32~~$6 million over the remainder of 2019. During the first ~~three~~nine months of 2019, we made payments of $2$4 million and $5$17 million related to unfunded pension plans and other postretirement benefit plans. ~~The~~

In connection with the sale of our U.K. business, the noncontributory defined benefit pension plan ~~is classified as held for sale in~~covering U.K. employees was transferred to the ~~consolidated balance sheet as of March 31, 2019.~~buyer. See Note 45 for further information on this disposition. During the three and nine months ended September 30, 2019, we reclassified $20 million from accumulated other comprehensive income to pension assets upon remeasurement of the plan.

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

See table below for summary of the obligations and funded status related to the U.K. pension plan for nine months ended September 30, 2019 and year-ended December 31, 2018.



	Pension Benefits
(In millions)	September 30, 2019			December 31, 2018
Accumulated benefit obligation	$	—		$	511
Change in benefit obligations:
Beginning balance	$	511		$	599
Interest cost	8			14
Plan amendment	—			3
Divestiture^(a)	(549		)	—
Actuarial loss (gain)	36			(38		)
Foreign currency exchange rate changes	6			(29		)
Settlements paid	—			(23		)
Benefits paid	(12		)	(15		)
Ending balance	$	—		$	511
Change in fair value of plan assets:
Beginning balance	$	594		$	670
Actual return on plan assets	68			(21		)
Employer contributions	8			17
Foreign currency exchange rate changes	8			(34		)
Divestiture	(666		)	—
Settlements paid	—			(23		)
Benefits paid	(12		)	(15		)
Ending balance	$	—		$	594
Funded status of plans at September 30, 2019 and December 31, 2018	$	—		$	83
Amounts recognized in the consolidated balance sheets:
Noncurrent assets	$	—		$	83
Accrued benefit cost	$	—		$	83
Pretax amounts in accumulated other comprehensive loss:
Net loss (gain)	$	—		$	59
Prior service cost (credit)	—			5


^(a)	Refer to Note 5 for further information on the sale of our U.K. business.

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

~~19.~~20. Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

The following table presents a summary of amounts reclassified from accumulated other comprehensive income (loss):


	Three Months Ended March 31,							Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2019			2018			Income Statement Line	2019			2018			2019			2018			Income Statement Line
Postretirement and postemployment plans								Postretirement and postemployment plans
Amortization of prior service credit	$	6		$	4		Other net periodic benefit costs	$	6		$	4		$	19		$	13		Other net periodic benefit costs
Amortization of actuarial loss	(2		)	(3		)	Other net periodic benefit costs	(3		)	(3		)	(7		)	(10		)	Other net periodic benefit costs
Net settlement loss	—			(4		)	Other net periodic benefit costs	—			(10		)	(2		)	(16		)	Other net periodic benefit costs
	4			(3		)	Income (loss) before income taxes	3			(9		)	10			(13		)	Income before income taxes
	—			—			(Provision) benefit for income taxes^(a)
Other insignificant								—			(4		)	—			(4		)	Net interest and other
U.K. pension plan transferred to buyer^(a)(b)								83			—			83			—			Net gain (loss) on disposal of assets
Foreign currency translation adjustment related to sale of U.K. business^(b)								30			—			30			—			Net gain (loss) on disposal of assets
Income tax provision^(c)								(46		)	—			(46		)	—			Provision for income taxes
Total reclassifications to expense, net of tax	$	4		$	(3	)	Net income (loss)	$	70		$	(13	)	$	77		$	(17	)	Net income


^(a)	SeeNote 19for detailon the U.K. pension plan.


^(b)	See Note 5 for detail on the U.K. disposition.


^(c)	During 2019 and 2018 we had a full valuation allowance on net federal deferred tax assets ~~and as such, there is no~~in the U.S. therefore, the income tax ~~impact~~provision in this table relates to our ~~postretirement and postemployment plans.~~former U.K. business.

~~20.~~21. Supplemental Cash Flow Information


	Three Months Ended March 31,				Nine Months Ended September 30,
(In millions)	2019		2018		2019		2018
Included in operating activities:
Interest paid, net of amounts capitalized	$	52	$	52	$	190	$	187
Income taxes paid to taxing authorities	29		231		151		298
Noncash investing activities:
Increase in asset retirement costs	$	23	$	4	$	40	$	12
Asset retirement obligations assumed by buyer^(a)	98		1		1,082		82

^(a)In 2019, our dispositions include the sale of the Droshky field (Gulf of Mexico), the sale of our non-operated interest in the Atrush block in Kurdistan and the sale of our U.K. business. See Note 5 for further detail on dispositions.


^(a)	~~In the first quarter of 2019, we closed on the sale of our working interest in the Droshky field (Gulf of Mexico), including our $98 million asset retirement obligation.~~

Other noncash investing activities include accrued capital expenditures for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018 of ~~$250~~$302 million and ~~$279~~$238 million.

~~21.~~22. Equity Method Investments

During the periods ended ~~March 31,~~September 30, 2019 and December 31, 2018 our equity method investees were considered related parties and included:

EGHoldings, in which we have a 60% noncontrolling interest. EGHoldings is engaged in LNG production activity.

•Alba Plant LLC, in which we have a 52% noncontrolling interest. Alba Plant LLC processes LPG.

AMPCO, in which we have a 45% interest. AMPCO is engaged in methanol production activity.

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

Our equity method investments are summarized in the following table:

Ownership as of March 31, December 31,
(In millions) March 31, 2019 2019 2018
EGHoldings 60% $ 368
$ 402
Alba Plant LLC 52% 169
167
AMPCO 45% 182
176
Total $ 719
$ 745



(In millions)	Ownership as of September 30, 2019	September 30, 2019		December 31, 2018
EGHoldings	60%	$	324	$	402
Alba Plant LLC	52%	158		167
AMPCO	45%	185		176
Total		$	667	$	745

Summarized financial information for equity method investees is as follows:

~~MARATHON OIL CORPORATION~~

~~Notes to Consolidated Financial Statements (Unaudited)~~


	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2019		2018		2019		2018		2019		2018
Income data:
Revenues and other income	$	220	$	198	$	184	$	238	$	637	$	664
Income from operations	49		97		61		151		192		391
Net income	32		79		45		129		140		331

~~22.~~23. Commitments and Contingencies

Following the sale of our U.K. business to RockRose, we continue to have surety bonds outstanding that guarantee our decommissioning liabilities related to the MOUK assets. We issued these surety bonds in November 2018 with a notional value of approximately £92 million and an expiration date of December 31, 2019. RockRose is contractually required to post a replacement security to cover 2020 by no later than December 1, 2019. If RockRose is unable to post a replacement security by December 1, 2019, the counterparties of our existing surety bonds have the right to submit a demand notice against our surety bonds. In order to mitigate this exposure, we have secured surety bonds from RockRose issued in favor of Marathon for the full amount of £92 million. As of September 30, 2019, RockRose had not posted a replacement security and we recognized a liability and corresponding expense of approximately $6 million related to the estimated fair value of our exposure to these surety bonds. Should RockRose post a replacement security, we will derecognize our $6 million other current liability and record income of a corresponding amount. See Note 5for discussion of the U.K. sale in further detail.

In the second quarter of 2019, Marathon E.G. Production Limited (“MEGPL”), a consolidated and wholly-owned subsidiary, signed a series of agreements to process third-party Alen Unit gas through existing infrastructure located in Punta Europa, E.G. MEGPL is a signatory to the agreements related to our equity method investee, Alba Plant LLC. These agreements contain clauses that cause MEGPL to indemnify the owners of the Alen Unit against actions or inaction by Alba Plant LLC. Pursuant to these agreements, MEGPL agreed to indemnify third party property or events, including environmental assessments, injury to Alba Plant LLC’s personnel, and damage to or loss of Alba Plant LLC’s automobiles. At this time, we cannot reasonably estimate this obligation as we do not have any history of prior indemnification claims, as completion of the plant modifications is not expected to finish until 2021, and as such, we do not have any history of environmental discharge or contamination. Therefore, we have not recorded a liability with respect to these indemnification clauses since the amount of potential future payments under such guarantees is not determinable.

In the fourth quarter of 2017, the U.K. tax authorities challenged the deductibility for certain Brae area decommissioning costs, which we claimed for U.K. corporation tax purposes. The dispute related to the timing of the deduction and did not dispute the general deductibility of decommissioning costs. In accordance with U.K. regulations, we paid the amount of tax and interest in question, approximately $108 million, ~~prior to~~and filed our appeal. In the first quarter of 2019, we withdrew our appeal on this matter, and the corresponding revisions to current and deferred tax liabilities have no cumulative adverse earnings impact on our consolidated results of operations.

We are continuously undergoing examination of our U.S. federal income tax returns by the IRS. With the closure of the 2010-2011 IRS Audit referenced in Note 78, these audits have been completed through the ~~2014~~2016 tax year with the exception of the ~~partnership item discussed below.~~following item. During the third quarter of 2017, we received a partnership adjustment notification related to the 2010 and 2011 tax years, for which we ~~have~~ filed a Tax Court Petition in the fourth quarter of 2017. ~~We believe that it~~During the third quarter of 2019, we received the court decision which ruled in our favor for all material items. The IRS is ~~more likely than not that we will prevail.~~in the process of preparing the final reports for the 2010 and 2011 tax years.

MARATHON OIL CORPORATION

Notes to Consolidated Financial Statements (Unaudited)

We are a defendant in a number of legal and administrative proceedings arising in the ordinary course of business including, but not limited to, royalty claims, contract claims, tax disputes and environmental claims. While the ultimate outcome and impact to us cannot be predicted with certainty, we believe the resolution of these proceedings will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

We have incurred and will continue to incur capital, operating and maintenance, and remediation expenditures as a result of environmental laws and regulations. If these expenditures, as with all costs, are not ultimately offset by the prices we receive for our products and services, our operating results will be adversely affected. We believe that substantially all of our competitors must comply with similar environmental laws and regulations. However, the specific impact on each competitor may vary depending on a number of factors, including the age and location of its operating facilities, marketing areas and production processes. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for noncompliance.

~~23. Subsequent Event~~

On April 1, 2019, we signed a definitive agreement to process third-party Alen Unit gas through existing infrastructure located in Punta Europa, E.G. First gas sales from the Alen Unit is expected in 2021, and will utilize available processing capacity not required by the Alba Field. We are the operator and majority shareholder of the integrated gas business at Punta Europa and will maintain market exposure through a combination of both profit sharing and tolling.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

Operations

Market Conditions

Results of Operations

Critical Accounting Estimates

Accounting Standards Not Yet Adopted

Cash Flows

Liquidity and Capital Resources

Environmental Matters and Other Contingencies

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the preceding consolidated financial statements and notes in Item 1.

Executive Overview

We are an independent exploration and production company based in Houston, Texas focused on U.S. resource ~~plays with~~plays: the Eagle Ford in Texas, Northern Delaware in New Mexico, STACK and SCOOP in Oklahoma, and the Bakken in North Dakota. We only have international operations in Equatorial Guinea after closing the ~~United States, Europe and Africa.~~sale of our U.K. business on July 1, 2019. Total proved reserves were 1.3 billion boe (including 21 million boe of proved reserves for our U.K. business) at December 31, 2018, and total assets were ~~$21.4~~$20.4 billion at ~~March 31,~~September 30, 2019. During the ~~first~~third quarter of 2019, we continued our ~~outstanding operational execution across~~emphasis on simplifying and concentrating our ~~multi-basin U.S.~~ portfolio, ~~maintained~~ a ~~strong~~strengthened balance sheet, focus on costs, and ~~delivered solid financial results.~~profitable growth within cash flows.

Key highlights ~~for the quarter~~ include the following:

Simplifying and concentrating our portfolio

On July 1, 2019, we closed on the sale of our U.K. business for proceeds of approximately $95 million, reflecting the assumption by the buyer of working capital and cash equivalent balances, asset retirement obligations of $966 million, as well as pension obligations.

In the ~~first~~third quarter of 2019, we sold a 25% non-operating working interest in the Louisiana Austin Chalk.

In the fourth quarter of 2019, we entered into agreements to acquire approximately 40,000 acres in a Texas Delaware oil play in West Texas for $106 million, subject to closing adjustments. Also during the fourth quarter of 2019, we entered into an agreement to ~~sell our business~~purchase approximately 18,000 net acres in the ~~U.K.,~~Eagle Ford for ~~proceeds of approximately $140~~$185 million, ~~which reflects the assumption by the buyer of the cash equivalent and working capital balances, which was approximately $350 million at December 31, 2018. Though there~~subject to closing adjustments. These transactions are ~~certain contractual requirements that must be satisfied, the transaction is~~ expected to close either later this year or in ~~the second half of 2019, with an effective date of January 1, 2019.~~

~~In February 2019, we closed the sale of our working interest in the Droshky field (Gulf of Mexico) for a pre-tax gain of $42 million, further concentrating and simplifying our portfolio.~~early 2020.

Strengthened balance sheet and liquidity

~~Returned additional capital~~Recently closed on three finance transactions that are collectively leverage neutral, extend maturities, generate annual cash cost savings, and reflect our commitment to ~~shareholders by acquiring~~maintaining a strong balance sheet and investment grade credit rating at all primary rating agencies.

At the end of the third quarter 2019, we had approximately 1$4.2 billion of liquidity, comprised of $1.2 billion in cash and an undrawn $3.0 billion revolving credit facility.

In the nine months ended September 30, 2019, we acquired approximately 19 million common shares at a cost of ~~$14~~$280 million, which were held as treasury stock with ~~$786 million~~approximately $1.5 billion of repurchase authorization remaining.

At the end of the first quarter 2019, we had approximately $4.4 billion of liquidity, comprised of $1.0 billion in cash and an undrawn $3.4 billion revolving credit facility. The company is rated investment grade at all three major credit ratings agencies following a recent upgrade by Moody’s Investor Services, Inc.

~~Reduced estimated costs of our asset retirement obligations by approximately $100 million in connection with the disposition of our working interest of the Droshky field in the Gulf of Mexico.~~

Financial and operational results

~~Total net sales volumes for the quarter were 385 mboed, including 297 mboed in the~~ U.S. ~~resource plays. Our U.S. resource plays~~ net sales volumes increased 7%during the quarter to 339 mboed compared to ~~the same quarter last year.~~

~~Wells to sales for the quarter increased 45%~~303 mboed in the prior year. Additionally, our U.S. ~~resource plays~~crude oil net sales volumes increased 16% compared to the same quarter last year.

Our net income per share was $0.21 in the ~~first~~third quarter of 2019 as compared to a net income per share of ~~$0.42~~$0.30 in the same period last year. Included in net income results for the current quarter:


◦	A decrease in revenues from contracts with customers of approximately ~~22%~~19% to $1.2 billion, compared to the same ~~quarter last year, primarily as a result of the sale of our Libya subsidiary in the prior year and lower price realizations and net sales volumes in the current quarter. See~~ ~~Note 4~~ ~~for further detail on the Libya disposition.~~


◦	Total costs and expenses from operations decreased $35 million during the quarter compared to the same quarter last year primarily as a result of lower production expenses and the sale of our Libya subsidiary. See ~~Note 4~~ ~~for further detail on the Libya disposition.~~

quarter last year, primarily as a result of lower commodity price realizations.

Net cash provided by operating activities in the first nine months of 2019 versus the same period last year decreased 14% as commodity price realizations similarly decreased 14%. Increased U.S. net sales volumes of 9% were offset by a 25% decrease in International net sales volumes due to dispositions and natural field decline in E.G. in the first nine months of 2019 versus the same period last year.

Operations

The following table presents a summary of our sales volumes for each of our segments. Refer to the Results of Operations section for a price-volume analysis for each of the segments.


	Three Months Ended March 31,			Three Months Ended September 30,				Nine Months Ended September 30,
Net Sales Volumes	2019	2018	Increase (Decrease)	2019	2018	Increase (Decrease)		2019	2018	Increase (Decrease)
United States (mboed)	297	284	5%	339	303	12	%	322	296	9	%
International (mboed)^(a)	88	147	(40)%	88	112	(21	)%	94	126	(25	)%
Total (mboed)	385	431	(11)%	427	415	3	%	416	422	(1	)%

^(a)

In the first quarter of 2019, we announced the sale of our U.K. business, which is expected to close in the second half of 2019 subject to certain contractual requirements that must be satisfied. The three months ended March 31, 2019 and 2018 includes net sales volumes related to the U.K. of 11 mboed and 17 mboed. We closed on the sale of our Libya subsidiary in the first quarter of ~~2018. The three months ended March 31,~~ 2018 ~~includes~~and our U.K. business in the third quarter of 2019. See further detail of International net sales volumes ~~relating to Libya of 32 mboed.~~below. See Note 45 to the consolidated financial statements for further ~~information.~~information on these dispositions.

United States

Net sales volumes in the segment were higher in the ~~first~~third quarter of 2019 primarily as a result of new wells to sales across ~~all~~ U.S. resource plays. The following tables provide additional details regarding net sales volumes, sales mix and operational drilling activity for our significant operations within this segment:



	Three Months Ended September 30,				Nine Months Ended September 30,
Net Sales Volumes	2019	2018	Increase (Decrease)		2019	2018	Increase (Decrease)
Equivalent Barrels (mboed)
Eagle Ford	107	115	(7	)%	107	108	(1	)%
Bakken	109	84	30	%	101	81	25	%
Oklahoma	84	73	15	%	77	76	1	%
Northern Delaware	30	21	43	%	28	18	56	%
Other United States	9	10	(10	)%	9	13	(31	)%
Total United States (mboed)	339	303	12	%	322	296	9	%

Three Months Ended March 31,
Net Sales Volumes 2019 2018 Increase (Decrease)
Equivalent Barrels (mboed)

Eagle Ford 105 104 1%
Bakken 92 74 24%
Oklahoma 63 74 (15)%
Northern Delaware 26 16 63%
Other United States 11 16 (31)%
Total United States (mboed)
297 284 5%


	Three Months Ended March 31, 2019					Three Months Ended September 30, 2019
Sales Mix - U.S. Resource Plays	Eagle Ford	Bakken	Oklahoma	Northern Delaware	Total	Eagle Ford		Bakken		Oklahoma		Northern Delaware		Total
Crude oil and condensate	58%	86%	25%	57%	60%	59	%	84	%	27	%	60	%	59	%
Natural gas liquids	22%	8%	29%	22%	18%	20	%	9	%	27	%	20	%	18	%
Natural gas	20%	6%	46%	21%	22%	21	%	7	%	46	%	20	%	23	%


	Three Months Ended March 31,		Three Months Ended September 30,		Nine Months Ended September 30,
Drilling Activity - U.S. Resource Plays	2019	2018	2019	2018	2019	2018
Gross Operated
Eagle Ford:
Wells drilled to total depth	30	34	31	26	97	93
Wells brought to sales	41	34	35	38	117	111
Bakken:
Wells drilled to total depth	12	19	20	20	52	63
Wells brought to sales	29	11	30	21	89	53
Oklahoma:
Wells drilled to total depth	20	13	15	14	53	37
Wells brought to sales	18	17	19	11	55	45
Northern Delaware:
Wells drilled to total depth	13	20	10	18	37	59
Wells brought to sales	15	9	10	18	41	40

•

Eagle Ford – Our net sales volumes were ~~105~~107 mboed in the ~~first~~third quarter of 2019, which ~~was 1% higher~~were 7% lower compared to the prior year quarter. ~~We brought 41 gross company-operated wells sales~~The current quarter highlighted a new quarterly record for average 30 day initial oil productivity for the asset. The Middle McCowen four-well pad in Atascosa featured average lateral lengths of 10,900 feet, a new lateral length record for the ~~quarter. We continue to concentrate in the condensate window as we focus on~~asset, highlighting optionality for capital efficient, long lateral development ~~by maximizing our available surface facility capacity.~~across parts of Atascosa County. Completed well cost per lateral foot remains on a declining trend, with the third quarter average approximately 10% below 2018.

•

Bakken – Our net sales volumes of 92109 mboed represent a ~~24%~~30% increase over the prior year quarter of 7484 mboed. ~~We brought 29 gross company-operated wells to sales in the first quarter 2019.~~ We continue to ~~enhance~~deliver capital efficiency, highlighted by strong productivity and declining completed well costs, which averaged $4.9 million, or about 20% below the 2018 average. The successful delineation of our ~~Williston Basin footprint and~~broader Hector acreage continued during the ~~second~~current quarter with an average completed well cost of ~~2019, executed a small bolt-on acquisition that added more than 50 company-operated locations to our inventory.~~$4.5 million.

•

Oklahoma – Our net sales volumes were 84 mboed in the ~~first~~third quarter of 2019, ~~decreased by~~which increased 15% from the prior year quarter ~~with net sales volumes~~ of 6373 mboed. We ~~brought 18~~ ~~gross company-operated wells~~continued to ~~sales in the quarter, with 16 of these wells brought to sales during March. Additionally, development continues in~~deliver strong results from the over-pressured STACK, ~~Meramac~~where the average completed well cost for the Marjorie and Lloyd pads was $6.3 million (normalized to a 10,000 foot lateral). In the SCOOP, we brought online three Springer wells with ~~various spacing designs.~~strong early performance.

•

Northern Delaware – Our net sales volumes were 2630 mboed in the ~~first~~third quarter of 2019 which was ~~63%~~43% higher compared to the prior year quarter. We continue to make progress in advancing learnings, reducing our cost structure and improving margins. The third quarter ~~while bringing 15 gross company-operated wells to sales. Our first quarter~~of 2019 ~~wells to sales include a mix of early development and delineation drilling across both~~featured strong Upper Wolfcamp productivity in the Malaga ~~and Red Hills area.~~area, with completed well costs per lateral foot 20% below the 2018 average.

International

Net sales volumes were lower in the ~~first~~third quarter of 2019 compared to the ~~first~~third quarter of 2018 primarily due to the sale of our ~~subsidiary~~U.K. business and natural field decline in ~~Libya, the planned triennial turnaround in~~ E.G. ~~and timing of liftings in the U.K.~~ The following table provides details regarding net sales volumes for our ~~significant~~ operations within this segment:


	Three Months Ended March 31,			Three Months Ended September 30,				Nine Months Ended September 30,
Net Sales Volumes	2019	2018	Increase (Decrease)	2019	2018	Increase (Decrease)		2019	2018	Increase (Decrease)
Equivalent Barrels (mboed)
Equatorial Guinea	75	93	(19)%	88	100	(12	)%	86	99	(13	)%
United Kingdom^(a)	11	17	(35)%	—	9	(100	)%	7	13	(46	)%
Libya	—	32	(100)%	—	—	—	%	—	10	(100	)%
Other International	2	5	(60)%	—	3	(100	)%	1	4	(75	)%
Total International (mboed)	88	147	(40)%	88	112	(21	)%	94	126	(25	)%
Equity Method Investees
LNG (mtd)	4,636	5,541	(16)%	4,590	6,152	(25	)%	4,849	5,947	(18	)%
Methanol (mtd)	1,003	1,195	(16)%	1,036	1,334	(22	)%	1,058	1,282	(17	)%
Condensate and LPG (boed)	9,890	12,416	(20)%	11,586	11,942	(3	)%	10,858	12,347	(12	)%


^(a)	Includes natural gas acquired for injection and subsequent resale.


•	Equatorial Guinea – Net sales volumes in the ~~first~~third quarter of 2019 were lower compared to the same period in 2018 as a result of anatural field decline. Net sales volumes for the first nine months of 2019 were lower compared to the same period in 2018 due to the planned triennial turnaround in E.G. completed in the first quarter of 2019 as well as natural field decline.

•

United Kingdom – First quarter 2019 net sales volumes were lower compared to the first quarter of 2018 primarily due to timing of liftings and operational issues in the non-operated Foinaven complex. In the first quarter ofOn July 1, 2019, we ~~entered into an agreement to sell~~closed on the sale of our U.K. business. See Note 45 to the consolidated financial statements for further information.


•	Libya – During the first quarter of 2018 we closed on the sale of our subsidiary in Libya. See Note 45 to the consolidated financial statements for further information.

Market Conditions

~~Crude oil and condensate and NGLs~~All pricing benchmarks decreased in the third quarter and first ~~quarter~~nine months of 2019 as compared to the same period in ~~2018. As~~2018 with a ~~result, we experienced decreased~~corresponding decrease to our price ~~realizations associated with those benchmarks.~~realizations.

United States

The following table presents our average price realizations and the related benchmarks for crude oil and condensate, NGLs and natural gas for the third quarter and first ~~quarter~~nine months of 2019 and 2018.


	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)
Average Price Realizations^(a)
Crude oil and condensate (per bbl)^(b)	$	54.05	$	62.22	(13	)%	$	55.09	$	68.51	(20	)%	$	56.14	$	65.66	(14	)%
Natural gas liquids (per bbl)	15.66		22.95		(32	)%	11.37		28.07		(59	)%	13.81		24.47		(44	)%
Natural gas (per mcf)^(c)	2.93		2.59		13	%	1.92		2.55		(25	)%	2.20		2.44		(10	)%
Benchmarks
WTI crude oil average of daily prices (per bbl)	$	54.90	$	62.89	(13	)%	$	56.44	$	69.43	(19	)%	$	57.10	$	66.79	(15	)%
Magellan East Houston ("MEH") crude oil average of daily prices (per bbl)^(d)	60.42
Magellan East Houston (“MEH”) crude oil average of daily prices (per bbl)^(c)							61.06						62.60
LLS crude oil average of daily prices (per bbl)^(d)(c)			65.83						75.10						71.19
Mont Belvieu NGLs (per bbl)^(d)	23.24		26.26		(12	)%	15.16		31.25		(51	)%	18.14		27.31		(34	)%
Henry Hub natural gas settlement date average (per mmbtu)	3.15		3.00		5	%	2.23		2.90		(23	)%	2.67		2.90		(8	)%


^(a)	Excludes gains or losses on commodity derivative instruments.


^(b)	Inclusion of realized gains (losses) on crude oil derivative instruments would have impacted average price realizations by ~~$1.10~~$0.72 per bbl and ~~$(4.33)~~$(5.70) per bbl for the third quarter 2019 and 2018 and $0.70 per bbl and $(5.71) per bbl for the first ~~quarter~~nine months of 2019 and 2018.


^(c)	~~Inclusion of realized gains (losses) on natural gas derivative instruments would have a minimal impact on average price realizations for the periods presented.~~


^(d)	Benchmark change due to industry shift to MEH in the first quarter of 2019.


^(e)(d)	Bloomberg Finance LLP: Y-grade Mix NGL of ~~50%~~55% ethane, 25% propane, ~~10%~~5% butane, 5%8% isobutane and ~~10%~~7% natural gasoline.

Crude oil and condensate – Price realizations may differ from benchmarks due to the quality and location of the product.

Natural gas liquids – The majority of our sales volumes are sold at reference to Mont Belvieu prices.

Natural gas – A significant portion of our volumes are sold at bid-week prices, or first-of-month indices relative to our specific producing areas.

International

The following table presents our average price realizations and the related benchmark for crude oil for the third quarter and first ~~quarter~~nine months of 2019 and 2018.


	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)
Average Price Realizations
Crude oil and condensate (per bbl)	$	53.93	$	66.23	(19	)%	$	46.04	$	64.08	(28	)%	$	53.98	$	65.71	(18	)%
Natural gas liquids (per bbl)	1.96		1.83		7	%	1.00		2.04		(51	)%	1.53		2.28		(33	)%
Natural gas (per mcf)	0.48		0.65		(26	)%	0.24		0.50		(52	)%	0.35		0.56		(38	)%
Benchmark
Brent (Europe) crude oil (per bbl)^(a)	$	63.17	$	66.81	(5	)%	$	61.93	$	75.22	(18	)%	$	64.67	$	72.18	(10	)%


^(a)	Average of monthly prices obtained from the United States Energy Information Agency website.

United Kingdom

Crude oil and condensate – Generally sold in relation to the Brent crude benchmark. We closed on the sale of our U.K. business on July 1, 2019.

Equatorial Guinea

Crude oil and condensate – Alba Field liquids production is primarily condensate and generally sold in relation to the Brent crude benchmark. Alba Plant LLC processes the rich hydrocarbon gas which is supplied by the Alba Field under a fixed price long term contract. Alba Plant LLC extracts ~~NGL’s~~NGLs and secondary condensate which is then sold by Alba Plant LLC at market prices, with our share of the revenue reflected in income from equity method investments on the consolidated statements of income. Alba Plant delivers the processed dry natural gas to the Alba Field for distribution and sale to AMPCO and EG LNG.

Natural gas liquids – Wet gas is sold to Alba Plant LLC at a fixed-price term contract resulting in realized prices not ~~fully~~ tracking market price. Alba Plant LLC extracts and keeps NGLs, which are sold at market price, with our share of income from Alba Plant LLC being reflected in the income from equity method investments on the consolidated statements of income.

Natural gas – Dry natural gas, processed by Alba Plant LLC on behalf of the Alba Field is sold by the Alba Field to ~~EGHoldings~~EG LNG and AMPCO at fixed-price long term contracts resulting in realized prices not ~~fully~~ tracking market price. We derive additional value from the equity investment in our downstream gas processing units EG LNG and AMPCO. EG LNG sells LNG on a market-based long-term contract and AMPCO ~~that market LNG and~~markets methanol at market prices.

Results of Operations

Three Months Ended ~~March 31,~~September 30, 2019 vs. Three Months Ended ~~March 31,~~September 30, 2018

Revenues from contracts with customers are presented by segment in the table below:

Three Months Ended March 31,
(In millions) 2019 2018
Revenues from contracts with customers
United States $ 1,062
$ 1,125
International 138
412
Segment revenues from contracts with customers $ 1,200
$ 1,537



	Three Months Ended September 30,
(In millions)	2019		2018
Revenues from contracts with customers
United States	$	1,172	$	1,347
International	77		191
Segment revenues from contracts with customers	$	1,249	$	1,538

Below is a price/volume analysis for each segment. Refer to the preceding Operations and Market Conditions sections for additional detail related to our net sales volumes and average price realizations.


			Increase (Decrease) Related to										Increase (Decrease) Related to
(In millions)	Three Months Ended March 31, 2018		Price Realizations			Net Sales Volumes			Three Months Ended March 31, 2019		Three Months Ended September 30, 2018		Price Realizations			Net Sales Volumes			Three Months Ended September 30, 2019
United States Price/Volume Analysis
Crude oil and condensate	$	919	$	(130	)	$	70		$	859	$	1,090	$	(247	)	$	174		$	1,017
Natural gas liquids	103		(36		)	10			77		152		(95		)	7			64
Natural gas	98		12			(7		)	103		102		(27		)	6			81
Other sales	5								23		3								10
Total	$	1,125							$	1,062	$	1,347							$	1,172
International Price/Volume Analysis
Crude oil and condensate	$	376	$	(26	)	$	(237	)	$	113	$	161	$	(26	)	$	(68	)	$	67
Natural gas liquids	1		—			1			2		2		(1		)	—			1
Natural gas	26		(5		)	(6		)	15		20		(9		)	(3		)	8
Other sales	9								8		8								1
Total	$	412							$	138	$	191							$	77

Net ~~loss~~gain (loss) on commodity derivatives ~~increased$11 million in~~In the ~~first three months~~third quarter of 2019, the net gain on commodity derivatives was $47 million, compared to the same period in ~~2018. In 2019, we~~2018, which was a net loss of $70 million. We have multiple crude oil derivative contracts that settle against various indices. We record commodity derivative gains/losses as the index pricing and forward curves change each period. See Note 1314 to the consolidated financial statements for further information.

Income from equity method investments decreased ~~$26~~$43 million for the ~~first three months~~third quarter of 2019 from the comparable 2018 period primarily due to lower prices ~~and~~as well as lower net sales volumes of ~~LPG at our Alba plant and~~ methanol at our AMPCO facility ~~primarily driven by~~and LNG at our ~~planned turnaround in E.G. during the first quarter 2019.~~EG LNG production facility.

~~Net gain on disposal of assets~~Other income decreased ~~$215~~$113 million ~~for~~in the ~~first three months~~third quarter of 2019 primarily as a result of the reduction of our U.K. asset retirement obligation in the third quarter of 2018. See Note 12to the consolidated financial statements for further information.

Production expenses decreased $52 million in the third quarter of 2019 versus the same period in 2018. International decreased $27 million primarily as a result of the sale of our ~~Libya subsidiary for a pre-tax gain of $255 million in~~U.K. business during the ~~first quarter of 2018, partially offset by the sale of our working interest in the Droshky field in the first~~third quarter of 2019. ~~See~~ ~~Note 4~~ ~~to the consolidated financial statements for information about dispositions.~~

~~Other income~~increased $31 million in the first three months of 2019 primarily as a result of indemnification of certain tax liabilities in connection with the closure of the 2010-2011 Federal Tax Audit with the IRS. The indemnity relates to tax and interest allocable to MPC as a result of the IRS audit in accordance with the Tax Sharing Agreement. See ~~Note 7~~ ~~for further detail.~~

Production expenses ~~for the first three months of 2019~~ across our United States segment decreased ~~by $30 million compared to the same period in 2018. International decreased $17~~$25 million primarily due to ~~the sale of our Libya subsidiary~~reduced water hauling costs with more water on pipes in the ~~first quarter of 2018.~~ ~~United States~~ ~~decreased $12 million primarily due to non-core asset dispositions in~~Northern Delaware; partially offset by costs associated with the ~~Gulf of Mexico during the third quarter 2018 and first quarter 2019.~~higher sales volumes.

The ~~first~~third quarter of 2019 production expense rate (expense per boe) was lower for ~~our~~ International ~~segment increased due to the aforementioned E.G. turnaround which reduced net sales volumes coupled with the impact related to~~as a result of the sale of our ~~Libya subsidiary~~U.K. business on July 1, 2019. For the United States segment, production expense rate was lower primarily due to reduced costs (see above) and higher net sales volumes in the ~~first~~third quarter of ~~2018.~~2019.

The following table provides production expense and production expense rates for each segment:


	Three Months Ended March 31,												Three Months Ended September 30,
($ per boe)	2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)
Production Expense and Production Expense Rate	Expense						Rate
Production Expense and Rate													Expense						Rate
United States	$	139	$	151	(8	)%	$	5.21	$	5.89	(12	)%	$	147	$	172	(15	)%	$	4.75	$	6.14	(23	)%
International	$	50	$	67	(25	)%	$	6.22	$	5.07	23	%	$	16	$	43	(63	)%	$	1.98	$	4.22	(53	)%

Shipping, handling and other operating expenses ~~increased~~decreased $2414 million in the ~~first three months~~third quarter of 2019 ~~from the comparable 2018 period,~~ primarily ~~due to an increase in our shipping and handling expenses~~ as a result of ~~increased sales volumes in~~the sale of our ~~United States~~ ~~segment.~~U.K. business on July 1, 2019.

Exploration expenses include unproved property impairments, dry well costs, geological and geophysical, and other, which ~~increased $7~~decreased $34 million in the ~~first three months~~third quarter of 2019. Decreases in unproved property impairments were driven by changes in impairment assumptions based on actual development experience.

The following table summarizes the components of exploration expenses:


	Three Months Ended March 31,						Three Months Ended September 30,
(In millions)	2019		2018		Increase (Decrease)		2019		2018			Increase (Decrease)
Exploration Expenses
Unproved property impairments	$	44	$	40	10	%	$	15	$	50		(70	)%
Dry well costs	5		2		150	%	1		1			—	%
Geological and geophysical	6		6		—	%	1		(1		)	(200	)%
Other	4		4		—	%	5		6			(17	)%
Total exploration expenses	$	59	$	52	13	%	$	22	$	56		(61	)%

Depreciation, depletion and amortization decreased ~~$36~~$4 million in the ~~first three months~~third quarter of ~~2019 from the comparable 2018 period primarily as a result of~~2019. In our International segment, we had a decrease of ~~$20~~$24 million ~~in our International segment~~primarily due to ~~lower sales volumes and $14 million~~the sale of our U.K. business during the third quarter of 2019 partially offset by higher production in the ~~United States~~ ~~segment due to a lower DD&A rate.~~U.S. Our segments apply the units-of-production method to the majority of their assets, including capitalized asset retirement costs; therefore volumes have an impact on DD&A expense.

The DD&A rate (expense per boe), which is impacted by field-level changes in reserves, capitalized costs and sales volumes, can also impact our DD&A expense. Our International DD&A rate decreased primarily due to the sale of our U.K. business. Our United States DD&A rate decreased primarily due to non-core asset dispositions in the ~~Gulf of Mexico in the~~ third quarter 2018 and first ~~quarter~~half 2019.

The following table provides DD&A expense and DD&A expense rates for each segment:


	Three Months Ended March 31,												Three Months Ended September 30,
($ per boe)	2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)
DD&A Expense and DD&A Expense Rate	Expense						Rate
DD&A Expense and Rate													Expense						Rate
United States	$	514	528		(3	)%	$	19.27	$	20.66	(7	)%	$	589	$	571	3	%	$	18.90	$	20.47	(8	)%
International	$	34	$	54	(37	)%	$	4.22	$	4.13	2	%	$	25	$	49	(49	)%	$	3.15	$	4.71	(33	)%

General and administrative decreased$19 million in the third quarter of 2019 primarily as a result of change in value of stock-based performance units tied to our total shareholder return (“TSR”) as compared to our peer group.

Provision (benefit) for income taxes reflects an effective income tax expense rate from continuing operations of ~~(544)%~~6% in the ~~first three months~~third quarter of 2019, as compared to an effective income tax expense rate of ~~32% from~~29% in the ~~comparable 2018 period.~~third quarter of 2018. See Note 78 to the consolidated financial statements for more detail discussion concerning the ~~components impacting the~~ rate ~~change.~~changes.

Segment Income ~~(Loss)~~

Segment income ~~(loss)~~ represents income ~~(loss)~~from continuing operations excluding certain items not allocated to operating segments, net of income taxes. A portion of our corporate and operations general and administrative support costs are not allocated to the operating segments. Gains or losses on dispositions, certain impairments, unrealized gains or losses on commodity derivative instruments, pension settlement losses, or other items (as determined by the CODM) are not allocated to operating segments.

The following table reconciles segment income ~~(loss)~~ to net ~~income (loss):~~income:


	Three Months Ended March 31,							Three Months Ended September 30,
(In millions)	2019			2018		Increase (Decrease)		2019			2018			Increase (Decrease)
United States	$	132		$	125	6	%	$	180		$	201		$	(21	)
International	61			132		(54	)%	43			116			(73		)
Segment income	193			257		(25	)%	223			317			(94		)
Items not allocated to segments, net of income taxes	(19		)	99		(119	)%	(58		)	(63		)	5
Net income	$	174		$	356	(51	)%	$	165		$	254		$	(89	)

United States segment ~~United States~~ ~~segment~~income ~~increased~~decreased $721 million after-tax primarily due to lower price realizations in the ~~first three months~~current quarter, which was slightly offset by realized commodity derivative gains in the third quarter of 2019 ~~from the comparable 2018 period.~~versus a realized commodity derivative loss in third quarter of 2018.

International segment income decreased ~~$71~~$73 million after-tax in the third quarter of 2019 primarily due to lower income from our equity method investments and E.G. as a result of lower price realizations and sales volumes resulting from natural field decline, slightly offset by dispositions.

Results of Operations

Nine Months Ended September 30, 2019 vs. Nine Months Ended September 30, 2018

Revenues from contracts with customers are presented by segment in the table below:



	Nine Months Ended September 30,
(In millions)	2019		2018
Revenues from contracts with customers
United States	$	3,434	$	3,693
International	396		829
Segment revenues from contracts with customers	$	3,830	$	4,522



			Increase (Decrease) Related to
(In millions)	Nine Months Ended September 30, 2018		Price Realizations			Net Sales Volumes			Nine Months Ended September 30, 2019
United States Price/Volume Analysis
Crude oil and condensate	$	3,022	$	(491	)	$	366		$	2,897
Natural gas liquids	370		(174		)	29			225
Natural gas	286		(28		)	5			263
Other sales	15								49
Total	$	3,693							$	3,434
International Price/Volume Analysis
Crude oil and condensate	$	730	$	(75	)	$	(314	)	$	341
Natural gas liquids	7		(2		)	(1		)	4
Natural gas	68		(21		)	(11		)	36
Other sales	24								15
Total	$	829							$	396

Net loss on commodity derivatives In the first ~~three~~nine months of 2019, the net loss on commodity derivatives was $28 million, compared to the same period in 2018 which was a loss of $324 million. We have multiple crude oil derivative contracts that settle against various indices. We record commodity derivative gains/losses as the index pricing and forward curves change each period. See Note 14 to the consolidated financial statements for further information.

Income from equity method investmentsdecreased $98 million for the first nine months of 2019 due to the triennial turnaround in E.G. and natural field decline of the Alba field, which resulted in lower net sales volumes for equity method investments in E.G.

Net gain on disposal of assetsdecreased $267 million for the first nine months of 2019 primarily as a result of the sale of our Libya subsidiary for a pre-tax gain of $255 million in the first quarter of 2018. See Note 5 to the consolidated financial statements for information about dispositions.

Other incomedecreased $81 million in the first nine months of 2019 primarily as a result of the 2018 reduction of our U.K. asset retirement obligation, versus the 2019 indemnification of certain tax liabilities in connection with the closure of the 2010-2011 Federal Tax Audit with the IRS. This indemnity relates to tax and interest allocable to MPC as a result of the IRS Audit in accordance with the Tax Sharing Agreement. See Note 8 for further detail.

Production expenses for the first nine months of 2019 decreased by $94 million compared to the same period in 2018. International decreased $50 million primarily as a result of dispositions, partially offset by an increase due to the planned triennial turnaround in E.G. during the first quarter of 2019. United States decreased $43 million primarily due to reduced water hauling costs with more water on pipe in the Northern Delaware, and non-core asset dispositions in the Gulf of Mexico during the third quarter 2018, slightly offset by increased net sales volumes.

The first nine months of 2019 production expense rate (expense per boe) was lower for our United States segment due to continued focus on cost reduction as well as higher net sales volumes in 2019. Expense per boe for our International segment decreased due to dispositions (above).

The following table provides production expense and production expense rates for each segment:



	Nine Months Ended September 30,
($ per boe)	2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)
Production Expense and Rate	Expense						Rate
United States	$	433	$	476	(9	)%	$	4.94	$	5.90	(16	)%
International	$	112	$	162	(31	)%	$	4.33	$	4.70	(8	)%

Shipping, handling and other operating expensesincreased$54 million in the first nine months of 2019 from the comparable 2018 period, primarily ~~due to lower net~~as a result of increased sales volumes ~~and price realizations~~in our United States segment partially offset by ~~lower taxes~~dispositions in the International segment.

Exploration expensesinclude unproved property impairments, dry well costs, geological and geophysical, and other, which decreased $66 million in the first nine months of 2019. Decreases in unproved property impairments were driven by changes in impairment assumptions based on actual development experience.

The following table summarizes the components of exploration expenses:



	Nine Months Ended September 30,
(In millions)	2019		2018		Increase (Decrease)
Exploration Expenses
Unproved property impairments	$	79	$	131	(40	)%
Dry well costs	6		13		(54	)%
Geological and geophysical	10		13		(23	)%
Other	12		16		(25	)%
Total exploration expenses	$	107	$	173	(38	)%

Depreciation, depletion and amortization decreased $47 million in the first nine months of 2019 from the comparable 2018 period, primarily ~~related to~~as a result of the sale of our U.K. business during the third quarter of 2019 and the sale of our Libya subsidiary in the first quarter of 2018. Our segments apply the units-of-production method to the majority of their assets, including capitalized asset retirement costs; therefore volumes have an impact on DD&A expense.

The DD&A rate (expense per boe), which is impacted by field-level changes in reserves, capitalized costs and sales volumes, can also impact our DD&A expense. The DD&A rate for International decreased primarily as a result of dispositions. For the United States segment, the 2019 rate decline is primarily due to non-core asset dispositions.

The following table provides DD&A expense and DD&A expense rates for each segment:



	Nine Months Ended September 30,
($ per boe)	2019		2018		Increase (Decrease)		2019		2018		Increase (Decrease)
DD&A Expense Rate	Expense						Rate
United States	$	1,664	$	1,655	1	%	$	18.95	$	20.53	(8	)%
International	$	97	$	153	(37	)%	$	3.77	$	4.43	(15	)%

Impairments decreased $26 million in the first nine months of 2019, primarily as a result of anticipated sales of certain non-core proved properties in our International and United States segments. See Note 11 for discussion of the impairments in further detail.

General and administrative decreased$43 million in the first nine months of 2019 primarily as a result of change in value of stock-based performance units tied to our total shareholder return (“TSR”) as compared to our peer group and a decrease in other compensation costs.

Provision (benefit) for income taxes reflects an effective income tax benefit rate of 27% in the first nine months of 2019, as compared to an effective income tax expense rate of 31% from the comparable 2018 period. See Note 8 to the consolidated financial statements for more detail discussion concerning the components impacting the rate change.

Segment Income

Segment income represents income excluding certain items not allocated to operating segments, net of income taxes. A portion of our corporate and operations general and administrative support costs is not allocated to the operating segments. Gains or losses on dispositions, certain impairments, unrealized gains or losses on commodity derivative instruments, pension settlement losses, or other items (as determined by the CODM) are not allocated to operating segments.

The following table reconciles segment income to net income :



	Nine Months Ended September 30,
(In millions)	2019			2018			Increase (Decrease)
United States	$	527		$	449		17	%
International	200			390			(49	)%
Segment income	727			839			(13	)%
Items not allocated to segments, net of income taxes	(227		)	(133		)	71	%
Net income	$	500		$	706		(29	)%

United States segment income increased$78 million after-tax in the first nine months of 2019 primarily as a result of higher net sales volumes coupled with the impact of realized commodity derivatives (gain in the first nine months of 2019 versus a loss in 2018), partially offset by decreases in net price realizations.

International segmentincomedecreased $190 million after-tax in the first nine months of 2019 primarily due to lower sales volumes and price realizations offset by lower costs and taxes due to dispositions. Sales volumes decreased as a result of dispositions, natural field decline in E.G., and the planned triennial turnaround in E.G. completed in the first quarter 2019.

Critical Accounting Estimates

There have been no material changes or developments in the evaluation of the accounting estimates and the underlying assumptions or methodologies pertaining to our Critical Accounting Estimates disclosed in our Form 10-K for the year ended December 31, ~~2018.~~2018 except as discussed below.

Fair Value Estimates - Goodwill

See Note 15 to the consolidated financial statements for further information regarding our annual goodwill impairment test.

Accounting Standards Not Yet Adopted

See Note 2 to the consolidated financial statements.

Cash Flows

The following table presents sources and uses of cash and cash equivalents:


	Three Months Ended March 31,						Nine Months Ended September 30,
(In millions)	2019			2018			2019			2018
Sources of cash and cash equivalents
Operating activities	$	515		$	649		$	2,049		$	2,379
Disposal of assets, net of cash transferred to the buyer	13			1,180			(84		)	1,249
Additions to other assets	14			—
Other	25			12			53			81
Total sources of cash and cash equivalents	$	567		$	1,841		$	2,018		$	3,709
Uses of cash and cash equivalents
Additions to property, plant and equipment	$	(615	)	$	(662	)	$	(1,934	)	$	(2,069	)
Additions to other assets	—			(72		)	41			(135		)
Acquisitions, net of cash acquired	—			(4		)	—			(25		)
Purchases of common stock	(30		)	(9		)	(296		)	(349		)
Dividends paid	(41		)	(42		)	(122		)	(128		)
Other	(1		)	(2		)	(4		)	(2		)
Total uses of cash and cash equivalents	$	(687	)	$	(791	)	$	(2,315	)	$	(2,708	)

Cash flows generated from operating activities in the first ~~three~~nine months of 2019 were ~~21%~~14% lower primarily as ~~both~~ commodity price realizations ~~and~~decreased 14% along with lower net sales volumes ~~decreased compared to the first three months~~in our International segment as a result of ~~2018. Consolidated average crude oil~~ dispositions;

and ~~condensate price realizations decreased~~partially offset by ~~approximately 13% and~~an increase in net sales volumes in our U.S. segment compared to 2018. Average crude oil price realizations, exclusive of the impacts of commodity derivatives, decreased ~~11% duri~~ by approximately 15% during the first ~~three~~nine months of 2019 as compared to the prior period.

Disposals of assets for the first nine months of 2019 were primarily related to proceeds, net of the cash transferred to the buyer, with the sale of our U.K. business; partially offset by the proceeds received from the sale of our 25% non-operating working interest in the Louisiana Austin Chalk as well as from the sale of our non-operated interest in the Atrush block in Kurdistan. Proceeds from the disposals of assets for the first ~~three~~nine months of 2018 were primarily related to the final proceeds received from the sale of our Canadian business and sale of our non-operated interest in Libya. See Note 45 to the consolidated financial statements for further information concerning dispositions.

Additions to property, plant and equipment in the first ~~three~~nine months of 2019 were consistent with expectations relative to our ~~$2.6 billion~~ Capital Budget, which includes approximately $2.4 billion of development capital and ~~$200~~approximately $280 million to fund resource play leasing and exploration ~~("REx"~~(“REx”).

The following table shows capital expenditures by segment and reconciles to additions to property, plant and equipment as presented in the consolidated statements of cash flows:


	Three Months Ended March 31,				Nine Months Ended September 30,
(In millions)	2019		2018		2019			2018
United States	$	606	$	611	$	1,959		$	1,943
International	5		6		16			28
Corporate	3		5		15			17
Total capital expenditures	614		622		1,990			1,988
Change in capital expenditure accrual	1		40		(56		)	81
Total use of cash and cash equivalents for property, plant and equipment	$	615	$	662	$	1,934		$	2,069

Additions to other assets of $41 million relates to the clearing of deposits onrelated to our REx ~~program.~~program to property, plant and equipment during the first nine months of 2019. During the first ~~three~~nine months of 2019 and 2018, our REx capital expenditures totaled ~~$37~~$109 million and $294 million, inclusive of costs included within property, plant and equipment, other assets, and acquisitions.

The Board of Directors approved a $0.05 per share dividend for each of the fourth quarter of 2018 and the first and second quarters of 2019, which ~~was~~were paid in the first, ~~quarter~~second and third quarters of 2019. See Capital Requirements below for additional information about ~~the fourth quarter dividend.~~dividends.

In the first ~~quarter~~nine months of 2019, we acquired approximately 119 million common shares at a cost of ~~$14~~$280 million, which were held as treasury stock. See Note 1617 to the consolidated financial statements for further information.

Liquidity and Capital Resources

Available Liquidity

In September 2019, we entered into an amendment to our Credit Facility to reduce the maximum borrowing from $3.4 billion to $3.0 billion and extended the maturity date by one year to May 28, 2023.

Our main sources of liquidity are cash and cash equivalents, internally generated cash flow from operations, sales of non-core assets, capital market transactions, and our revolving Credit Facility. At ~~March 31,~~September 30, 2019, we had approximately ~~$4.4~~$4.2 billion of liquidity consisting of ~~$1.0~~$1.2 billion in cash and cash equivalents and ~~$3.4~~$3.0 billion available under our revolving Credit Facility. Our working capital requirements are supported by these sources and we may issue either commercial paper backed by our Credit Facility or draw on our revolving Credit Facility to meet short-term cash requirements, or issue debt or equity securities through the shelf registration statement discussed below as part of our longer-term liquidity and capital management program. Because of the alternatives available to us as discussed above, we believe that our short-term and long-term liquidity are adequate to fund not only our current operations, but also our near-term and long-term funding requirements including our capital spending programs, dividend payments, defined benefit plan contributions, repayment of debt maturities, and other amounts that may ultimately be paid in connection with contingencies.

General economic conditions, commodity prices, and financial, business and other factors could affect our operations and our ability to access the capital markets. Our corporate credit ratings as of ~~March 31,~~September 30, 2019are: Standard & ~~Poor's~~Poor’s Ratings Services ~~BBB- (positive)~~BBB (stable); Fitch Ratings BBB (stable); and ~~Moody's Investor Services, Inc. Ba1 (positive). On April 24, 2019,~~ Moody’s Investor Services, Inc. ~~upgraded our~~Baa3 (stable). We are rated investment grade at all three primary credit rating ~~to Baa3 (stable). As a result of the recent upgrade to an investment grade credit rating,~~agencies. In addition, we also have the ability to borrow on our U.S. commercial paper

program, which is backed by the revolving ~~credit facility.~~Credit Facility. A downgrade in our credit ratings could increase our future cost of financing or limit our ability to access capital, and could result in additional ~~collateral~~credit support requirements. See Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of how a ~~further~~ downgrade in our credit ratings could affect us.

Capital Resources

Credit Arrangements and Borrowings

At ~~March 31,~~September 30, 2019, we had no borrowings against our ~~revolving credit facility.~~Credit Facility or under our U.S. commercial paper program that is backed by the Credit Facility.

At ~~March 31,~~September 30, 2019, we had $5.5 billion ~~in long-term~~of total debt outstanding, ~~with~~including $600 million due June 2020. On October 3, 2019, we redeemed our $600 million 2.7% senior unsecured notes due June 2020. After considering this debt redemption, our next debt maturity inis the ~~amount of $600 million~~$1.0 billion 2.8% senior unsecured notes due ~~in June 2020.~~2022. We do not have any triggers on any of our corporate debt that would cause an event of default in the case of a downgrade of our credit ratings.

On October 1, 2019, we closed a $600 million remarketing to investors of sub-series A bonds which are part of the $1.0 billion St. John the Baptist, State of Louisiana revenue refunding bonds originally issued and purchased in December 2017. The $600 million in proceeds from the conversion and remarketing were used to pay the purchase price of our converted 2017 bonds on the closing date. We continue to own the remaining $400 million of the revenue refunding bonds and have the right to convert and remarket them to investors at any time up to the 2037 maturity date.

Shelf Registration

We have a universal shelf registration statement filed with the SEC under which we, as a ~~"well-known~~“well-known seasoned ~~issuer"~~issuer” for purposes of SEC rules, have the ability to issue and sell an indeterminate amount of various types of debt and equity securities.

Asset Disposal

~~In the first quarter of~~On July 1, 2019, we ~~entered into an agreement to sell~~closed on the sale of our U.K. ~~business. Subject to customary adjustments, the closing consideration payable to us will be~~business for proceeds of approximately ~~$140~~$95 million, ~~which reflects~~reflecting the assumption by the buyer of ~~the MOUK~~working capital and ~~MOWOS~~ cash equivalent ~~balance and working capital balance, which was approximately $350~~balances, asset retirement obligations of $966 million, ~~at December 31, 2018. Though there are certain contractual requirements that must be satisfied,~~as well as the ~~transaction is expected to close in~~pension obligations.

In the second ~~half~~quarter of 2019, ~~with an effective date~~we closed on the sale of ~~January 1, 2019.~~

~~We entered into an agreement to sell our subsidiary, Marathon Oil KDV B.V., which holds~~ our 15% non-operated interest in the Atrush block in Kurdistan for proceeds of $63 million, before closing adjustments. ~~We expect this transaction to close in the second quarter of 2019.~~ See Note 45 to the consolidated financial statements for further information concerning dispositions.

Debt-To-Capital Ratio

The Credit Facility includes a covenant requiring that our debt-to-capital ratio ~~of total debt to total capitalization~~ not exceed 65% as of the last day of the fiscal quarter. Our debt-to-capital ratio was 31% at ~~March 31,~~September 30, 2019 and at December 31, 2018.

Capital Requirements

Share Repurchase Program

In the nine months ended September 30, 2019, we acquired approximately 19 million common shares at a cost of $280 million under our share repurchase program with remaining share repurchase authorization is $1.5 billion.

Other Expected Cash Outflows

On ~~April 24,~~October 30, 2019, our Board of Directors approved a dividend of $0.05 per share for the ~~first~~third quarter of 2019 payable ~~June~~December 10, 2019 to stockholders of record at the close of business on ~~May 15,~~November 20, 2019.

As of ~~March 31,~~September 30, 2019, we plan to make contributions of up to ~~$32~~$6 million to our funded pension plans during the remainder of 2019.

Contractual Cash Obligations

AsIn the first quarter of ~~March 31,~~ 2019, we ~~have~~ entered into various transportation and processing commitments to guarantee capacity on crude oil and natural gas pipelines and natural gas processing facilities, which have varying terms extending as far as 2027. Future commitments remaining as of ~~March 31,~~September 30, 2019 under the arrangements amount to ~~$571~~$559 million, of which ~~$17~~$5 million is expected to be incurred in the remainder of 2019, $54 million in 2020, $75 million in 2021, $76 million in 2022, $78 million in 2023, and $271 million thereafter.

Environmental Matters and Other Contingencies

There have been no significant changes to the environmental, health and safety matters under Item 1. Business or Item 3. Legal Proceedings in our 2018 Annual Report on Form 10-K. See Note 2223 to the consolidated financial statements for a description of other contingencies.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). All statements, other than statements of historical fact, including without limitation statements regarding our future performance, business strategy, reserve estimates, asset quality, ~~production guidance,~~ drilling plans, capital plans, cost and expense estimates, asset acquisitions and dispositions, future financial position and other plans and objectives for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,"” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would” or similar words may be used to identify forward-looking statements; however, the absence of these words does not mean that the statements are not forward-looking. While we believe our assumptions concerning future events are reasonable, a number of factors could cause results to differ materially from those projected, including, but not limited to:

conditions in the oil and gas industry, including supply and demand levels for crude oil and condensate, NGLs and natural gas and the resulting impact on price;

changes in expected reserve or production levels;

changes in political and economic conditions in the jurisdictions in which we operate, including changes in foreign currency exchange rates, interest rates, inflation rates, and global and domestic market conditions;

risks related to our hedging activities;

our ability to complete our announced acquisitions on the timeline currently anticipated, if at all;

liability resulting from litigation;

capital available for exploration and development;

the inability of any party to satisfy closing conditions or delays in execution with respect to our asset acquisitions and ~~dispositions, including the sale of our U.K. business;~~dispositions;

drilling and operating risks;

lack of, or disruption in, access to pipelines or other transportation methods;

well production timing;

availability of drilling rigs, materials and labor, including ~~the costs~~ associated ~~therewith;~~costs;

difficulty in obtaining necessary approvals and permits;

non-performance by third parties of contractual obligations;

unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response thereto;

cyber-attacks;

changes in safety, health, environmental, tax and other ~~regulations;~~regulations or other requirements or initiatives, including those addressing the impact of global climate change, flaring or water management;

other geological, operating and economic considerations; and

the risk factors, forward-looking statements and challenges and uncertainties described in our 2018 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings with the SEC.

All forward-looking statements included in this report are based on information available to us on the date of this report. Except as required by law, we undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the normal course of business including commodity price risk and interest rate risk. We employ various strategies, including the use of financial derivatives to manage the risks related to commodity price fluctuations. See Note 1314 and Note 1415 to the consolidated financial statements for detail relating to our open commodity derivative positions, including underlying notional quantities, how they are reported in our consolidated financial statements and how their fair values are measured.

Commodity Price Risk

As of ~~March 31,~~September 30, 2019, we had various open commodity derivatives related to crude oil with a net asset position of ~~$14~~$58 million. Based on the ~~March 31,~~September 30, 2019 published index prices, a hypothetical 10% change (per bbl for crude oil) increases (decreases) the fair values of our net commodity derivative open positions as follows:


(In millions)	Hypothetical Price Increase of 10%			Hypothetical Price Decrease of 10%		Hypothetical Price Increase of 10%			Hypothetical Price Decrease of 10%
Crude oil derivatives	$	(30	)	$	30	$	(50	)	$	45

Interest Rate Risk

At ~~March 31,~~September 30, 2019 our portfolio of current and long-term debt is comprised of fixed-rate instruments with an outstanding balance of $5.5 billion. Our sensitivity to interest rate movements and corresponding changes in the fair value of our fixed-rate debt portfolio affects our results of operations and cash flows only when we elect to repurchase or otherwise retire fixed-rate debt at prices different than carrying value.

Item 4. Controls and Procedures

An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. As of the end of the period covered by this Report based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2019.

During the ~~first~~ three months ofended September 30, 2019, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II – OTHER INFORMATION

Item 1. Legal Proceedings

There have been no significant changes to Item 3. Legal Proceedings in our 2018 Annual Report on Form 10-K. See Note 2223 to the consolidated financial statements included in Part I, Item I for a description of such legal and administrative proceedings.

Item 1A. Risk Factors

We are subject to various risks and uncertainties in the course of our business. There have been no material changes to the risk factors under Item 1A. Risk Factors in our 2018 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about purchases by Marathon Oil and its affiliated purchaser, during the quarter ended ~~March 31,~~September 30, 2019 of equity securities that are registered by Marathon Oil pursuant to Section 12 of the Securities Exchange Act of 1934:

Period
Total Number of
Shares
Purchased^(a)

Average
Price Paid
per Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs^(b)

Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans
or Programs^(b)
01/01/2019 – 01/31/2019
6,153
$ 14.72
—
$ 800,286,037
02/01/2019 – 02/28/2019
152,607
$ 16.66
—
$ 800,286,037
03/01/2019 – 03/31/2019
1,575,353
$ 17.06
836,025
$ 786,036,185
Total 1,734,113
$ 17.02
836,025



Period	Total Number of Shares Purchased^(a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs^(b)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs^(b)
07/01/2019 - 07/31/2019	8,597	$	14.21	—	$	1,500,286,171
08/01/2019 - 08/31/2019	823,095	$	12.19	820,696	$	1,490,286,250
09/01/2019 - 09/30/2019	1,576,714	$	12.68	1,576,714	$	1,470,286,190
Total	2,408,406	$	12.52	2,397,410


^(a)	~~898,088~~10,996 shares of restricted stock were delivered by employees to Marathon Oil, upon vesting, to satisfy tax withholding requirements.


^(b)	In January 2006, we announced a $2.0 billion share repurchase program. Our Board of Directors subsequently increased the authorization for repurchases under the program by $500 million in January 2007, by $500 million in May 2007, by $2.0 billion in July 2007, ~~and~~ by $1.2 billion in December 2013, ~~for a total authorized amount of $6.2 billion.~~and by $950 million in July 2019.

As of ~~December 31, 2018,~~September 30, 2019, we have repurchased ~~157~~176 million common shares at a cost of approximately ~~$5.4~~$5.7 billion, excluding transaction fees and commissions. In the ~~first~~third quarter of 2019, ~~we repurchased~~share repurchases were approximately ~~1 million common shares at a cost of approximately $14~~$30 million, excluding transaction fees and commissions. ~~The remaining share repurchase authorization as of March 31, 2019, is approximately $786 million.~~ Purchases under the program are made at our discretion and may be in either open market transactions, including block purchases, or in privately negotiated transactions using cash on hand, cash generated from operations, proceeds from potential asset sales or cash from available borrowings to acquire shares. This program may be changed based upon our financial condition or changes in market conditions and is subject to termination prior to completion. Shares repurchased as of ~~March 31,~~September 30, 2019 were held as treasury stock.

Item 6. Exhibits

The information required by this Item 6 is set forth in the Exhibit Index accompanying this Form 10-Q.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



~~May 2,~~November 7, 2019		MARATHON OIL CORPORATION

	By:	/s/ Gary E. Wilson
		Gary E. Wilson
		Vice President, Controller and Chief Accounting Officer
		(Duly Authorized Officer)

Exhibit Index

Incorporated by Reference (File No. 001-05153, unless otherwise indicated)
Exhibit Number Exhibit Description Form Exhibit Filing Date
3.1
Restated Certificate of Incorporation of Marathon Oil Corporation
8-K 3.1 6/1/2018
3.2
Marathon Oil Corporation By-laws (amended and restated as of February 24, 2016)
10-Q 3.2 8/4/2016
3.3
Specimen of Common Stock Certificate
10-K 3.3 2/28/2014
4.1
Indenture, dated as of February 26, 2002, between Marathon Oil Corporation and The Bank of New York Trust Company, N.A., successor in interest to JPMorgan Chase Bank as Trustee, relating to senior debt securities of Marathon Oil Corporation. Pursuant to CFR 229.601(b)(4)(iii), instruments with respect to long-term debt issues have been omitted where the amount of securities authorized under such instruments does not exceed 10% of the total consolidated assets of Marathon Oil. Marathon Oil hereby agrees to furnish a copy of any such instrument to the SEC upon its request.
10-K 4.2 2/28/2014
10.1*
2019 Form of Marathon Oil Corporation 2016 Incentive Compensation Plan Restricted Stock Award Agreement for Section 16 Officers

10.2*
2019 Form of Marathon Oil Corporation 2016 Incentive Compensation Plan Nonqualified Stock Option Award Agreement for Section 16 Officers

10.3*
2019 Form of Marathon Oil Corporation 2016 Incentive Compensation Plan Restricted Stock Unit Award Agreement for Section 16 Officers

10.4*
2019 Form of Marathon Oil Corporation 2016 Incentive Compensation Plan Performance Unit Award Agreement for Section 16 Officers

10.5*
Summary Director Compensation Arrangement, effective 2019

31.1*
Certification of President and Chief Executive Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934

31.2*
Certification of Executive Vice President and Chief Financial Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934

32.1*
Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2*
Certification of Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101.INS* XBRL Instance Document - the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH* XBRL Taxonomy Extension Schema
101.CAL* XBRL Taxonomy Extension Calculation Linkbase
101.DEF* XBRL Taxonomy Extension Definition Linkbase
101.LAB* XBRL Taxonomy Extension Label Linkbase
101.PRE* XBRL Taxonomy Extension Presentation Linkbase
* Filed herewith.



		Incorporated by Reference (File No. 001-05153, unless otherwise indicated)
Exhibit Number	Exhibit Description	Form	Exhibit	Filing Date
3.1	Restated Certificate of Incorporation of Marathon Oil Corporation	8-K	3.1	6/1/2018
3.2	Marathon Oil Corporation By-laws (amended and restated as of February 24, 2016)	10-Q	3.2	8/4/2016
3.3	Specimen of Common Stock Certificate	10-K	3.3	2/28/2014
4.1	Indenture, dated as of February 26, 2002, between Marathon Oil Corporation and The Bank of New York Trust Company, N.A., successor in interest to JPMorgan Chase Bank as Trustee, relating to senior debt securities of Marathon Oil Corporation. Pursuant to CFR 229.601(b)(4)(iii), instruments with respect to long-term debt issues have been omitted where the amount of securities authorized under such instruments does not exceed 10% of the total consolidated assets of Marathon Oil. Marathon Oil hereby agrees to furnish a copy of any such instrument to the SEC upon its request	10-K	4.2	2/28/2014
10.1*†	Marathon Oil Corporation Officer Change in Control Severance Benefits Plan (As amended effective October 30, 2019)
10.2	Fourth Amendment, dated as of September 24, 2019, to the Amended and Restated Credit Agreement dated as of May 28, 2014, as amended by the First Amendment dated as of May 5, 2015, the Second Amendment dated as of June 22, 2017, and the Third Amendment dated as of October 18, 2018 and as supplemented by the Incremental Commitments Supplement dated as of March 4, 2016 and Incremental Commitments Supplement dated as July 11, 2017, among Marathon Oil Corporation, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and certain other financial institutions named therein	8-K	10.1	9/24/2019
31.1*	Certification of President and Chief Executive Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934
31.2*	Certification of Executive Vice President and Chief Financial Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934
32.1*	Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350
32.2*	Certification of Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350
101.INS*	XBRL Instance Document - the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase
104*	Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101
*	Filed herewith.
†	Management contract or compensatory plan or arrangement.



	Table of Contents
		Page
Part I - FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Consolidated Statements of Income (Unaudited)	2
	Consolidated Statements of Comprehensive Income (Unaudited)	3
	Consolidated Balance Sheets (Unaudited)	4
	Consolidated Statements of Cash Flows (Unaudited)	5
	Consolidated Statements of Stockholders' Equity (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	78
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2333
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3547
Item 4.	Controls and Procedures	3547
Part II - OTHER INFORMATION
Item 1.	Legal Proceedings	3648
Item 1A.	Risk Factors	3648
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3648
Item 6.	Exhibits	3648
	Signatures	3749



	Ownership as of	March 31,		December 31,
(In millions)	March 31, 2019	2019		2018
EGHoldings	60%	$	368	$	402
Alba Plant LLC	52%	169		167
AMPCO	45%	182		176
Total		$	719	$	745



Period	Total Number of Shares Purchased^(a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs^(b)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs^(b)
01/01/2019 – 01/31/2019	6,153	$	14.72	—	$	800,286,037
02/01/2019 – 02/28/2019	152,607	$	16.66	—	$	800,286,037
03/01/2019 – 03/31/2019	1,575,353	$	17.06	836,025	$	786,036,185
Total	1,734,113	$	17.02	836,025