Document and Entity Information
Document and Entity Information (USD $) | |||
In Millions, except Share data | 3 Months Ended
Mar. 31, 2010 | Apr. 30, 2010
| Jun. 30, 2009
|
Document and Entity Information | |||
Document type | 10-Q | ||
Document period end date | 2010-03-31 | ||
Document fiscal period focus | Q1 | ||
Document fiscal year focus | 2,010 | ||
Amendment flag | false | ||
Entity registrant name | Marathon Oil Corporation | ||
Entity central index key | 0000101778 | ||
Entity current reporting status | Yes | ||
Entity voluntary filers | No | ||
Current fiscal year end date | --12-31 | ||
Entity filer category | Large Accelerated Filer | ||
Entity well-known seasoned issuer | Yes | ||
Entity common stock, shares outstanding | 709,502,223 | ||
Entity public float | $21,272 |
Consolidated Statements of Inco
Consolidated Statements of Income (Unaudited) (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Revenues and other income: | ||
Sales and other operating revenues (including consumer excise taxes) | $15,849 | $10,156 |
Sales to related parties | 20 | 20 |
Income from equity method investments | 105 | 47 |
Net gain on disposal of assets | 813 | 4 |
Other income | 33 | 52 |
Total revenues and other income | 16,820 | 10,279 |
Costs and expenses: | ||
Cost of revenues (excludes items below) | 12,881 | 7,357 |
Purchases from related parties | 133 | 95 |
Consumer excise taxes | 1,212 | 1,174 |
Depreciation, depletion and amortization | 649 | 660 |
Long-lived asset impairments | 434 | 0 |
Selling, general and administrative expenses | 298 | 291 |
Other taxes | 115 | 102 |
Exploration expenses | 98 | 62 |
Total costs and expenses | 15,820 | 9,741 |
Income from operations | 1,000 | 538 |
Net interest and other financing costs | (30) | (16) |
Income from continuing operations before income taxes | 970 | 522 |
Provision for income taxes | 513 | 257 |
Income from continuing operations | 457 | 265 |
Discontinued operations | 0 | 17 |
Net income | $457 | $282 |
Basic: | ||
Income from continuing operations, per basic share | 0.64 | 0.37 |
Discontinued operations, per basic share | $0 | 0.03 |
Net income per share, basic | 0.64 | 0.4 |
Diluted: | ||
Income from continuing operations, per diluted share | 0.64 | 0.37 |
Discontinued operations, per diluted share | $0 | 0.03 |
Net income per share, diluted | 0.64 | 0.4 |
Dividends paid, per share | 0.24 | 0.24 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
Current assets: | ||
Cash and cash equivalents | $2,718 | $2,057 |
Receivables, less allowance for doubtful accounts of $14 and $14 | 4,860 | 4,677 |
Receivables from United States Steel, current | 22 | 22 |
Receivables from related parties | 70 | 60 |
Inventories | 3,848 | 3,622 |
Other current assets | 221 | 199 |
Total current assets | 11,739 | 10,637 |
Equity method investments | 2,004 | 1,970 |
Receivables from United States Steel, noncurrent | 320 | 324 |
Property, plant and equipment, less accumulated depreciation, depletion and amortization of $18,217 and $17,185 | 31,674 | 32,121 |
Goodwill | 1,414 | 1,422 |
Other noncurrent assets | 574 | 578 |
Total assets | 47,725 | 47,052 |
Current liabilities: | ||
Accounts payable | 7,143 | 6,982 |
Payables to related parties | 59 | 64 |
Payroll and benefits payable | 360 | 399 |
Accrued taxes | 679 | 547 |
Deferred income taxes, current | 408 | 403 |
Other current liabilities | 638 | 566 |
Long-term debt due within one year | 98 | 96 |
Total current liabilities | 9,385 | 9,057 |
Long-term debt | 8,440 | 8,436 |
Deferred income taxes, noncurrent | 4,099 | 4,104 |
Defined benefit postretirement plan obligations | 2,078 | 2,056 |
Asset retirement obligations | 1,121 | 1,099 |
Payable to United States Steel | 5 | 5 |
Deferred credits and other liabilities, noncurrent | 370 | 385 |
Total liabilities | 25,498 | 25,142 |
Commitments and contingencies | ||
Stockholders' Equity | ||
Preferred stock - 5 million shares issued, 1 million shares outstanding (no par value, 6 million shares authorized) | 0 | 0 |
Common stock, Issued - 769 million and 769 million shares (par value $1 per share, 1.1 billion shares authorized) | 769 | 769 |
Common stock, Securities exchangeable into common stock - 5 million shares issued, 1 million shares outstanding (no par value, unlimited shares authorized) | 0 | 0 |
Held in treasury, at cost - 61 million shares | (2,696) | (2,706) |
Additional paid-in capital | 6,751 | 6,738 |
Retained earnings | 18,328 | 18,043 |
Accumulated other comprehensive loss | (925) | (934) |
Total stockholders' equity | 22,227 | 21,910 |
Total liabilities and stockholders' equity | $47,725 | $47,052 |
Consolidated Balance Sheets Par
Consolidated Balance Sheets Parentheticals (Unaudited) (USD $) | ||
In Millions, except Share data | Mar. 31, 2010
| Dec. 31, 2009
|
Consolidated Balance Sheets (Parenthetical) | ||
Allowance for doubtful accounts | $14 | $14 |
Accumulated depreciation, depletion and amortization | $18,217 | $17,185 |
Preferred stock, no par value | 0 | 0 |
Preferred stock, shares authorized | 6,000,000 | 6,000,000 |
Preferred stock, shares issued | 5,000,000 | 5,000,000 |
Preferred stock, shares outstanding | 1,000,000 | 1,000,000 |
Common stock, par value per share | 1 | 1 |
Common stock, shares authorized | 1,100,000,000 | 1,100,000,000 |
Common stock, shares issued | 769,000,000 | 769,000,000 |
Common stock, shares outstanding | 769,000,000 | 769,000,000 |
Common stock, securities exchangable, no par value | 0 | 0 |
Common stock, securities exchangable, shares authorized | Unlimited | Unlimited |
Common stock, securities exchangable, shares issued | 5,000,000 | 5,000,000 |
Common stock, securities exchangable, shares outstanding | 1,000,000 | 1,000,000 |
Held in treasury, shares | 61,000,000 | 61,000,000 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Operating activities: | ||
Net income | $457 | $282 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Discontinued operations | 0 | (17) |
Deferred income taxes | (25) | 50 |
Depreciation, depletion and amortization | 649 | 660 |
Long-lived asset impairments | 434 | 0 |
Pension and other postretirement benefits, net | 50 | 38 |
Exploratory dry well costs and unproved property impairments | 52 | 16 |
Net gain on disposal of assets | (813) | (4) |
Equity method investments, net | (42) | 11 |
Changes in operating capital: | ||
Changes in current receivables | (193) | 200 |
Changes in inventories | (235) | 18 |
Changes in current accounts payable and accrued liabilities | 448 | (473) |
All other operating, net | 67 | 29 |
Net cash provided by continuing operations | 849 | 810 |
Net cash provided by discontinued operations | 0 | 29 |
Net cash provided by operating activities | 849 | 839 |
Investing activities: | ||
Additions to property, plant and equipment | (1,348) | (1,586) |
Disposal of assets | 1,342 | 20 |
Trusteed funds - withdrawals | 0 | 13 |
Investments - loans and advances | (7) | (3) |
Investments - repayments of loans and return of capital | 14 | 26 |
Investing activities of discontinued operations | 0 | (34) |
All other investing, net | (11) | 6 |
Net cash used in investing activities | (10) | (1,558) |
Financing activities: | ||
Borrowings | 0 | 1,491 |
Debt issuance costs | 0 | (11) |
Debt repayments | (2) | (3) |
Dividends paid | (172) | (170) |
All other financing, net | 2 | 0 |
Net cash provided by (used in) financing activities | (172) | 1,307 |
Effect of exchange rate changes on cash: | ||
Continuing operations, effect of exchange rate changes on cash | (6) | (2) |
Discontinued operations, effect of exchange rate changes on cash | 0 | (2) |
Total effect of exchange rate changes on cash | (6) | (4) |
Net increase in cash and cash equivalents | 661 | 584 |
Cash and cash equivalents at beginning of period | 2,057 | 1,285 |
Cash and cash equivalents at end of period | $2,718 | $1,869 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Unaudited) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Consolidated Statements of Comprehensive Income | ||
Net income | $457 | $282 |
Post-retirement and post-employment plans | ||
Change in actuarial gain | 30 | 8 |
Income tax provision on post-retirement and post-employment plans | (24) | (9) |
Post-retirement and post-employment plans, net of tax | 6 | (1) |
Derivative hedges | ||
Net unrecognized gain (loss) | 2 | (27) |
Income tax benefit (provision) on derivatives | 1 | (3) |
Derivative hedges, net of tax | 3 | (30) |
Foreign currency translation and other | ||
Unrealized gain | 0 | 2 |
Income tax provision on foreign currency translation and other | 0 | (1) |
Foreign currency translation and other, net of tax | 0 | 1 |
Other comprehensive income (loss) | 9 | (30) |
Comprehensive income | $466 | $252 |
Basis of Presentation
Basis of Presentation (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Basis of Presentation | |
1. Basis of Presentation | 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 presentation 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 Securities and Exchange Commission and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Marathon Oil Corporation ("Marathon") 2009 Annual Report on Form 10-K. The results of operations for the quarter ended March 31, 2010, are not necessarily indicative of the results to be expected for the full year. Reclassifications We have revised 2009 amounts of capital expenditures in the consolidated statement of cash flows. The presentation within the consolidated statement of cash flows for additions to property, plant and equipment reflects capital expenditures on a cash basis. The following reflects the reclassifications made: Three Months Ended Six Months Ended Nine Months Ended (in millions) March 31, 2009 June 30, 2009 September 30, 2009 Capital expenditures from continuing operations, previously reported $ (1,336) $ (2,939) $ (4,350) Discontinued operations, previously reported 0 (47) (66) Reclassification of capital accruals (284) (287) (402) Additions to property, plant and equipment, including discontinued operations $ (1,620) $ (3,273) $ (4,818) The corresponding offsets to the amounts above have been reflected within cash provided by operating activities through change in current accounts payable and accrued liabilities. Three Months Ended Six Months Ended Nine Months Ended (in millions) March 31, 2009 June 30, 2009 September 30, 2009 Cash flow from operations, previously reported $ 555 $ 1,750 $ 2,906 Reclassification of capital accruals 284 287 402 Cash flow from operations $ 839 $ 2,037 $ 3,308 |
Accounting Standards
Accounting Standards (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Accounting Standards | |
2. Accounting Standards | 2.Accounting Standards Recently Adopted Variable interest accounting standards were amended by the Financial Accounting Standards Board ("FASB") in June 2009. The new accounting standards replace the existing quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity. In addition, the concept of qualifying special-purpose entities has been eliminated. Ongoing assessments of whether an enterprise is the primary beneficiary of a variable interest entity are also required. The amended variable interest accounting standard requires reconsideration for determining whether an entity is a variable interest entity when changes in facts and circumstances occur such that the holders of the equity investment at risk, as a group, lack the power from voting rights or similar rights to direct the activities of the entity. Enhanced disclosures are required for any enterprise that holds a variable interest in a variable interest entity. Prospective application of this standard in the first quarter of 2010 did not have significant impact on our consolidated results of operations, financial position or cash flows. The required disclosures are presented in Note 3. A standard to improve disclosures about fair value measurements was issued by the FASB in January 2010. The additional disclosures required include: (1) the different classes of assets and liabilities measured at fair value, (2) the significant inputs and techniques used to measure Level 2 and Level 3 assets and liabilities for both recurring and nonrecurring fair value measurements, (3) the gross presentation of purchases, sales, issuances and settlements for the rollforward of Level 3 activity, and (4) the transfers in and out of Levels 1 and 2. We adopted all aspects of this standard in the first quarter of 2010, including the gross presentation of the Level 3 activity rollforward, which could have been deferred until next year. This adoption did not have a significant impact on our consolidated results of operations, financial position or cash flows. The required disclosures are presented in Note 11. Oil and Gas Reserve Estimation and Disclosure standards were issued by the FASB in January 2010, which align the FASB's reporting requirements with the Securities and Exchange Commission ("SEC") requirements. Similar to the SEC requirements, the FASB requirements were effective for periods ending on or after December 31, 2009. The SEC introduced a new definition of oil and gas producing activities which allows companies to include volumes in their reserve base from unconventional resources. The FASB also addresses the impact of changes in the SEC's rules and definitions on accounting for oil and gas producing activities. Initial adoption did not have an impact on our consolidated results of operations, financial position or cash flows; however, there will be an impact on the amount of depreciation, depletion and amortization expense recognized in future periods. The effect on depre |
Variable Interest Entities
Variable Interest Entities (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Variable Interest Entities | |
3. Variable Interest Entities | 3.Variable Interest Entities The Athabasca Oil Sands Project ("AOSP"), in which we hold a 20 percent undivided interest, contracted with a wholly-owned subsidiary of a publicly traded Canadian limited partnership ("Corridor Pipeline") to provide materials transportation capabilities among the Muskeg River mine, the Scotford upgrader and markets in Edmonton. The contract, originally signed in 1999 by a company we acquired, allows each holder of an undivided interest in the AOSP to ship materials in accordance with its undivided interest. Costs under this contract are accrued and recorded on a monthly basis, with a $1 million current liability recorded at March 31, 2010. Under this agreement, the AOSP absorbs all of the operating and capital costs of the pipeline. Currently, no third-party shippers use the pipeline. Should shipments be suspended, by choice or due to force majeure, we are responsible for the portion of the payment related to our undivided interest for all remaining periods. The contract expires in 2029; however, the shippers can extend its term perpetually. This contract qualifies as a variable interest contractual arrangement and the Corridor Pipeline qualifies as a VIE. We hold a significant variable interest but are not the primary beneficiary because our shipments are only 20 percent of the total; therefore, the Corridor Pipeline is not consolidated by Marathon. Our maximum exposure to loss as a result of our involvement with this VIE is the amount we will be required to pay over the contract term, which was $1.0 billion as of March 31, 2010. The liability on our books related to this contract at any given time will reflect amounts due for the immediately previous month's activity, which is substantially less than the maximum exposure over the contract term. We have not provided financial assistance to Corridor Pipeline and we do not have any guarantees of such assistance in the future. |
Income per Common Share
Income per Common Share (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Income Per Common Share | |
4. Income Per Common Share | 4.Income per Common Share Basic income per share is based on the weighted average number of common shares outstanding, including securities exchangeable into common shares. Diluted income per share assumes exercise of stock options and stock appreciation rights, provided the effect is not antidilutive. Three Months Ended March 31, 2010 2009 (In millions, except per share data) Basic Diluted Basic Diluted Income from continuing operations $ 457 $ 457 $ 265 $ 265 Discontinued operations - - 17 17 Net income $ 457 $ 457 $ 282 $ 282 Weighted average common shares outstanding 709 709 709 709 Effect of dilutive securities - 2 - 3 Weighted average common shares, including dilutive effect 709 711 709 712 Per share: Income from continuing operations $ 0.64 $ 0.64 $ 0.37 $ 0.37 Discontinued operations $ 0.00 $ 0.00 $ 0.03 $ 0.03 Net income $ 0.64 $ 0.64 $ 0.40 $ 0.40 The per share calculations above exclude 12 million and 9 million stock options and stock appreciation rights for the first three months of 2010 and 2009, that were antidilutive. |
Dispositions
Dispositions (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Dispositions | |
5. Dispositions | 5.Dispositions During the first quarter 2010, we closed the sale of a 20 percent outside-operated interest in our EP segment's Production Sharing Contract and Joint Operating Agreement in Block 32 offshore Angola. We received net proceeds of $1.3 billion and recorded a pretax gain on the sale in the amount of $811 million. We retained a 10 percent outside-operated interest in Block 32. |
Segment Information
Segment Information (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Segment Information | |
6. Segment Information | 6.Segment Information We have four reportable operating segments. Each of these segments is organized and managed based upon the nature of the products and services they offer. 1)Exploration and Production ("EP") explores for, produces and markets liquid hydrocarbons and natural gas on a worldwide basis; 2)Oil Sands Mining ("OSM") mines, extracts and transports bitumen from oil sands deposits in Alberta, Canada, and upgrades the bitumen to produce and market synthetic crude oil and vacuum gas oil; 3)Integrated Gas ("IG") markets and transports products manufactured from natural gas, such as liquefied natural gas ("LNG") and methanol, on a worldwide basis; and 4)Refining, Marketing and Transportation ("RMT") refines, markets and transports crude oil and petroleum products, primarily in the Midwest, upper Great Plains, Gulf Coast and southeastern regions of the U.S. Our Irish and Gabonese businesses were sold in 2009 and were accounted for as discontinued operations. Segment information for the first three months of 2009 excludes any amounts for these operations. Three Months Ended March 31, 2010 (In millions) EP OSM IG RMT Total Revenues: Customer $ 2,337 $ 147 $ 27 $ 13,338 $ 15,849 Intersegment {a} 172 18 0 16 206 Related parties 12 0 0 8 20 Segment revenues 2,521 165 27 13,362 16,075 Elimination of intersegment revenues (172) (18) 0 (16) (206) Total revenues $ 2,349 $ 147 $ 27 $ 13,346 $ 15,869 Segment income (loss) $ 502 $ (17) $ 44 $ (237) $ 292 Income from equity method investments 37 0 48 20 105 Depreciation, depletion and amortization {c} 397 23 1 220 641 Income tax provision (benefit){b} 538 (7) 23 (153) 401 Capital expenditures {c}{d} 603 265 1 310 1,179 (a)Management believes intersegment transactions were conducted under terms comparable to those with unrelated parties. (b) Differences between segment totals and our totals represent amounts related to corporate administrative activities and other unallocated items and are included in "Items not allocated to segments, net of income taxes" in reconciliation below. (c) Differences between segment totals and our totals represent amounts related to corporate administrative activities. (d)Includes accruals. Three Months Ended March 31, 2009 (In millions) EP OSM IG RMT Total Revenues: Customer $ 1,306 $ 97 $ 11 $ 8,660 $ 10,074 Intersegment {a} 119 25 0 9 153 Related parties 15 0 0 5 20 Segment revenues 1,440 122 11 8,674 10,247 Elimination of intersegment revenues (119) (25) 0 (9) (153) Gain on U.K. natural gas contracts{e} 82 0 0 0 82 Total revenues $ 1,403 $ 97 $ 11 $ 8,665 $ 10,176 Segment income (loss) $ 83 $ (24) $ 27 $ 159 $ 245 Income (loss) from equity method investments 11 0 42 (6) 47 Depreciation, depletion and amortization {c} 465 37 1 152 655 Income tax provision (benefit){b} 178 (8) 13 106 289 Capital expenditures {c}{d} 365 286 0 660 1,311 (a)Management believes interse |
Defined Benefit Postretirement
Defined Benefit Postretirement Plans (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Defined Benefit Postretirement Plans | |
7. Defined Benefit Postretirement Plans | 7.Defined Benefit Postretirement Plans The following summarizes the components of net periodic benefit cost: Three Months Ended March 31, Pension Benefits Other Benefits (In millions) 2010 2009 2010 2009 Service cost $ 29 $ 35 $ 5 $ 5 Interest cost 45 42 10 11 Expected return on plan assets (40) (40) 0 - Amortization: prior service cost (credit) 3 3 (1) (1) actuarial loss 25 6 (1) 0 Net periodic benefit cost $ 62 $ 46 $ 13 $ 15 During the first three months of 2010, we made contributions of $9 million to our funded international pension plans. We expect to make additional contributions up to an estimated $8 million to our funded international pension plans over the remainder of 2010 and do not anticipate making any contributions to our domestic plans. Current benefit payments related to unfunded pension and other postretirement benefit plans were $8 million and $8 million during the first three months of 2010. |
Income Taxes
Income Taxes (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Income Taxes | |
8. Income Taxes | 8.Income Taxes The following is an analysis of the effective income tax rates for the periods presented: Three Months Ended March 31, 2010 2009 Statutory U.S. income tax rate 35 % 35 % Effects of foreign operations, including foreign tax credits 14 13 State and local income taxes, net of federal income tax effects (1) 1 Legislation change 5 0 Effective income tax rate for continuing operations 53 % 49 % The Patient Protection and Affordable Care Act ("PPACA") and the Health Care and Education Reconciliation Act of 2010 ("HCERA"), (together, the "Acts") were signed in to law in March 2010. The "Acts" effectively change the tax treatment of federal subsidies paid to sponsors of retiree health benefit plans that provide prescription drug benefits that are at least actuarially equivalent to the corresponding benefits provided under Medicare Part D. The federal subsidy paid to employers was introduced as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the "MPDIMA"). Under the MPDIMA, the federal subsidy does not reduce our income tax deduction for the costs of providing such prescription drug plans nor is it subject to income tax individually. Beginning in 2013, under the Acts, our income tax deduction for the costs of providing Medicare Part D-equivalent prescription drug benefits to retirees will be reduced by the amount of the federal subsidy. Such a change in the tax law must be recognized in earnings in the period enacted regardless of the effective date. As a result, we have recorded a charge of $45 million in the first quarter of 2010 for the write-off of deferred tax assets to reflect the change in the tax treatment of the federal subsidy. The effective income tax rate is influenced by a variety of factors including the geographic and functional sources of income, the relative magnitude of these sources of income, and foreign currency remeasurement effects. The provision for income taxes is allocated on a discrete, stand-alone basis to pretax segment income and to individual items not allocated to segments. The difference between the total provision and the sum of the amounts allocated to segments and to individual items not allocated to segments is reported in "Corporate and other unallocated items" shown in Note 6. We are continuously undergoing examination of our U.S. federal income tax returns by the Internal Revenue Service. Such audits have been completed through the 2005 tax year. We believe adequate provision has been made for federal income taxes and interest which may become payable for years not yet settled. Further, we are routinely involved in U.S. state income tax audits and foreign jurisdiction tax audits. We believe all other audits will be resolved within the amounts paid and/or provided for these liabilities. As of March 31, 2010, our income tax returns remain subject to examination in the following major tax jurisdictions for the tax years indicated. United States {a} 2001 - 2008 Canada{b} 2004 - 2008 Equatorial Guinea 2006 - 2008 Libya 2006 - 2008 Norway 2008 United Kingdom 2007 - 2009 (a)Includes federal and state jurisdiction |
Inventories
Inventories (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Inventories | |
9. Inventories | 9.Inventories Inventories are carried at the lower of cost or market value. The cost of inventories of crude oil, refined products and merchandise is determined primarily under the last-in, first-out ("LIFO") method. March 31, December 31, (In millions) 2010 2009 Liquid hydrocarbons, natural gas and bitumen $ 1,560 $ 1,393 Refined products and merchandise 1,933 1,790 Supplies and sundry items 355 439 Total, at cost $ 3,848 $ 3,622 |
Property, Plant and Equipment
Property, Plant and Equipment (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Property, Plant and Equipment | |
10. Property, Plant and Equipment | 10.Property, Plant and Equipment March 31, December 31, (In millions) 2010 2009 Exploration and Production United States $ 5,839 $ 6,005 International 4,912 5,522 Total EP 10,751 11,527 Oil Sands Mining 8,776 8,531 Integrated Gas 35 34 Refining, Marketing Transportation 11,979 11,887 Corporate 133 142 Total $ 31,674 $ 32,121 Exploratory well costs capitalized greater than one year after completion of drilling were $173 million as of March 31, 2010, an increase of $23 million from December 31, 2009. The offshore Gulf of Mexico Shenandoah appraisal well was added to this category in the first quarter of 2010 at a cost of $28 million. The Shenandoah costs were incurred primarily during 2009. Appraisal drilling for the Shenandoah prospect is expected to commence in 2011. The results of the appraisal well program will be used to evaluate the commercial viability of the project. A new, detailed study of the commerciality of the Gardenia well in Equatorial Guinea concluded that development of this area is now uncertain and therefore $20 million in costs associated with this well were written off in the first quarter of 2010. The remaining $10 million of exploration well costs in Equatorial Guinea are associated with the Corona well which were incurred in 2004. Efforts to develop these reserves continue and we are evaluating both a unitization with existing production facilities and stand-alone development. Thecoal bed methane project in the United Kingdom was added to this category in the first quarter of 2010 at a cost of $15 million. Most of the project costs were incurred in 2008. Technical work is ongoing to develop well design programs along with sourcing a suitable drilling rig. In December 2009, we began drilling the Flying Dutchman prospect, located on Green Canyon Block 511 in the Gulf of Mexico. The Flying Dutchman reached its targeted total depth in early May 2010. The well encountered hydrocarbon-bearing sands in an Upper Miocene that will require further technical evaluation. During the second quarter of 2010, we anticipate expensing approximately $45 million for drilling costs incurred below the depth of the hydrocarbon-bearing sands. The results of the Flying Dutchman well will be evaluated along with additional potential drilling on Green Canyon Block 511 to determine overall commerciality. As a result, approximately $90 million of exploratory well costs will be suspended while we evaluate the results. We are the operator and will have a 63 percent working interest in this prospect. |
Fair Value Measurements
Fair Value Measurements (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Fair Value Measurements | |
11. Fair Value Measurements | 11.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, 2010 and December 31, 2009 by fair value hierarchy level. March 31, 2010 (In millions) Level 1 Level 2 Level 3 Collateral Total Derivative instruments, assets Commodity $ 153 $ 49 $ 2 $ 46 250 Interest rate 0 0 11 0 11 Foreign currency 0 0 5 0 5 Derivative instruments, assets 153 49 18 46 266 Derivative instruments, liabilities Commodity $ (146) $ (39) $ (10) $ 0 (195) Derivative instruments, liabilities (146) (39) (10) 0 (195) Net derivative assets $ 7 10 8 46 71 December 31, 2009 (In millions) Level 1 Level 2 Level 3 Collateral Total Derivative instruments, assets Commodity $ 133 $ 11 $ 12 $ 63 $ 219 Interest rate 0 0 7 0 7 Foreign currency 0 1 2 0 3 Derivative instruments, assets 133 12 21 63 229 Derivative instruments, liabilities Commodity $ (125) $ (12) $ (10) $ 0 $ (147) Interest rate 0 0 (2) 0 (2) Derivative instruments, liabilities (125) (12) (12) 0 (149) Net derivative assets $ 8 $ 0 $ 9 $ 63 $ 80 Commodity derivatives in Level 1 are exchange-traded contracts for crude oil, natural gas, refined products and ethanol measured at fair value with a market approach using the close-of-day settlement price for the market. Commodity derivatives and foreign currency forwards in Level 2 are measured at fair value with a market approach using broker price quotes or prices obtained from third-party services such as Bloomberg L.P. or Platt's, a Division of McGraw-Hill Corporation ("Platt's"), which have been corroborated with data from active markets for similar assets and liabilities. Collateral deposits related to both Level 1 and Level 2 commodity derivatives are in broker accounts covered by master netting agreements. Commodity and interest rate derivatives in Level 3 are measured at fair value with a market approach using prices obtained from various third-party services such as Platt's and price assessments from other independent brokers. The fair value of foreign currency options is measured using an option pricing model for which the inputs are obtained from a reporting service. Since we are unable to independently verify information from the third-party service providers to active markets, these measures are considered Level 3. The following is a reconciliation of the net beginning and ending balances recorded for derivative instruments classified as Level 3 in the fair value hierarchy. Three Months Ended March 31, (In millions) 2010 2009 Beginning balance $ 9 $ (26) Total realized and unrealized gains (losses): Included in net income (1) 77 Included in other comprehensive income 2 - Purchases 2 - Sales - (22) Settlements (4) (20) Ending balance $ 8 $ 9 Net income for the quarters ended March 31, 2010, and 2009 included unrealized losses of $1 million and gains of $76 million related to inst |
Derivatives
Derivatives (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Derivatives | |
12. Derivatives | 12.Derivatives For information regarding the fair value measurement of derivative instruments see Note 11. The following table presents the gross fair values of derivative instruments, excluding cash collateral, and where they appear on the consolidated balance sheets as of March 31, 2010 and December 31, 2009. March 31, 2010 (In millions) Asset Liability Net Asset Balance Sheet Location Cash Flow Hedges Foreign currency $ 5 $ 0 $ 5 Other current assets Fair Value Hedges Interest rate 11 0 11 Other noncurrent assets Total Designated Hedges 16 0 16 Not Designated as Hedges Commodity 202 (162) 40 Other current assets Total Not Designated as Hedges 202 (162) 40 Total $ 218 $ (162) $ 56 March 31, 2010 (In millions) Asset Liability Net Liability Balance Sheet Location Not Designated as Hedges Commodity $ 2 $ (33) $ (31) Other current liabilities Total Not Designated as Hedges 2 (33) (31) Total $ 2 $ (33) $ (31) December 31, 2009 (In millions) Asset Liability Net Asset Balance Sheet Location Cash Flow Hedges Foreign currency $ 2 $ 0 $ 2 Other current assets Fair Value Hedges Interest rate 8 (3) 5 Other noncurrent assets Total Designated Hedges 10 (3) 7 Not Designated as Hedges Foreign Currency 1 0 1 Other current assets Commodity 116 (104) 12 Other current assets Total Not Designated as Hedges 117 (104) 13 Total $ 127 $ (107) $ 20 December 31, 2009 (In millions) Asset Liability Net Liability Balance Sheet Location Fair Value Hedges Commodity $ 0 $ (1) $ (1) Other current liabilities Total Designated Hedges 0 (1) (1) Not Designated as Hedges Commodity 13 (15) (2) Other current liabilities Total Not Designated as Hedges 13 (15) (2) Total $ 13 $ (16) $ (3) Derivatives Designated as Cash Flow Hedges As of March 31, 2010, the following foreign currency options were designated as cash flow hedges. (In millions) Period Notional Amount Weighted Average Forward Rate Foreign Currency Options: Dollar (Canada) April 2010 - December 2010 $ 144 1.040{a} (a)U.S. dollar to Foreign currency The following table summarizes the pretax effect of derivative instruments designated as hedges of cash flows in other comprehensive income for the first quarters of 2010 and 2009. Gain (Loss) in OCI Three Months Ended March 31, (In millions) 2010 2009 Foreign currency $ 2 $ (12) Interest rate $ 0 $ (15) Derivatives Designated as Fair Value Hedges As of March 31, 2010, we had multiple interest rate swap agreements with a total notional amount of $1,450 million at a weighted average, LIBOR-based, floating rate of 4.4 percent. The offsetting impacts on both the derivative and the hedged item were $5 million in the first quarter of 2010. Derivatives not Designated as Hedges At March 31, 2010, Euro forwards not designated as hedges with a notional value of $2 million remain open to June 2010 at a weighted average forward rate of 1.290. The |
Debt
Debt (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Debt | |
13. Debt | 13.Debt At March 31, 2010, we had no borrowings against our revolving credit facility and no commercial paper outstanding under our U.S. commercial paper program that is backed by the revolving credit facility. In April 2010, we repurchased $500 million in aggregate principal of our debt under two tender offers for the notes below, at a weighted average price equal to 117 percent of face value. (In millions) 9.375% debentures due 2012 $ 34 9.125% debentures due 2013 60 6.000% Senior notes due 2017 68 5.900% Senior notes due 2018 106 7.500% debentures due 2019 112 9.375% debentures due 2022 33 8.500% debentures due 2023 46 8.125% debentures due 2023 41 Total $ 500 As a result, we expect to recognize a second quarter estimated loss on extinguishment of debt of $92 million, including the transaction premium costs as well as the expensing of related deferred financing costs on the repurchased debt. |
Stockholders' Equity
Stockholders' Equity (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Stockholders' Equity | |
14. Stockholders' Equity | 14.Stockholders' Equity In conjunction with our acquisition of Western Oil Sands Inc. on October 18, 2007, Canadian residents were able to receive, at their election, cash, Marathon common stock or securities exchangeable into Marathon common stock (the "Exchangeable Shares"). The Exchangeable Shares are shares of an indirect Canadian subsidiary of Marathon and were exchanged into Marathon stock based upon an exchange ratio that began at one-for-one and adjusted quarterly to reflect cash dividends. The Exchangeable Shares were exchangeable at the option of the holder at any time and are automatically redeemable on October 18, 2011. They could also be redeemed prior to their automatic redemption if certain conditions were met. Those conditions have been met and we filed notice of the proposed redemption in Canada on March 3, 2010. On April 7, 2010, the remaining exchangeable shares were redeemed. The related Marathon voting preferred shares have also been acquired and are being held in treasury. |
Commitments and Contingencies
Commitments and Contingencies (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Commitments and Contingencies | |
15. Commitments and Contingencies | 15.Commitments and Contingencies We are the subject of, or party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to our consolidated financial statements. However, management believes that we will remain a viable and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably. Certain of our commitments and contingencies are discussed below. Contractual commitments At March 31, 2010, our contract commitments to acquire property, plant and equipment totaled $2,850 million. |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Supplemental Cash Flow Information | |
16. Supplemental Cash Flow Information | 16.Supplemental Cash Flow Information Three Months Ended March 31, (In millions) 2010 2009 Net cash provided from operating activities: Interest paid (net of amounts capitalized) $ 39 $ - Income taxes paid to taxing authorities 406 648 Commercial paper and revolving credit arrangements, net: Commercial paper - issuances $ - $ 897 - repayments - (897) Total $ 0 $ - The consolidated statements of cash flows exclude changes to the consolidated balance sheets that did not affect cash. The following is a reconciliation of additions to property, plant and equipment to total capital expenditures. Three Months Ended (in millions) 2010 2009 Additions to property, plant and equipment $ 1,348 $ 1,586 Change in capital accruals (169) (284) Discontinued operations 0 34 Capital expenditures $ 1,179 $ 1,336 |