Marathon Oil (MRO) 10-Q/A 28 Aug 09 2009 Q2 Quarterly report (amended) Financial data

Document and Entity Information

Document and Entity Information (USD $)
In Millions, except Share data	6 Months Ended Jun. 30, 2009	Jul. 31, 2009	Jun. 30, 2008
Document information
Document type	10-Q
Document period end date	2009-06-30
Amendment flag	true
Amendment description	Furnish Interactive Data documents
Entity information
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		707,726,372
Entity public float			$36,559

Consolidated Statements of Inco

Consolidated Statements of Income (Unaudited) (USD $)
In Millions, except Per Share data	3 Months Ended Jun. 30, 2009	3 Months Ended Jun. 30, 2008	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Revenues and other income:
Sales and other operating revenues (including consumer excise taxes)	$13,059	$21,203	$23,213	$38,404
Sales to related parties	21	686	41	1,228
Income from equity method investments	62	256	109	465
Net gain on disposal of assets	191	12	195	22
Other income	25	45	77	104
Total revenues and other income	13,358	22,202	23,635	40,223
Costs and expenses:
Cost of revenues (excludes items below)	9,776	17,985	17,133	32,400
Purchases from related parties	110	226	205	365
Consumer excise taxes	1,226	1,295	2,400	2,511
Depreciation, depletion and amortization	701	493	1,363	933
Selling, general and administrative expenses	321	361	612	659
Other taxes	97	127	199	250
Exploration expenses	64	130	126	259
Total costs and expenses	12,295	20,617	22,038	37,377
Income from operations	1,063	1,585	1,597	2,846
Net interest and other financing costs	(11)	(11)	(28)	(4)
Income from continuing operations before income taxes	1,052	1,574	1,569	2,842
Provision for income taxes	711	806	962	1,357
Income from continuing operations	341	768	607	1,485
Discontinued operations	72	6	88	20
Net income	$413	$774	$695	$1,505
Basic:
Income from continuing operations, per basic share	0.48	1.08	0.86	2.09
Discontinued operations, per basic share	0.1	0.01	0.12	0.02
Net income per share, basic	0.58	1.09	0.98	2.11
Diluted:
Income from continuing operations, per diluted share	0.48	1.07	0.86	2.07
Discontinued operations, per diluted share	0.1	0.01	0.12	0.03
Net income per share, diluted	0.58	1.08	0.98	2.1
Dividends, per share	0.24	0.24	0.48	0.48

Consolidated Balance Sheets (Un

Consolidated Balance Sheets (Unaudited) (USD $)
In Millions	6 Months Ended Jun. 30, 2009	12 Months Ended Dec. 31, 2008
Current assets:
Cash and cash equivalents	$1,496	$1,285
Receivables, less allowance for doubtful accounts of $9 and $6	3,857	3,094
Receivables from United States Steel, current	24	23
Receivables from related parties	48	33
Inventories	3,498	3,507
Other current assets	191	461
Total current assets	9,114	8,403
Equity method investments	2,035	2,080
Receivables from United States Steel, noncurrent	457	469
Property, plant and equipment, less accumulated depreciation, depletion and amortization of $16,394 and $15,581	30,452	29,414
Goodwill	1,423	1,447
Other noncurrent assets	960	873
Total assets	44,441	42,686
Current liabilities:
Accounts payable	5,513	4,712
Payables to related parties	29	21
Payroll and benefits payable	310	400
Accrued taxes	499	1,133
Deferred income taxes, current	615	561
Other current liabilities	704	828
Long-term debt due within one year	103	98
Total current liabilities	7,773	7,753
Long-term debt	8,518	7,087
Deferred income taxes, noncurrent	3,312	3,330
Defined benefit postretirement plan obligations	1,636	1,609
Asset retirement obligations	982	963
Payable to United States Steel	4	4
Deferred credits and other liabilities, noncurrent	403	531
Total liabilities	22,628	21,277
Commitments and contingencies
Stockholders' Equity
Preferred stock - 5 million shares issued, 1 million and 3 million shares outstanding (no par value, 6 million shares authorized)	0	0
Common stock, Issued - 769 million and 767 million shares (par value $1 per share, 1.1 billion shares authorized)	769	767
Common stock, Securities exchangeable into common stock - 5 million shares issued, 1 million and 3 million shares outstanding (no par value, unlimited shares authorized)	0	0
Held in treasury, at cost - 61 million and 61 million shares	(2,713)	(2,720)
Additional paid-in capital	6,721	6,696
Retained earnings	17,614	17,259
Accumulated other comprehensive loss	(578)	(593)
Total stockholders' equity	21,813	21,409
Total liabilities and stockholders' equity	$44,441	$42,686

Consolidated Balance Sheets Par

Consolidated Balance Sheets Parentheticals (Unaudited) (USD $)
In Millions, except Share data	Jun. 30, 2009	Dec. 31, 2008
Consolidated Balance Sheets (Parenthetical)
Allowance for doubtful accounts	$9	$6
Accumulated depreciation, depletion and amortization	$16,394	$15,581
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	3,000,000
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	767,000,000
Common stock, shares outstanding	769,000,000	767,000,000
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	3,000,000
Held in treasury, shares	61,000,000	61,000,000

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Millions	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Operating activities:
Net income	$695	$1,505
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations	(88)	(20)
Deferred income taxes	333	8
Depreciation, depletion and amortization	1,363	933
Pension and other postretirement benefits, net	73	75
Exploratory dry well costs and unproved property impairments	33	114
Net gain on disposal of assets	(195)	(22)
Equity method investments, net	11	(149)
Changes in the fair value of derivative instruments	23	748
Changes in operating capital:
Changes in current receivables	(785)	(1,759)
Changes in inventories	6	(1,737)
Changes in current accounts payable and accrued liabilities	168	3,191
All other operating, net	78	(49)
Net cash provided by continuing operations	1,715	2,838
Net cash provided by discontinued operations	35	117
Net cash provided by operating activities	1,750	2,955
Investing activities:
Capital expenditures	(2,939)	(3,329)
Disposal of assets	402	24
Trusteed funds - withdrawals	16	258
Investing activities of discontinued operations	(47)	(53)
All other investing, net	(51)	(58)
Net cash used in investing activities	(2,619)	(3,158)
Financing activities:
Short-term debt, net	0	980
Borrowings	1,491	1,248
Debt issuance costs	(11)	(7)
Debt repayments	(40)	(1,331)
Purchases of common stock	0	(295)
Dividends paid	(340)	(342)
All other financing, net	(1)	13
Net cash provided by financing activities	1,099	266
Effect of exchange rate changes on cash:
Continuing operations, effect of exchange rate changes on cash	(17)	6
Discontinued operations, effect of exchange rate changes on cash	(2)	2
Net increase in cash and cash equivalents	211	71
Cash and cash equivalents at beginning of period	1,285	1,199
Cash and cash equivalents at end of period	$1,496	$1,270

Basis of Presentation

Basis of Presentation
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
1. Basis of Presentation	1.Basis of PresentationThese consolidated financial statements are unaudited; however, in the opinion of management, 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 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. Certain reclassifications of prior year data have been made to conform to 2009 classifications. Events and transactions subsequent to the balance sheet date have been evaluated through August 6, 2009, the date these consolidated financial statements were issued, for potential recognition or disclosure in the consolidated 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) 2008 Annual Report on Form 10-K. The results of operations for the quarter and six months ended June 30, 2009 are not necessarily indicative of the results to be expected for the full year.

New Accounting Standards

New Accounting Standards
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
2. New Accounting Standards	2.New Accounting StandardsSFAS No. 165 In May 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 165, Subsequent Events.This statement establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. SFAS No. 165 should not significantly change the subsequent events that an entity reports. It codifies into the accounting standards guidance that existed in the auditing standards. We began applying this standard prospectively in the second quarter of 2009. The disclosures required by SFAS No. 165 appear in Note 1.FSP FAS 107-1 In April 2009, the FASB issued a Staff Position (FSP) FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1). FSP FAS 107-1 amends SFAS No. 107 and Accounting Principles Board (APB) Opinion No. 28 to require disclosures about fair value of financial instruments in interim reporting periods for publicly traded companies. Disclosures are expanded, making the annual disclosures of SFAS No. 107 required in interim periods. This FSP is effective for the second quarter of 2009 and does not require disclosures for earlier periods presented for comparative purposes. Adoption did not have an impact on our consolidated results of operations, financial position or cash flows. The required disclosures are presented in Note 10.FSP FAS 157-4 Also in April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,. FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157 when the volume and level of activity for the asset or liability has significantly decreased. It also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP FAS 157-4 is effective for the second quarter of 2009 and does not require disclosures for earlier periods presented for comparative purposes. Adoption did not have a significant impact on our consolidated results of operations, financial position or cash flows. EITF 08-6 In November 2008, the FASB ratified Emerging Issues Task Force (EITF) Issue 08-6, Equity Method Investment Accounting Considerations (EITF 08-6) which clarifies how to account for certain transactions involving equity method investments. The initial measurement, decreases in value and changes in the level of ownership of the equity method investment are addressed. EITF 08-6 is effective on a prospective basis on January 1, 2009 and for interim periods. Early application by an entity that has previously adopted an alternative accounting policy is not permitted. Since this standard will be applied prospectively, adoption did not have a significant impact on our consolidated results of operations, financial position or cash flows. FSP EITF 03-6-1 In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securit

Income per Common Share

Income per Common Share
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
3. Income Per Common Share	3.Income per Common ShareBasic income per share is based on the weighted average number of common shares outstanding, including securities exchangeable into common shares. Diluted income per share includes exercise of stock options, provided the effect is not antidilutive. Three Months Ended June 30, 2009 2008 (In millions, except per share data) Basic Diluted Basic Diluted Income from continuing operations $ 341 $ 341 $ 768 $ 768 Discontinued operations 72 72 6 6 Net income $ 413 $ 413 $ 774 $ 774 Weighted average common shares outstanding 709 709 710 710 Effect of dilutive securities - 2 - 4 Weighted average common shares, including dilutive effect 709 711 710 714 Per share: Income from continuing operations $ 0.48 $ 0.48 $ 1.08 $ 1.07 Discontinued operations $ 0.10 $ 0.10 $ 0.01 $ 0.01 Net income $ 0.58 $ 0.58 $ 1.09 $ 1.08 Six Months Ended June 30, 2009 2008 (In millions, except per share data) Basic Diluted Basic Diluted Income from continuing operations $ 607 $ 607 $ 1,485 $ 1,485 Discontinued operations 88 88 20 20 Net income $ 695 $ 695 $ 1,505 $ 1,505 Weighted average common shares outstanding 709 709 711 711 Effect of dilutive securities - 2 - 5 Weighted average common shares, including dilutive effect 709 711 711 716 Per share: Income from continuing operations $ 0.86 $ 0.86 $ 2.09 $ 2.07 Discontinued operations $ 0.12 $ 0.12 $ 0.02 $ 0.03 Net income $ 0.98 $ 0.98 $ 2.11 $ 2.10 The per share calculations above exclude 8 million stock options for the second quarter and the first six months of 2009 and 6 million stock options for the second quarter and the first six months of 2008, as they were antidilutive.

Dispositions

Dispositions
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
4. Dispositions	4.Dispositions Ireland disposition - In April 2009, we closed the sale of our operated properties in Ireland for net proceeds of $84 million, after adjusting for cash held by the sold subsidiary. A $158 million pretax gain on the sale was recorded. As a result of this sale, we terminated our pension plan in Ireland, incurring a charge of $18 million. Activities related to our operated properties in Ireland had been reported in our Exploration and Production (EP) segment.On June 24, 2009 we entered into an agreement to sell the subsidiary holding our 19 percent outside-operated interest in the Corrib natural gas development offshore Ireland. Activities related to the Corrib development also had been reported in our EP segment. Total proceeds will range between $235 million and $400 million, subject to the timing of first commercial gas at Corrib and closing adjustments. At closing on July 30, 2009, the initial $100 million payment plus closing adjustments was received. Additional proceeds of $135 million to $300 million will be received on the earlier of first commercial gas or December 31, 2012. The fair value of the consideration for this asset was $311 million which was less than its book value. An impairment of $154 million was recognized in the second quarter of 2009 in discontinued operations. Additional gains or losses may be recognized until the final proceeds payment is received (see Note 10).As a result of these dispositions, our Irish exploration and production businesses have been reported as discontinued operations in the consolidated statements of income and the consolidated statements of cash flows for all periods presented. The net loss on the sales reported in discontinued operations for 2009 was $14 million before income taxes. Revenues and pretax income associated with the operations are shown in the following table: Three Months Ended Six Months Ended June 30, June 30, (In millions) 2009 2008 2009 2008 Revenues applicable to discontinued operations $ 4 $ 23 $ 83 $ 102 Pretax income (loss) from discontinued operations $ (2) $ 10 $ 33 $ 40 Existing guarantees of our subsidiaries performance issued to Irish government entities will remain in place after the sales until the purchaser issues similar guarantees to replace them. The guarantees, related to asset retirement obligations and natural gas production levels, have been indemnified by the purchaser. Our maximum potential undiscounted payments under these guarantees were $155 million as of June 30, 2009. Permian Basin disposition - In June 2009, we closed the sales of a portion of our operated and all of our outside-operated Permian Basin producing assets in New Mexico and west Texas for net proceeds after closing adjustments of $292 million. A $199 million pretax gain on the sale was recorded. Activities related to these assets also had been reported in our EP segment.Pending Angola disposition - In July 2009, we entered into an agreement to sell an undivided 20 percent outside-operated interest in the Production Sharing Contract and Joint Operating Agreement in Block 32 offshore Angola for $1.3 billion, excluding any purchase price adjustment

Segment Information

Segment Information
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
5. Segment Information	5.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 by-products;3)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 United States; and4)Integrated Gas (IG) markets and transports products manufactured from natural gas, such as liquefied natural gas (LNG) and methanol, on a worldwide basis, and is developing other projects to link stranded natural gas resources with key demand areas.As discussed in Note 4, our Irish businesses have been reported as discontinued operations. Segment information for all presented periods excludes amounts for these operations. Three Months Ended June 30, 2009 (In millions) EP OSM RMT IG Total Revenues: Customer $ 1,871 $ 126 $ 11,052 $ 7 $ 13,056 Intersegment {a} 123 29 8 - 160 Related parties 14 - 7 - 21 Segment revenues 2,008 155 11,067 7 13,237 Elimination of intersegment revenues (123) (29) (8) - (160) Gain on U.K. natural gas contracts 3 - - - 3 Total revenues $ 1,888 $ 126 $ 11,059 $ 7 $ 13,080 Segment income $ 220 $ 2 $ 165 $ 13 $ 400 Income from equity method investments{b} 26 - 8 28 62 Depreciation, depletion and amortization {c} 502 34 157 1 694 Income tax provision {c} 444 0 104 2 550 Capital expenditures {d} 617 281 713 1 1,612 Three Months Ended June 30, 2008 (In millions) EP OSM RMT IG Total Revenues: Customer $ 3,160 $ (80) $ 18,267 $ 21 $ 21,368 Intersegment {a} 226 96 37 - 359 Related parties 15 - 671 - 686 Segment revenues 3,401 16 18,975 21 22,413 Elimination of intersegment revenues (226) (96) (37) - (359) Loss on U.K. natural gas contracts (165) - - - (165) Total revenues $ 3,010 $ (80) $ 18,938 $ 21 $ 21,889 Segment income (loss) $ 822 $ (157) $ 158 $ 102 $ 925 Income from equity method investments{b} 77 0 43 136 256 Depreciation, depletion and amortization {c} 300 33 150 1 484 Income tax provision (benefit){c} 851 (54) 108 36 941 Capital expenditures {d} 839 262 702 0 1,803 Six Months Ended June 30, 2009 (In millions) EP OSM RMT IG Total Revenues: Customer $ 3,175 $ 223 $ 19,712 $ 18 $ 23,128 Intersegment {a} 242 54 17 - 313 Related parties 29 - 12 - 41 Segment revenues 3,446 277 19,741 18 23,482 Elimination of intersegment revenues (242) (54) (17) - (313) Gain on U.K. natural gas contracts 85 - - - 85 Total revenues $ 3,289 $ 223 $ 19,724 $ 18

Defined Benefit Postretirement

Defined Benefit Postretirement Plans
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
6. Defined Benefit Postretirement Plans	6.Defined Benefit Postretirement PlansThe following summarizes the components of net periodic benefit cost: Three Months Ended June 30, Pension Benefits Other Benefits (In millions) 2009 2008 2009 2008 Service cost $ 37 $ 39 $ 4 $ 4 Interest cost 42 41 9 10 Expected return on plan assets (40) (42) - - Amortization: prior service cost (credit) 4 4 (2) 0 actuarial loss (gain) 10 11 (2) (2) net settlement/curtailment loss{a} 18 0 0 0 Net periodic benefit cost $ 71 $ 53 $ 9 $ 12 Six Months Ended June 30, Pension Benefits Other Benefits (In millions) 2009 2008 2009 2008 Service cost $ 72 $ 73 $ 9 $ 9 Interest cost 84 80 20 22 Expected return on plan assets (80) (84) - - Amortization: prior service cost (credit) 7 7 (3) (4) actuarial loss (gain) 16 15 (2) 1 net settlement/curtailment loss{a} 18 0 0 0 Net periodic benefit cost $ 117 $ 91 $ 24 $ 28 (a) The curtailment and settlement is related to our discontinued operations in Ireland, as discussed in Note 4. Pension expense related to Ireland was not material in any period presented. During the first six months of 2009, we made contributions of $40 million to our funded pension plans. We expect to make additional contributions up to an estimated $290 million to our funded pension plans over the remainder of 2009, the majority of which will occur in the third quarter of 2009. We are still evaluating guidance issued by the Internal Revenue Service on March 31, 2009, which may cause actual contributions to differ from our estimate. Current benefit payments related to unfunded pension and other postretirement benefit plans were $8 million and $16 million during the first six months of 2009.

Income Taxes

Income Taxes
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
7. Income Taxes	7.Income TaxesThe following is an analysis of the effective income tax rates for the periods presented: Six Months Ended June 30, 2009 2008 Statutory U.S. income tax rate 35 % 35 % Foreign taxes in excess of federal statutory rate 25 14 State and local income taxes, net of federal income tax effects 1 1 Other tax effects 0 (2) Effective income tax rate 61 % 48 % 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 change in mix of liquid hydrocarbon and natural gas sales in 2009 from 2008 included more sales in jurisdictions with high tax rates. This change, as well as unfavorable foreign currency remeasurement effects, contributed to the increase in the effective income tax rate in the first six months of 2009 when compared to the same period in 2008. 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 June 30, 2009, our income tax returns remain subject to examination in the following major tax jurisdictions for the tax years indicated. United States {a} 2001 - 2007 Canada 2000 - 2008 Equatorial Guinea 2006 - 2008 Libya 2006 - 2008 Norway 2007 - 2008 United Kingdom 2007 (a)Includes federal and state jurisdictions.

Comprehensive Income

Comprehensive Income
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
8. Comprehensive Income	8.Comprehensive IncomeThe following sets forth comprehensive income for the periods indicated: Three Months Ended Six Months Ended June 30, June 30, (In millions) 2009 2008 2009 2008 Net income $ 413 $ 774 $ 695 $ 1,505 Other comprehensive income, net of taxes: Defined benefit postretirement plans 19 (31) 18 (20) Derivatives 26 1 (4) 4 Other 0 0 1 (5) Comprehensive income $ 458 $ 744 $ 710 $ 1,484

Inventories

Inventories
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
9. Inventories	9.InventoriesInventories 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. June 30, December 31, (In millions) 2009 2008 Liquid hydrocarbons, natural gas and bitumen $ 1,122 $ 1,376 Refined products and merchandise 1,935 1,797 Supplies and sundry items 441 334 Total, at cost $ 3,498 $ 3,507

Fair Value Measurements

Fair Value Measurements
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
10. Fair Value Measurements	10.Fair Value MeasurementsFair Values - RecurringThe following table presents the assets (liabilities) accounted for at fair value on a recurring basis as of June 30, 2009, and December 31, 2008: June 30, 2009 (In millions) Level 1 Level 2 Level 3 Total Derivative Instruments: Commodity $ 18 $ 1 $ (6) $ 13 Interest rate 0 0 (23) (23) Foreign currency 0 (22) 0 (22) Total derivative instruments 18 (21) (29) (32) Other assets 2 0 0 2 Total at fair value $ 20 $ (21) $ (29) $ (30) December 31, 2008 (In millions) Level 1 Level 2 Level 3 Total Derivative Instruments: Commodity $ 107 $ 6 $ (55) $ 58 Interest rate 0 0 29 29 Foreign currency 0 (75) 0 (75) Total derivative instruments 107 (69) (26) 12 Other assets 2 0 0 2 Total at fair value $ 109 $ (69) $ (26) $ 14 Deposits of $17 million in broker accounts covered by master netting agreements are netted against the value to arrive at the fair values of commodity derivatives. 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 prices for the market. Derivatives in Level 2 are measured at fair value with a market approach using broker quotes or third-party pricing services, which have been corroborated with data from active markets. Level 3 derivatives are measured at fair value using either a market or income approach. Generally at least one input is unobservable, such as the use of an internally generated model or an external data source. Commodity derivatives in Level 3 at June 30, 2009 include two U.K. natural gas sales contracts that are accounted for as derivative instruments and crude oil options related to sales of Canadian synthetic crude oil. The fair value of the U.K. natural gas contracts is measured with an income approach by applying the difference between the contract price and the U.K. forward natural gas strip price to the expected sales volumes for the remaining contract term. These contracts originated in the early 1990s and expire in September 2009. The contract prices are reset annually in October based on the previous twelve-month changes in a basket of energy and other indices. Consequently, the prices under these contracts do not track forward natural gas prices. The crude oil options, which expire December 2009, are measured at fair value using a Black-Scholes option pricing model, an income approach that utilizes prices from an active market and market volatility calculated by a third-party service.Also in Level 3 are commodity derivatives intended to manage price risk related to acquisition of ethanol for blending and light products fixed priced sales contracts. The fair value of these derivatives is measured using quoted market prices adjusted for broker market assessments.The fair value of interest rate swaps is measured using broker quotes or quotes from a reporting service which are not corroborated to data from an active market; therefore these inputs are classified as Level 3.The following is a reconciliat

Derivatives

Derivatives
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
11. Derivatives	11.DerivativesWe may use derivatives to manage our exposure to commodity price risk, interest rate risk and foreign currency risk. Derivative instruments are recorded at fair value. Derivative instruments on our consolidated balance sheet are reported on a net basis by brokerage firm, as permitted by master netting agreements. For further information regarding the fair value measurement of derivative instruments see Note 10. The following table presents the gross fair values of derivative instruments, excluding cash collateral, and where they appear on the consolidated balance sheet as of June 30, 2009: (In millions) Asset Liability Net Asset Balance Sheet Location Cash Flow Hedges Foreign currency $ 1 $ 0 $ 1 Other current assets Total Designated Hedges 1 0 1 Not Designated as Hedges Commodity 292 (270) 22 Other current assets Total Not Designated as Hedges 292 (270) 22 Total $ 293 $ (270) $ 23 (In millions) Asset Liability Net Liability Balance Sheet Location Cash Flow Hedges Foreign currency $ 0 $ (23) $ (23) Other current liabilities Fair Value Hedges Commodity 0 (7) (7) Other current liabilities Interest rate 0 (23) (23) Deferred credits and other liabilities Total Designated Hedges 0 (53) (53) Not Designated as Hedges Commodity 8 (27) (19) Other current liabilities Total Not Designated as Hedges 8 (27) (19) Total $ 8 $ (80) $ (72) Derivatives Designated as Cash Flow HedgesWe also use foreign currency forwards and options to hedge anticipated transactions, primarily expenditures for capital projects, in certain foreign currencies and designate them cash flow hedges. As of June 30, 2009, the following foreign currency forwards were outstanding: (In millions) Period Notional Amount Weighted Average Forward Rate Foreign Currency Forwards: Dollar (Canada) July 2009 - February 2010 $ 275 1.069 Euro July 2009- June 2010 $ 6 1.278 Kroner (Norway) July 2009 - November 2009 $ 40 6.285 (a)Foreign currency to U.S. dollar. (b)U.S. dollar to foreign currency.We may use interest rate derivative instruments to manage the market risk of interest rate movements on anticipated borrowings. No such derivatives were outstanding at June 30, 2009. In recent past transactions, such derivatives have been outstanding for a period of less than one month. For derivatives qualifying as hedges of future cash flows, the effective portion of any changes in fair value is recognized in other comprehensive income (OCI) and is reclassified to net income when the underlying forecasted transaction is recognized in net income. Any ineffective portion of cash flow hedges is recognized in net income as it occurs. For discontinued cash flow hedges, prospective changes in the fair value of the derivative are recognized in net income. The accumulated gain or loss recognized in OCI at the time a hedge is discontinued continues to be deferred until the original forecasted transaction occurs. However, if it is determined that the likelihood of the original forecasted transaction occurring is no longer prob

Debt

Debt
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
12. Debt	12.DebtAt June 30, 2009, 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. On February 17, 2009, we issued $700 million aggregate principal amount of senior notes bearing interest at 6.5 percent with a maturity date of February 15, 2014 and $800 million aggregate principal amount of senior notes bearing interest at 7.5 percent with a maturity date of February 15, 2019. Interest on both issues is payable semi-annually beginning August 15, 2009.

Stock-Based Compensation Plans

Stock-Based Compensation Plans
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
13. Stock-Based Compensation Plans	13.Stock-Based Compensation PlansThe following table presents a summary of stock option award and restricted stock award activity for the six month period ended June 30, 2009: Stock Options Restricted Stock Number of Shares Weighted Average Exercise Price Awards Weighted Average Grant Date Fair Value Outstanding at December 31, 2008 13,841,748 $ 37.59 2,049,255 $ 47.72 Granted {a} 4,970,500 27.62 227,935 24.15 Options Exercised/Stock Vested (28,610) 15.86 (282,291) 43.13 Canceled (141,990) 52.41 (69,995) 43.15 Outstanding at June 30, 2009 18,641,648 $ 34.85 1,924,904 $ 45.77 (a) The weighted average grant date fair value of stock option awards granted was $7.67 per share.

Commitments and Contingencies

Commitments and Contingencies
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
14. Commitments and Contingencies	14.Commitments and ContingenciesWe 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 are discussed below. Litigation We settled a number of lawsuits pertaining to methyl tertiary-butyl ether (MTBE) in 2008. Presently, we are a defendant, along with other refining companies, in 26 cases arising in four states alleging damages for MTBE contamination.Of the 26 cases in which we remain a defendant, 20 are pending in New York, 4 in Florida and 1 in Illinois. These 25 cases allege damages to water supply wells, similar to the damages claimed in the cases that were settled in 2008. In the other remaining case, the State of New Jersey is seeking natural resources damages allegedly resulting from contamination of groundwater by MTBE. This is the only MTBE contamination case in which we are a defendant and natural resources damages are sought. Thirteen of the 20 New York cases have been dismissed from the multi-district litigation (MDL) and re-filed in the state courts of Nassau and Suffolk Counties, New York. The remaining cases, like the cases that were settled in 2008, are consolidated in the MDL in the Southern District of New York for pretrial proceedings. We are vigorously defending these cases. We have engaged in settlement discussions related to the majority of the cases. We do not expect our share of liability, if any, for the remaining cases to significantly impact our consolidated results of operations, financial position or cash flows. We voluntarily discontinued producing MTBE in 2002.We are currently a party in two qui tam cases, which allege that federal and Indian leases violated the False Claims Act with respect to the reporting and payment of royalties on natural gas and natural gas liquids. A qui tam action is an action in which the relator files suit on behalf of himself as well as the federal government. One case is U.S. ex rel Harrold E. Wright v. Agip Petroleum Co. et al. which is primarily a gas valuation case. A settlement agreement has been reached, but not yet finalized. Such settlement is not expected to significantly impact our consolidated results of operations, financial position or cash flows. The other case is U.S. ex rel Jack Grynberg v. Alaska Pipeline, et al. involving allegations of natural gas measurement. This case was dismissed by the trial court and the dismissal has been affirmed by the 10th Circuit Court of Appeals. The relator is expected to file an appeal to the U.S. Supreme Court. The outcome of this case is not expected to significantly impact our consolidated results of operations, financial position or cash flows.A lawsuit filed in the U.S. District Court for the Southern District of West Virginia alleged that our Catl

Supplemental Cash Flow Informat

Supplemental Cash Flow Information
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
15. Supplemental Cash Flow Information	15.Supplemental Cash Flow Information Six Months Ended June 30, (In millions) 2009 2008 Net cash provided from operating activities included: Interest paid (net of amounts capitalized) $ 0 $ 54 Income taxes paid to taxing authorities 1,050 1,498 Short term debt, net: Commercial paper - issuances $ 897 $ 28,992 - repayments (897) (28,012) Noncash investing and financing activities: Capital lease and sale-leaseback financing obligations $ 47 $ 32

Accounting Standards Not Yet Ad

Accounting Standards Not Yet Adopted
	6 Months Ended Jun. 30, 2009 USD / shares
Note to Consolidated Financial Statements
16. Accounting Standards Not Yet Adopted	16.Accounting Standards Not Yet Adopted SFAS No. 167 In June 2009, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 167, Amendments of FASB Interpretation No. 46(R).This statement replaces 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 and therefore, will now be evaluated for consolidation in accordance with the applicable consolidation guidance. Ongoing assessments of whether an enterprise is the primary beneficiary of a variable interest entity are also required. SFAS No. 167 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. SFAS No. 167 will be applied prospectively beginning in the first quarter of 2010, and for all interim and annual periods thereafter. Earlier application of SFAS No. 167 is prohibited. We are currently evaluating the provisions of this statement.Reporting on Oil Gas Producing Activities In December 2008, the SEC announced that it had approved revisions to its oil and gas reporting disclosures. The new disclosure requirements include provisions that:Introduce a new definition of oil and gas producing activities. This new definition allows companies to include volumes in their reserve base from unconventional resources. Such unconventional resources include bitumen extracted from oil sands and oil and gas extracted from coal beds and shale formations. Report oil and gas reserves using an unweighted average price using the prior 12-month period, based on the closing prices on the first day of each month, rather than year-end prices. The SEC indicated that they will continue to communicate with the FASB staff to align their accounting standards with these rules. The FASB currently requires a single-day, year-end price for accounting purposes.Permit companies to disclose their probable and possible reserves on a voluntary basis. Under current rules, proved reserves were the only reserves allowed in the disclosures. Require companies to provide additional disclosure regarding the aging of proved undeveloped reserves. Permit the use of reliable technologies to determine proved reserves if those technologies have been demonstrated empirically to lead to reliable conclusions about reserves volumes. Replace the existing certainty test for areas beyond one offsetting drilling unit from a productive well with a reasonable certainty test. Require additional disclosures regarding the qualifications of the chief technical person who oversees the company's overall reserve estimation process. Additionall