Marathon Oil (MRO) 10-K 26 Feb 10 2009 FY Annual report Financial data

Document and Entity Information

Document and Entity Information (USD $)
In Millions, except Share data	12 Months Ended Dec. 31, 2009	Jan. 29, 2010	Jun. 30, 2009
Document and Entity Information
Document type	10-K
Document period end date	2009-12-31
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		707,926,768
Entity public float			$21,272

Consolidated Statements of Inco

Consolidated Statements of Income (USD $)
In Millions, except Per Share data	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
Revenues and other income:
Sales and other operating revenues (including consumer excise taxes)	$53,373	$74,875	$62,471
Sales to related parties	97	1,879	1,625
Income from equity method investments	298	765	545
Net gain on disposal of assets	205	423	36
Other income	166	188	74
Total revenues and other income	54,139	78,130	64,751
Costs and expenses:
Cost of revenues (excludes items below)	40,560	59,677	49,129
Purchases from related parties	485	715	363
Consumer excise taxes	4,924	5,065	5,163
Depreciation, depletion and amortization	2,623	2,129	1,564
Goodwill impairment	0	1,412	0
Selling, general and administrative expenses	1,263	1,382	1,315
Other taxes	387	482	393
Exploration expenses	307	489	454
Total costs and expenses	50,549	71,351	58,381
Income from operations	3,590	6,779	6,370
Net interest and other financing income (costs)	(149)	(28)	33
Gain on foreign currency derivative instruments	0	0	182
Loss on early extinguishment of debt	0	0	(17)
Income from continuing operations before income taxes	3,441	6,751	6,568
Provision for income taxes	2,257	3,367	2,802
Income from continuing operations	1,184	3,384	3,766
Discontinued operations	279	144	190
Net income	$1,463	$3,528	$3,956
Basic:
Income from continuing operations, per basic share	1.67	4.77	5.46
Discontinued operations, per basic share	0.39	0.2	0.27
Net income per share, basic	2.06	4.97	5.73
Diluted:
Income from continuing operations, per diluted share	1.67	4.75	5.42
Discontinued operations, per diluted share	0.39	0.2	0.27
Net income per share, diluted	2.06	4.95	5.69
Dividends paid, per share	0.96	0.96	0.92

Consolidated Balance Sheets

Consolidated Balance Sheets (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008
Current assets:
Cash and cash equivalents	$2,057	$1,285
Receivables, less allowance for doubtful accounts of $14 and $6	4,677	3,094
Receivables from United States Steel, current	22	23
Receivables from related parties	60	33
Inventories	3,622	3,507
Other current assets	199	461
Total current assets	10,637	8,403
Equity method investments	1,970	2,080
Receivables from United States Steel, noncurrent	324	469
Property, plant and equipment, less accumulated depreciation, depletion and amortization of $17,185 and $15,581	32,121	29,414
Goodwill	1,422	1,447
Other noncurrent assets	578	873
Total assets	47,052	42,686
Current liabilities:
Accounts payable	6,982	4,712
Payables to related parties	64	21
Payroll and benefits payable	399	400
Accrued taxes	547	1,133
Deferred income taxes, current	403	561
Other current liabilities	566	828
Long-term debt due within one year	96	98
Total current liabilities	9,057	7,753
Long-term debt	8,436	7,087
Deferred income taxes, noncurrent	4,104	3,330
Defined benefit postretirement plan obligations	2,056	1,609
Asset retirement obligations	1,099	963
Payable to United States Steel	5	4
Deferred credits and other liabilities, noncurrent	385	531
Total liabilities	25,142	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	(2,706)	(2,720)
Additional paid-in capital	6,738	6,696
Retained earnings	18,043	17,259
Accumulated other comprehensive loss	(934)	(593)
Total stockholders' equity	21,910	21,409
Total liabilities and stockholders' equity	$47,052	$42,686

Consolidated Balance Sheets Par

Consolidated Balance Sheets Parentheticals (USD $)
In Millions, except Share data	Dec. 31, 2009	Dec. 31, 2008
Consolidated Balance Sheets (Parenthetical)
Allowance for doubtful accounts	$14	$6
Accumulated depreciation, depletion and amortization	$17,185	$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 (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
Operating activities:
Net income	$1,463	$3,528	$3,956
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on early extinguishment of debt	0	0	17
Discontinued operations	(279)	(144)	(190)
Deferred income taxes	1,072	94	(352)
Goodwill impairment	0	1,412	0
Depreciation, depletion and amortization	2,623	2,129	1,564
Pension and other postretirement benefits, net	(116)	133	33
Exploratory dry well costs and unproved property impairments	81	170	233
Net gain on disposal of assets	(205)	(423)	(36)
Equity method investments, net	42	62	(43)
Changes in the fair value of derivative instruments	(43)	(312)	206
Changes in operating capital:
Changes in current receivables	(1,632)	2,612	(1,329)
Changes in inventories	(126)	(246)	(89)
Changes in current accounts payable and accrued liabilities	2,169	(2,532)	1,677
All other operating, net	161	50	24
Net cash provided by continuing operations	5,210	6,533	5,671
Net cash provided by discontinued operations	58	219	229
Net cash provided by operating activities	5,268	6,752	5,900
Investing activities:
Additions to property, plant and equipment	(6,231)	(6,989)	(3,757)
Acquisitions	0	0	(3,926)
Disposal of assets	865	999	137
Trusteed funds - withdrawals	16	752	280
Investments - loans and advances	(23)	(117)	(114)
Investments - repayments of loans and return of capital	94	93	59
Deconsolidation of Equatorial Guinea LNG Holdings Limited	0	0	(37)
Investing activities of discontinued operations	(84)	(127)	(88)
All other investing, net	125	(16)	(35)
Net cash used in investing activities	(5,238)	(5,405)	(7,481)
Financing activities:
Borrowings	1,491	1,247	2,261
Debt issuance costs	(11)	(7)	(20)
Debt repayments	(81)	(1,366)	(694)
Issuance of common stock	4	9	27
Purchases of common stock	0	(402)	(822)
Excess tax benefits from stock-based compensation arrangements	0	7	30
Dividends paid	(679)	(681)	(637)
Contributions from minority shareholders of Equatorial Guinea LNG Holdings Limited	0	0	39
Net cash provided by (used in) financing activities	724	(1,193)	184
Effect of exchange rate changes on cash:
Continuing operations, effect of exchange rate changes on cash	19	(44)	9
Discontinued operations, effect of exchange rate changes on cash	(1)	(24)	2
Net increase (decrease) in cash and cash equivalents	772	86	(1,386)
Cash and cash equivalents at beginning of period	1,285	1,199	2,585
Cash and cash equivalents at end of period	$2,057	$1,285	$1,199

Consolidated Statements of Stoc

Consolidated Statements of Stockholders' Equity (USD $)
In Millions	Preferred Stock	Common Stock	Common Stock Securities Exchangable	Treasury Stock	Additional Paid In Capital	Retained Earnings	Other Comprehensive Income	Total
Beginning Balance at Dec. 31, 2006	$0	$736	$0	($1,638)	$4,784	$11,093	($368)	$14,607
Shares issued - acquisition	0	29	0	0	1,844	0	0	1,873
Shares issued - stock based compensation	0	0	0	99	0	0	0	99
Shares repurchased	0	0	0	(845)	0	0	0	(845)
Stock-based compensation	0	0	0	0	51	0	0	51
Net income	0	0	0	0	0	3,956	0	3,956
Other comprehensive income (loss)	0	0	0	0	0	0	119	119
Dividends paid	0	0	0	0	0	(637)	0	(637)
Ending Balance at Dec. 31, 2007	0	765	0	(2,384)	6,679	14,412	(249)	19,223
Shares issued - stock based compensation	0	0	0	76	(63)	0	0	13
Shares exchanged	0	2	0	0	2	0	0	4
Shares repurchased	0	0	0	(412)	0	0	0	(412)
Stock-based compensation	0	0	0	0	78	0	0	78
Net income	0	0	0	0	0	3,528	0	3,528
Other comprehensive income (loss)	0	0	0	0	0	0	(344)	(344)
Dividends paid	0	0	0	0	0	(681)	0	(681)
Ending Balance at Dec. 31, 2008	0	767	0	(2,720)	6,696	17,259	(593)	21,409
Shares issued - stock based compensation	0	0	0	20	(9)	0	0	11
Shares exchanged	0	2	0	0	(2)	0	0	0
Shares repurchased	0	0	0	(6)	0	0	0	(6)
Stock-based compensation	0	0	0	0	53	0	0	53
Net income	0	0	0	0	0	1,463	0	1,463
Other comprehensive income (loss)	0	0	0	0	0	0	(341)	(341)
Dividends paid	0	0	0	0	0	(679)	0	(679)
Ending Balance at Dec. 31, 2009	$0	$769	$0	($2,706)	$6,738	$18,043	($934)	$21,910

1_Consolidated Statements of St

Consolidated Statements of Stockholders' Equity (shares) (USD $)
Share data in Millions	Preferred Stock	Common Stock	Common Stock Securities Exchangable	Treasury Stock
Beginning Balance at Dec. 31, 2006	0	736	0	(40)
Shares issued - acquisition	5	29	5	0
Shares issued - stock based compensation	0	0	0	2
Shares repurchased	0	0	0	(17)
Ending Balance at Dec. 31, 2007	5	765	5	(55)
Shares issued - stock based compensation	0	0	0	2
Shares exchanged	(2)	2	(2)	0
Shares repurchased	0	0	0	(8)
Ending Balance at Dec. 31, 2008	3	767	3	(61)
Shares issued - stock based compensation	0	0	0	0
Shares exchanged	(2)	2	(2)	0
Ending Balance at Dec. 31, 2009	1	769	1	(61)

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income (USD $)
In Millions	12 Months Ended Dec. 31, 2009	12 Months Ended Dec. 31, 2008	12 Months Ended Dec. 31, 2007
Consolidated Statements of Comprehensive Income
Net income	$1,463	$3,528	$3,956
Post-retirement and post-employment plans
Change in actuarial gain (loss)	(564)	(397)	194
Income tax benefit (provision) on post-retirement and post-employment plans	208	147	(87)
Post-retirement and post-employment plans, net of tax	(356)	(250)	107
Derivative hedges
Net unrecognized gain (loss)	24	(91)	13
Income tax benefit (provision) on derivatives	(12)	24	(4)
Derivative hedges, net of tax	12	(67)	9
Foreign currency translation and other
Unrealized gain (loss)	4	(43)	5
Income tax benefit (provision) on foreign currency translation and other	(1)	16	(2)
Foreign currency translation and other, net of tax	3	(27)	3
Other comprehensive income (loss)	(341)	(344)	119
Comprehensive income	$1,122	$3,184	$4,075

Summary of Principal Accounting

Summary of Principal Accounting Policies
	12 Months Ended Dec. 31, 2009 USD / shares
Summary of Principal Accounting Policies
1. Summary of Principal Accounting Policies	1.Summary of Principal Accounting Policies We are engaged in worldwide exploration, production and marketing of liquid hydrocarbons and natural gas; oil sands mining and bitumen upgrading in Canada; domestic refining, marketing and transportation of crude oil and petroleum products; and worldwide marketing and transportation of products manufactured from natural gas, such as liquefied natural gas ("LNG") and methanol. Principles applied in consolidation These consolidated financial statements include the accounts of our majority-owned, controlled subsidiaries and variable interest entities for which we are the primary beneficiary. Investments in entities over which we have significant influence, but not control, are accounted for using the equity method of accounting and are carried at our share of net assets plus loans and advances. This includes entities in which we hold majority ownership but the minority shareholders have substantive participating rights in the investee. Income from equity method investments represents our proportionate share of net income generated by the equity method investees. Differences in the basis of the investments and the separate net asset value of the investees, if any, are amortized into net income over the remaining useful lives of the underlying assets, except for the excess related to goodwill. Equity method investments are assessed for impairment whenever changes in the facts and circumstances indicate a loss in value has occurred, if the loss is deemed to be other than temporary. When the loss is deemed to be other than temporary, the carrying value of the equity method investment is written down to fair value, and the amount of the write-down is included in net income. Investments in unincorporated joint ventures and undivided interests in certain operating assets are consolidated on a pro rata basis. Reclassifications We have revised prior years 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: (in millions) 2008 2007 Capital expenditures, previously reported $ (7,146) $ (4,466) Reclassification of capital accruals 30 621 Additions to property, plant and equipment, including discontinued operations $ (7,116) $ (3,845) 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. (in millions) 2008 2007 Cash flow from operations, previously reported $ 6,782 $ 6,521 Reclassification of capital accruals (30) (621) Cash flow from operations $ 6,752 $ 5,900 Use of estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amou

Accounting Standards

Accounting Standards
	12 Months Ended Dec. 31, 2009 USD / shares
Accounting Standards
2. Accounting Standards	2.Accounting Standards Recently Adopted Oil and Gas Reserve Estimation and Disclosure standards were issued by the Financial Accounting Standards Board ("FASB") in January 2010, which aligns the FASB's reporting requirements with the below requirements of the Securities and Exchange Commission ("SEC"). The FASB also addresses the impact of changes in the SEC's rules and definitions on accounting for oil and gas producing activities. Similar to the SEC requirements, the FASB requirements were effective for periods ending on or after December 31, 2009. 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. We expect this effect as compared to prior periods will not be significant. The required disclosures are presented in Supplementary Information on Oil and Gas Producing Activities (Unaudited). 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. Permit companies to disclose their probable and possible reserves on a voluntary basis. 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. Additionally, disclosures regarding internal controls surrounding reserve estimation, as well as a report addressing the independence and qualifications of its reserves preparer or auditor are required. Require separate disclosure of reserves in foreign countries if they represent 15 percent or more of total proved reserves, based on barrels of oil equivalents. As with the FASB standard described above, adoption did not have an impact on our consolidated results of operations, financial position or cash flows. The additional disclosures required by the SEC can be found in Item 1. Business Reserves. Measuring liabilities at fair value, a FASB accounting standards update, was issued in August 2009. This update provides clarification for circumstances in which a quoted price in an active market for an identical liability is not available. In such circumst

Information about United States

Information about United States Steel
	12 Months Ended Dec. 31, 2009 USD / shares
Information about United States Steel
3. Information about United States Steel	3.Information about United States Steel The USX Separation Prior to December 31, 2001, Marathon had two outstanding classes of common stock: USX - Marathon Group common stock, which was intended to reflect the performance of our energy business, and USX - U.S. Steel Group common stock ("Steel Stock"), which was intended to reflect the performance of our steel business. On December 31, 2001, in a tax-free distribution to holders of Steel Stock, we exchanged the common stock of United States Steel for all outstanding shares of Steel Stock on a one-for-one basis (the "USX Separation"). In connection with the USX Separation, Marathon and United States Steel entered into a number of agreements, including: Financial Matters Agreement Marathon and United States Steel entered into a Financial Matters Agreement that provides for United States Steel's assumption of certain industrial revenue bonds and certain other financial obligations of Marathon. The Financial Matters Agreement also provides that, on or before the tenth anniversary of the USX Separation, United States Steel will provide for our discharge from any remaining liability under any of the assumed industrial revenue bonds. Under the Financial Matters Agreement, United States Steel has all of the existing contractual rights under the leases assumed, including all rights related to purchase options, prepayments or the grant or release of security interests. However, United States Steel has no right to increase amounts due under or lengthen the term of any of the assumed leases, other than extensions set forth in the terms of any of the assumed leases. United States Steel was the sole general partner of Clairton 1314B Partnership, L.P., which owned certain cokemaking facilities at United States Steel Clairton Works. We guaranteed to the limited partners all obligations of United States Steel under the partnership documents ("the Clairton 1314B Guarantee"). The Financial Matters Agreement requires United States Steel to use commercially reasonable efforts to have Marathon released from its obligations under this guarantee. The Clairton 1314B Partnership was terminated on October 31, 2008. We were not released from our obligations under the Clairton 1314B Guarantee upon termination of the partnership. As a result, we continue to guarantee the United States Steel indemnification of the former limited partners for certain income tax exposures. The Financial Matters Agreement requires us to use commercially reasonable efforts to assure compliance with all covenants and other obligations to avoid the occurrence of a default or the acceleration of payments on the assumed obligations. United States Steel's obligations to Marathon under the Financial Matters Agreement are general unsecured obligations that rank equal to United States Steel's accounts payable and other general unsecured obligations. The Financial Matters Agreement does not contain any financial covenants and United States Steel is free to incur additional debt, grant mortgages on or security interests in its property and sell or transfer assets without our consent.

Variable Interest Entities

Variable Interest Entities
	12 Months Ended Dec. 31, 2009 USD / shares
Variable Interest Entities
4. Variable Interest Entities	4.Variable Interest Entities Equatorial Guinea LNG Holdings Limited ("EGHoldings"), in which we hold a 60 percent interest, was formed for the purpose of constructing and operating an LNG production facility. During facility construction, EGHoldings was a variable interest entity ("VIE") that was consolidated because we were its primary beneficiary. Once the LNG production facility commenced its primary operations and began to generate revenue in May 2007, EGHoldings was no longer a VIE. Effective May 1, 2007, we no longer consolidated EGHoldings, despite the fact that we hold majority ownership, because the minority shareholders have rights limiting our ability to exercise control over the entity. We account for our investment in EGHoldings, using the equity method of accounting, at our share of net assets plus loans and advances, if any. Our investment is included in the equity method investments line of our consolidated balance sheet (see Note 13 to the consolidated financial statements). The owners of the Athabasca Oil Sands Project ("AOSP"), in which we own 20 percent, 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 Marathon's predecessor, allows each owner to ship materials in accordance with its AOSP ownership. Currently, no third-party shippers use the pipeline. Under this agreement, the AOSP owners collectively are absorbing all of the operating and capital costs of the pipeline. Should shipments be suspended, by choice or due to force majeure, the AOSP owners remain responsible for the payments. This contract therefore qualifies as a variable interest contractual arrangement in a VIE. We hold a significant variable interest but are not the primary beneficiary; 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 maximum amount we will be required to pay over the contract term, which was $928 million as of December 31, 2009. The contract expires in 2029; however, the shippers can perpetually extend its term.

Related Party Transactions

Related Party Transactions
	12 Months Ended Dec. 31, 2009 USD / shares
Related Party Transactions
5. Related Party Transactions	5.Related Party Transactions During 2009, 2008 and 2007 only our equity method investees were considered related parties including: Alba Plant LLC, in which we have a 52 percent noncontrolling interest. Alba Plant LLC processes liquefied petroleum gas. The Andersons Clymers Ethanol LLC, in which we have a 35 percent interest, and The Andersons Marathon Ethanol LLC, in which we have a 50 percent interest ("Ethanol investments"). These companies each own an ethanol production facility. Atlantic Methanol Production Company LLC ("AMPCO"), in which we have a 45 percent interest. AMPCO is engaged in methanol production activity. Centennial Pipeline LLC ("Centennial"), in which we have a 50 percent interest. Centennial operates a refined products pipeline and storage facility. EGHoldings, in which we have a 60 percent noncontrolling interest. EGHoldings processes liquefied natural gas. LOOP LLC, in which we have a 51 percent noncontrolling interest. LOOP LLC operates an offshore oil port. Pilot Travel Centers LLC ("PTC"), in which we sold our 50 percent interest in October 2008. PTC owns and operates travel centers primarily in the United States. Poseidon Oil Pipeline Company, LLC ("Poseidon"), in which we have a 28 percent interest. Poseidon transports crude oil. We believe that transactions with related parties were conducted under terms comparable to those with unrelated parties. Related party sales to PTC consisted primarily of petroleum products. In the fourth quarter of 2008, we completed the sale of our 50 percent ownership interest in PTC. Revenues from related parties were as follows: (In millions) 2009 2008 2007 EGHoldings $ 44 $ 39 $ 19 Centennial 34 31 27 Other equity method investees 19 20 23 PTC - 1,789 1,556 Total $ 97 $ 1,879 $ 1,625 Purchases from related parties were as follows: (In millions) 2009 2008 2007 Alba Plant LLC $ 143 $ 235 $ 131 Ethanol investments 143 188 9 Poseidon 53 154 16 Centennial 58 61 57 LOOP LLC 40 35 43 Other equity method investees 48 42 107 Total $ 485 $ 715 $ 363 Current receivables from related parties were as follows: December 31, (In millions) 2009 2008 EGHoldings $ 36 $ 19 Poseidon 11 1 Alba Plant LLC 10 6 AMPCO 2 5 Other equity method investees 1 2 Total $ 60 $ 33 Payables to related parties were as follows: December 31, (In millions) 2009 2008 Poseidon $ 20 $ 3 LOOP 17 2 Ethanol investments 9 6 Alba Plant LLC 9 5 Other equity method investees 9 5 Total $ 64 $ 21

Acquisitions

Acquisitions
	12 Months Ended Dec. 31, 2009 USD / shares
Acquisitions
6. Acquisitions	6.Acquisitions Western Oil Sands Inc. On October 18, 2007, we completed the acquisition of all the outstanding shares of Western Oil Sands Inc. ("Western") for cash and securities of $5,833 million. Subsequent to the transaction, Western's name was changed to Marathon Oil Canada Corporation. The acquisition was accounted for under the purchase method of accounting and, as such, our results of operations include Western's results from October 18, 2007. Western's oil sands mining and bitumen upgrading operations are reported as a separate Oil Sands Mining segment, while its ownership interests in leases where in-situ recovery techniques are expected to be utilized are included in the EP segment. The final purchase price for the Western acquisition was as follows: (In millions) Cash $ 3,907 Marathon common stock and securities exchangeable for Marathon common stock 1,910 Transaction-related costs 16 Purchase price 5,833 Fair value of debt acquired 1,063 Total consideration including debt acquired $ 6,896 (a)Western shareholders received cash of 3,808 million Canadian dollars. (b)Western shareholders received 29 million shares of Marathon common stock and 5 million securities exchangeable for Marathon common stock valued at $55.70 per share, which was the average common stock price over the trading days between July 26 and August 1, 2007 (the days surrounding the announcement of the transaction). The primary reasons for the acquisition and the principal factors contributing to a purchase price resulting in goodwill are: access to the long-life AOSP of northern Alberta, Canada; the opportunity to realize a fully-integrated oil strategy, capitalizing on the ownership of this asset by aligning production from the AOSP developments, including planned expansions of the current mining operations, with our refining system; potential for expanded growth opportunities in the Athabasca region; and access to a trained workforce with expertise in bitumen production and upgrading and in synthetic crude oil marketing. The goodwill arising from the purchase price allocation was $1,508 million, of which $1,437 million was assigned to the Oil Sands Mining segment and $71 million was assigned to the EP segment. Reductions of $25 million were made to Oil Sands Mining segment goodwill upon resolution of tax and royalty issues in 2008. None of the goodwill is deductible for tax purposes. The following unaudited pro forma data was prepared as if the acquisition of Western had been consummated at the beginning of each period presented. The pro forma data is based on historical information and does not reflect the actual results that would have occurred nor is it indicative of future results of operations. (In millions, except per share amounts) 2007 Revenues and other income $ 65,633 Income from continuing operations 3,313 Net income 3,503 Per share data: Income from continuing operations basic $ 4.80 Income from continuing operations diluted $ 4.77 Net income basic $ 5.08 Net income diluted $ 5.04

Dispositions

Dispositions
	12 Months Ended Dec. 31, 2009 USD / shares
Dispositions
7. Dispositions	7.Dispositions During 2009, we have disposed of our exploration and production businesses in Ireland, Gabon and certain producing assets in the Permian Basin of New Mexico and Texas. At December 31, 2009, agreements were pending to dispose of certain assets under development in Angola (see discussion below). These dispositions all relate to our Exploration and Production ("EP") segment. Our Irish and Gabonese 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. Discontinued operations - Revenues and pretax income associated with our discontinued Irish and Gabonese operations are shown in the following table: (In millions) 2009 2008 2007 Revenues applicable to discontinued operations $ 188 $ 439 $ 456 Pretax income from discontinued operations $ 80 $ 221 $ 281 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 adjustments at closing, with an effective date of January 1, 2009. The sale closed and we received net proceeds of $1.3 billion in February 2010. The pretax gain on the sale will be approximately $800 million. We retained a 10 percent outside-operated interest in Block 32. Gabon disposition In December 2009, we closed the sale of our operated fields offshore Gabon, receiving net proceeds of $269 million, after closing adjustments. A $232 million pretax gain on this disposition was reported in discontinued operations for 2009. Permian Basin disposition In June 2009, we closed the sale of our operated and a portion of our outside-operated Permian Basin producing assets in New Mexico and west Texas for net proceeds after closing adjustments of $293 million. A $196 million pretax gain on the sale was recorded. Ireland dispositions 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. In June 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. Total proceeds were estimated to 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. The fair value of the proceeds was estimated to be $311 million. Fair value of anticipated sale proceeds includes (i) $100 million received at closing, (ii) $135 million minimum amount due at the earlier of first gas or December 31, 2012, and (iii) a range of zero to $165 million of contingent proceeds subject to the timing of first commercial gas. A $154 million impairment of the held for sale ass

Income per Common Share

Income per Common Share
	12 Months Ended Dec. 31, 2009 USD / shares
Income Per Common Share
8. Income Per Common Share	8.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. 2009 2008 2007 (In millions except per share data) Basic Diluted Basic Diluted Basic Diluted Income from continuing operations $ 1,184 $ 1,184 $ 3,384 $ 3,384 $ 3,766 $ 3,766 Discontinued operations 279 279 144 144 190 190 Net income $ 1,463 $ 1,463 $ 3,528 $ 3,528 $ 3,956 $ 3,956 Weighted average common shares outstanding 709 709 709 709 690 690 Effect of dilutive securities - 2 - 4 - 5 Weighted average common shares, including dilutive effect 709 711 709 713 690 695 Per share: Income from continuing operations $ 1.67 $ 1.67 $ 4.77 $ 4.75 $ 5.46 $ 5.42 Discontinued operations $ 0.39 $ 0.39 $ 0.20 $ 0.20 $ 0.27 $ 0.27 Net income $ 2.06 $ 2.06 $ 4.97 $ 4.95 $ 5.73 $ 5.69 The per share calculations above exclude 10 million, 5 million and 3 million stock options and stock appreciation rights in 2009, 2008 and 2007 that were antidilutive.

Segment Information

Segment Information
	12 Months Ended Dec. 31, 2009 USD / shares
Segment Information
9. Segment Information	9.Segment Information We have four reportable operating segments: Exploration and Production; Oil Sands Mining; Integrated Gas and Refining, Marketing and Transportation. Each of these segments is organized and managed based upon the nature of the products and services they offer. Exploration and Production ("EP") explores for, produces and markets liquid hydrocarbons and natural gas on a worldwide basis;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;Integrated Gas ("IG") markets and transports products manufactured from natural gas, such as LNG and methanol, on a worldwide basis, and is developing other projects to link stranded natural gas resources with key demand areas; andRefining, 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. Information regarding assets by segment is not presented because it is not reviewed by the chief operating decision maker ("CODM"). Segment income represents income from continuing operations, net of income taxes, attributable to the operating segments. Our corporate general and administrative costs are not allocated to the operating segments. These costs primarily consist of employment costs (including pension effects), professional services, facilities and other costs associated with corporate activities, net of associated income tax effects. Foreign currency remeasurement and transaction gains or losses are not allocated to operating segments. Non-cash gains and losses on two natural gas sales contracts in the United Kingdom that were accounted for as derivative instruments, impairments or other items that affect comparability (as determined by the CODM) also are not allocated to operating segments. Revenues from external customers are attributed to geographic areas based on selling location. No single customer accounts for more than 10 percent of annual revenues. (In millions) EP OSM IG RMT Total 2009 Revenues: Customer $ 7,241 $ 549 $ 50 $ 45,461 $ 53,301 Intersegment {b} 551 118 0 31 700 Related parties 59 0 0 38 97 Segment revenues 7,851 667 50 45,530 54,098 Elimination of intersegment revenues (551) (118) 0 (31) (700) Gain on U.K. natural gas contracts{c} 72 0 0 0 72 Total revenues $ 7,372 $ 549 $ 50 $ 45,499 $ 53,470 Segment income $ 1,221 $ 44 $ 90 $ 464 $ 1,819 Income from equity method investments{d} 125 0 144 29 298 Depreciation, depletion and amortization {e} 1,795 124 3 670 2,592 Income tax provision {e} 1,563 6 39 234 1,842 Capital expenditures {f}{g} 2,162 1,115 2 2,570 5,849 (In millions) EP OSM IG RMT Total 2008 Revenues: Customer $ 11,197 $ 922 $ 93 $ 62,445 $ 74,657 Intersegment {b} 798 200 0 209 1,207 Related parties 52 0 0 1,827 1,879 Segment revenues 12,047 1,122 93 64,481 77,

Other Items

Other Items
	12 Months Ended Dec. 31, 2009 USD / shares
Other Items
10. Other Items	10.Other Items Net interest and other financing income (costs) (In millions) 2009 2008 2007 Interest: Interest income $ 11 $ 55 $ 139 Interest expense{a} (510) (418) (275) Income (loss) on interest rate swaps 17 1 (15) Interest capitalized 441 305 198 Total interest (41) (57) 47 Other: Net foreign currency gains (losses) (36) 40 - Writeoff off contingent proceeds{b} (70) - - Other (2) (11) (14) Total other (108) 29 (14) Net interest and other financing income (costs) $ (149) $ (28) $ 33 (a)Excludes $27 million, $29 million and $30 million paid by United States Steel in 2009, 2008 and 2007 on assumed debt. (b)A portion of he contingent proceeds from the sale of the Corrib natural gas development (see Note 7) was written off in the fourth quarter of 2009 on the basis of new public information regarding the pipeline that would transport gas from the Corrib development. Should further delays occur with respect to commercial first gas, the remaining carrying value of this contingent asset of $15 million may be reduced. Foreign currency transactions - Aggregate foreign currency gains (losses) were included in the consolidated statements of income as follows: (In millions) 2009 2008 2007 Net interest and other financing costs $ (36) $ 40 $ - Provision for income taxes (319) 249 19 Aggregate foreign currency gains (losses) $ (355) $ 289 $ 19

Income Taxes

Income Taxes
	12 Months Ended Dec. 31, 2009 USD / shares
Income Taxes
11. Income Taxes	11. Income Taxes Income tax provisions (benefits) were: 2009 2008 2007 (In millions) Current Deferred Total Current Deferred Total Current Deferred Total Federal $ (224) $ 162 $ (62) $ 921 $ 192 $ 1,113 $ 1,289 $ (8) $ 1,281 State and local (75) 40 (35) 146 12 158 184 22 206 Foreign 1,484 870 2,354 2,206 (110) 2,096 1,681 (366) 1,315 Total $ 1,185 $ 1,072 $ 2,257 $ 3,273 $ 94 $ 3,367 $ 3,154 $ (352) $ 2,802 A reconciliation of the federal statutory income tax rate (35 percent) applied to income from continuing operations before income taxes to the provision for income taxes follows: 2009 2008 2007 Statutory rate applied to income from continuing operations before income taxes 35 % 35 % 35 % Effects of foreign operations, including foreign tax credits{a} 12 21 11 Foreign currency remeasurement (gain) loss 10 (4) - Effects of nondeductible goodwill impairment - 7 - Adjustments to valuation allowances{b} 8 (10) - State and local income taxes, net of federal income tax effects (1) 2 2 Other 2 (1) (5) Provision for income taxes 66 % 50 % 43 % (a)Includes foreign tax credits but excludes the effects of remeasuring income tax assets and liabilities denominated in foreign currencies. 2009 includes foreign tax credit benefits related to crediting certain foreign taxes that were previously considered deductible for U.S. tax purposes. (b)In 2009, it was determined that we may not be able to realize all recorded foreign tax credit benefits and therefore a valuation allowance was recorded against these benefits. In 2008, we released the valuation allowance on the Norwegian deferred tax asset associated with operating loss carryforwards upon completion of the operated Alvheim/Vilje development offshore Norway, with first production from Alvheim in June 2008 and from Vilje in July 2008. Deferred tax assets and liabilities resulted from the following: December 31, 2009 2008 Deferred tax assets: Employee benefits $ 1,163 $ 918 Operating loss carryforwards{a} 625 1,150 Derivative instruments - 86 Foreign tax credits 1,934 1,088 Other 177 160 Valuation allowances Federal{b} (280) 0 State (45) (50) Foreign{c} (157) (212) Total deferred tax assets 3,417 3,140 Deferred tax liabilities Property, plant and equipment 5,862 4,679 Inventories 615 649 Investments in subsidiaries and affiliates 1,330 1,361 Derivative instruments 33 63 Other 75 0 Total deferred tax liabilities 7,915 6,752 Net deferred tax liabilities $ 4,498 $ 3,612 (a)At December 31, 2009, foreign operating loss carryforwards primarily include $118 million for Norway special petroleum tax and $847 million for Angola income tax. The Norway and Angola operating loss carryforwards have no expiration dates. The remainder of foreign carryforwards were in several other foreign jurisdictions, the majority of which expire in 2010 through 2020. State operating loss carryforwards of $1,196 million expire in 2010 through

Inventories

Inventories
	12 Months Ended Dec. 31, 2009 USD / shares
Inventories
12. Inventories	12.Inventories December 31, (In millions) 2009 2008 Liquid hydrocarbons, natural gas and bitumen $ 1,393 $ 1,376 Refined products and merchandise 1,790 1,797 Supplies and sundry items 439 334 Total, at cost $ 3,622 $ 3,507 The LIFO method accounted for 85 percent and 90 percent of total inventory value at December 31, 2009 and 2008. Current acquisition costs were estimated to exceed the LIFO inventory value at December 31, 2009 and 2008 by $3,115 million and $777 million.

Equity Method Investments

Equity Method Investments
	12 Months Ended Dec. 31, 2009 USD / shares
Equity Method Investments
13. Equity Method Investments	13.Equity Method Investments Ownership as of December 31, (In millions) December 31, 2009 2009 2008 EGHoldings 60% $ 986 $ 1,053 Alba Plant LLC 52% 317 315 Atlantic Methanol Production Company LLC 45% 224 235 LOOP LLC 51% 149 143 Ethanol investments (a) 62 70 Other 232 264 Total $ 1,970 $ 2,080 (a)As discussed in Note 5, Ethanol investments represent our 35 percent ownership in The Andersons Clymers Ethanol LLC and our 50 percent ownership in The Anderson Marathon Ethanol LLC. Our Ethanol investments were impaired by $40 million ($25 million, net of tax), in 2008, due to an other-than-temporary loss in value as a result of declining demand and prices for ethanol, a poor outlook for short-term future profitability and, in the case of one production facility, recurring operating losses. Summarized financial information for equity method investees is as follows: (In millions) 2009 2008 2007 Income data year: Revenues and other income $ 1,916 $ 15,766 $ 14,133 Income from operations 677 1,608 1,098 Net income 576 1,436 1,038 Balance sheet data December 31: Current assets $ 802 $ 837 Noncurrent assets 4,266 4,692 Current liabilities 767 993 Noncurrent liabilities 807 821 As of December 31, 2009, the carrying value of our equity method investments was $301 million higher than the underlying net assets of investees. This basis difference is being amortized into net income over the remaining estimated useful lives of the underlying net assets, except for $49 million of the excess related to goodwill. Dividends and partnership distributions received from equity method investees (excluding distributions that represented a return of capital previously contributed) were $340 million in 2009, $827 million in 2008 and $502 million in 2007. In 2008 we received a $75 million partial redemption of our partnership interest from Pilot Travel Centers that was accounted for as a return of our investment.

Property, Plant and Equipment

Property, Plant and Equipment
	12 Months Ended Dec. 31, 2009 USD / shares
Property, Plant and Equipment
14. Property, Plant and Equipment	14.Property, Plant and Equipment December 31, (In millions) 2009 2008 Exploration and production $ 23,436 $ 22,497 Oil sands mining and bitumen upgrading 8,595 7,935 Refining 11,522 9,026 Marketing 2,098 2,144 Transportation 2,703 2,592 Other 952 801 Total $ 49,306 $ 44,995 Less accumulated depreciation, depletion and amortization 17,185 15,581 Net property, plant and equipment $ 32,121 $ 29,414 Property, plant and equipment includes gross assets acquired under capital leases of $247 million and $82 million at December 31, 2009 and 2008, with related amounts in accumulated depreciation, depletion and amortization of $26 million and $18 million at December 31, 2009 and 2008. Property impairments were $19 million, $21 million and $19 million in 2009, 2008 and 2007. The economic and commodity price declines in the latter part of 2008 and weak natural gas prices in 2009 caused us to assess the carrying value of our assets. No significant impairments resulted due to the cash flows these assets are expected to generate. Should market conditions continue to deteriorate or commodity prices continue to decline, further assessment of the carrying value of assets may be necessary. Deferred exploratory well costs were as follows: December 31, (In millions) 2009 2008 2007 Amounts capitalized less than one year after completion of drilling $ 679 $ 863 $ 683 Amounts capitalized greater than one year after completion of drilling 150 54 100 Total deferred exploratory well costs $ 829 $ 917 $ 783 Number of projects with costs capitalized greater than one year after completion of drilling 3 2 3 Exploratory well costs capitalized greater than one year after completion of drilling as of December 31, 2009 included $84 million for the Stones appraisal well incurred in 2008, $36 million for the Gunflint/Freedom appraisal well incurred in 2008 and $30 million related to wells in Equatorial Guinea (primarily Corona and Gardenia) that was primarily incurred in 2004. The Minerals Management Service (MMS) has approved a plan for the Stones prospect. Engineering and data-gathering efforts continue to progress according to the approved plan. Various development alternatives are being evaluated and optimization efforts continue. Appraisal drilling for the Gunflint/Freedom prospect will commence in 2010 and continue into 2011. The results of the appraisal well program will be used to evaluate the commercial viability of the project. The Equatorial Guinea discovery wells are part of our long-term LNG strategy. These discoveries will be developed when the natural gas supply from the nearby Alba Field starts to decline. The net changes in deferred exploratory well costs were as follows: (In millions) 2009 2008 2007 Beginning Balance $ 917 $ 783 $ 470 Additions 155 413 394 Dry well expense (32) (63) (39) Transfers to development (211) (216) (42) Ending Balance $ 829 $ 917 $ 783

Goodwill

Goodwill
	12 Months Ended Dec. 31, 2009 USD / shares
Goodwill
15. Goodwill	15.Goodwill Goodwill is tested for impairment on an annual basis, or when events or changes in circumstances indicate the fair value of a reporting unit with goodwill has been reduced below the carrying value. We performed our annual impairment test during 2009 and no impairment was required. The fair value of our reporting units exceeded the book value appreciably for each of our reporting units. We performed our 2008 annual goodwill impairment test during the second quarter for our EP reporting unit, during the third quarter for our OSM reporting unit and during the fourth quarter for our reporting units comprising the RMT segment, at which time no impairment to the carrying value of goodwill was identified. We tested goodwill for impairment again in the fourth quarter of 2008 for our EP and OSM reporting units because of the late 2008 disruption in the credit and equity markets and the significant change in commodity prices impacted several of the significant assumptions used in our determination of fair value. Since limited market-based data was available, we principally used an income based discounted cash flow model to compute the fair value of our reporting units. In applying this valuation method, there was a significant amount of judgment required, involving estimates regarding amount and timing of future production, commodity prices and the discount rate appropriate for each reporting unit. We used our planning and capital investment projections, which consider factors such as a combination of proved and risk-adjusted probable and possible reserves, expected future commodity prices and operating costs. An appropriate discount rate was selected for the each of the reporting units. We also compared our significant assumptions used to determine the fair value amounts against other market-based information, if available. In addition, we considered several fair value determination scenarios using key assumption sensitivities to corroborate our fair value estimates. Testing goodwill for impairment is a two step process. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to be impaired, thus the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment, if any. Our fourth quarter 2008 fair value estimate for the OSM reporting unit was less than the carrying amount. The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. The implied fair value of goodwill shall be determined in the same manner as the amount of goodwill recognized in a business combination. This requires a hypothetical purchase price to be established as if the fair value of the reporting unit was the current price paid to acquire th

Fair Value Measurements

Fair Value Measurements
	12 Months Ended Dec. 31, 2009 USD / shares
Fair Value Measurements
16. Fair Value Measurements	16.Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three approaches for measuring the fair value of assets and liabilities: the market approach, the income approach and the cost approach, each of which includes multiple valuation techniques. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to measure fair value by converting future amounts, such as cash flows or earnings, into a single present value amount using current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace the service capacity of an asset. This is often referred to as current replacement cost. The cost approach assumes that the fair value would not exceed what it would cost a market participant to acquire or construct a substitute asset of comparable utility, adjusted for obsolescence. The fair value accounting standards do not prescribe which valuation technique should be used when measuring fair value and does not prioritize among the techniques. These standards establish a fair value hierarchy that prioritizes the inputs used in applying the various valuation techniques. Inputs broadly refer to the assumptions that market participants use to make pricing decisions, including assumptions about risk. Level 1 inputs are given the highest priority in the fair value hierarchy while Level 3 inputs are given the lowest priority. The three levels of the fair value hierarchy are as follows. Level 1 Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.Level 2 Observable market-based inputs or unobservable inputs that are corroborated by market data. These are inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 3 Unobservable inputs that are not corroborated by market data and may be used with internally developed methodologies that result in management's best estimate of fair value. Valuation techniques that maximize the use of observable inputs are favored. Assets and liabilities are classified in their entirety based on the lowest priority level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets and liabilities within the levels of the fair value hierarchy. We use a market or income approach for recurring fair value measurements and endeavor to use the best information available. The following tables present net assets and liabilities accounted for at fair value on a recurring basis as of

Derivatives

Derivatives
	12 Months Ended Dec. 31, 2009 USD / shares
Derivatives
17. Derivatives	17.Derivatives For further information regarding the fair value measurement of derivative instruments see Note 16. See our Note 1 for discussion of the types of derivatives we use and the reasons for them. 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 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 (In millions) Asset Liability Net Liability Balance Sheet Location Cash Flow Hedges Foreign currency $ 0 $ 0 $ 0 Other current liabilities 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 December 31, 2009, the following foreign currency forwards and options were designated as cash flow hedges: (In millions) Settlement Period Notional Amount Weighted Average Forward Rate Foreign Currency Forwards Dollar (Canada) January 2010 - February 2010 $ 24 1.062{a} (a)U.S. dollar to foreign currency. (In millions) Period Notional Amount Weighted Average Exercise Price Foreign Currency Options Dollar (Canada) January 2010 - September 2010 $ 144 1.042{a} (a)U.S. dollar to foreign currency. Approximately $2 million in losses are expected to be reclassified from accumulated other comprehensive income ("AOCI") over the next 12 months. Ineffectiveness related to cash flow hedges was a $1 million loss in 2009. The following table summarizes the pretax effect of derivative instruments designated as hedges of cash flows in other comprehensive income: Gain (Loss) in OCI (In millions) 2009 Foreign currency $ 39 Interest rate $ (15) The following table summarizes the pretax effect of AOCI reclassifications related to derivative instruments designated as hedges of cash flows in our consolidated statement of income: Gain (Loss) Reclassified from AOCI into Net Income (In millions) Income Statement Location 2009 Foreign currency Discontinued operations $ 1 Foreign currency Depreciation, depletion and amortization $ 1 Interest rate Net interest and other financing income (costs) $ (3) Derivatives Designated as Fair Value Hedges As of December 31, 2009, we had multiple interest rate swap agreements with a total notional amount of $1.35 billion at a weighted-average, LIBOR-based, floating rate of 4.37 percent. As of December 31, 2009, we also had commodity derivative instruments for a weighted average 5,00

Short Term Debt

Short Term Debt
	12 Months Ended Dec. 31, 2009 USD / shares
Short Term Debt
18. Short Term Debt	18.Short Term Debt We have a commercial paper program that is supported by the unused credit on our revolving credit facility discussed in Note 19. At December 31, 2009 and 2008, there were no commercial paper borrowings outstanding.

Long Term Debt

Long Term Debt
	12 Months Ended Dec. 31, 2009 USD / shares
Long Term Debt
19. Long Term Debt	19.Long Term Debt Our long term debt agreements do not contain restrictive financial covenants. December 31, (In millions) 2009 2008 Marathon Oil Corporation: Revolving credit facility due 2012{a} $ 0 $ 0 6.125% notes due 2012{b} 450 450 6.000% notes due 2012{b} 400 400 5.900% notes due 2018{c} 1,000 1,000 6.800% notes due 2032{b} 550 550 9.375% debentures due 2012 87 87 9.125% debentures due 2013 174 174 6.500% debentures due 2014{d} 700 0 7.500% debentures due 2019{d} 800 0 6.000% debentures due 2017{b} 750 750 9.375% debentures due 2022 65 65 8.500% debentures due 2023 116 116 8.125% debentures due 2023 172 172 6.600% debentures due 2037{b} 750 750 4.550% promissory note, semi-annual payments due 2010 - 2015 408 476 Series A medium term notes due 2022 3 3 4.750% - 6.875% obligations relating to industrial development and environmental improvement bonds and notes due 2013 - 2033{e} 310 439 5.125% obligation relating to revenue bonds due 2037 1,000 1,000 Sale-leaseback financing due 2010 - 2012{f} 29 37 Capital lease obligation due 2010 - 2012{g} 25 32 Consolidated subsidiaries 8.375% secured notes due 2012{b} {h} 448 448 Capital lease obligations due 2010 - 2020{i} 265 183 Total 8,502 7,132 Unamortized fair value differential for debt assumed in acquisitions 27 37 Unamortized discount (20) (13) Fair value adjustments {l} 23 29 Amounts due within one year (96) (98) Total long-term debt due after one year $ 8,436 $ 7,087 (a)During 2008, we entered into an amendment of our $3.0 billion revolving credit facility, extending the termination date on $2,625 million from May 2012 to May 2013. The remaining $375 million continues to have a termination date of May 2012. The facility requires a representation at an initial borrowing that there has been no change in our consolidated financial position or operations, considered as a whole which would materially and adversely affect our ability to perform our obligations under the revolving credit facility. Interest on the facility is based on defined short-term market rates. During the term of the agreement, we are obligated to pay a variable facility fee on the total commitment, which at December 31, 2009 was 0.08 percent. (b)These notes contain a make-whole provision allowing us the right to repay the debt at a premium to market price. (c)In 2008, we issued $1.0 billion aggregate principal amount of senior notes bearing interest at 5.9 percent with a maturity date of March 15, 2018. Interest on the senior notes is payable semi-annually beginning September 15, 2008. (d)In 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 is payable semi-annually beginning August 15, 2009. (e)United States Steel has assumed responsibility for repayment of $286 million of these obli

Asset Retirement Obligations

Asset Retirement Obligations
	12 Months Ended Dec. 31, 2009 USD / shares
Asset Retirement Obligations
20. Asset Retirement Obligations	20.Asset Retirement Obligations The following summarizes the changes in asset retirement obligations: (In millions) 2009 2008 Asset retirement obligations as of January 1 $ 965 $ 1,134 Liabilities incurred, including acquisitions 14 30 Liabilities settled (65) (94) Accretion expense (included in depreciation, depletion and amortization) 64 66 Revisions to previous estimates 124 24 Held for sale - (195) Asset retirement obligations as of December 31 $ 1,102 $ 965 (a)Includes asset retirement obligation of $3 and $2 million classified as short-term at December 31, 2009, and 2008.

Supplemental Cash Flow Informat

Supplemental Cash Flow Information
	12 Months Ended Dec. 31, 2009 USD / shares
Supplemental Cash Flow Information
21. Supplemental Cash Flow Information	21.Supplemental Cash Flow Information (In millions) 2009 2008 2007 Net cash provided from operating activities from continuing operations included: Interest paid (net of amounts capitalized) $ 19 $ 92 $ 66 Income taxes paid to taxing authorities 1,663 2,921 3,283 Income tax settlements paid to United States Steel - - 13 Commercial paper and revolving credit arrangements, net: Commercial paper - issuances $ 897 $ 46,706 $ 12,751 - repayments (897) (46,706) (12,751) Credit agreements - borrowings - 404 - - repayments - (404) - Noncash investing and financing activities: Additions to property, plant and equipment Asset retirement costs capitalized, excluding acquisitions $ 135 $ 26 $ 8 Change in capital expenditure accrual (343) 30 621 Debt payments made by United States Steel 144 14 21 Capital lease and sale-leaseback financing obligations increase 86 84 49 Bond obligation assumed for trusteed funds - - 1,000 Acquisitions: Debt and other liabilities assumed - - 1,541 Common stock or securities exchangeable for common stock issued - - 1,910 Deconsolidation of EGHoldings: Decrease in non-cash assets - - 1,759 Equity method investment recorded - - 942 Decrease in liabilities - - 310 Elimination of minority interests - - 544

Defined Benefit Postretirement

Defined Benefit Postretirement Plans
	12 Months Ended Dec. 31, 2009 USD / shares
Defined Benefit Postretirement Plans
22. Defined Benefit Postretirement Plans	22.Defined Benefit Postretirement Plans We have noncontributory defined benefit pension plans covering substantially all domestic employees as well as international employees located in Norway and the United Kingdom. Through 2009, benefits under these plans have been based primarily on years of service and final average pensionable earnings. We also have defined benefit plans for other postretirement benefits covering most employees. Health care benefits are provided through comprehensive hospital, surgical and major medical benefit provisions subject to various cost-sharing features. Life insurance benefits are provided to certain nonunion and union-represented retiree beneficiaries. Other postretirement benefits are not funded in advance. Obligations and funded status The following summarizes the obligations and funded status for our defined benefit pension and other postretirement plans. Pension Benefits Other Benefits 2009 2008 2009 2008 (In millions) U.S. Int'l U.S. Int'l Change in benefit obligations: Benefit obligations at January 1 $ 2,164 $ 288 $ 2,143 $ 426 $ 694 $ 736 Service cost 130 14 127 19 17 18 Interest cost 146 22 135 25 41 44 Actuarial loss (gain) 703 85 (58) (72) (35) (75) Plan amendment 0 0 0 1 0 0 Foreign currency exchange rate changes 0 26 0 (99) 0 0 Divestiture{a} 0 (30) 0 0 0 Benefits paid (154) (10) (183) (12) (32) (29) Benefit obligations at December 31 $ 2,989 $ 395 $ 2,164 $ 288 $ 685 $ 694 Change in plan assets: Fair value of plan assets at January 1 $ 1,203 $ 288 $ 1,790 $ 381 $ 0 $ 0 Actual return on plan assets 257 52 (448) (28) 0 0 Employer contributions 311 34 44 41 0 0 Foreign currency exchange rate changes 0 28 0 (94) 0 0 Divestiture{a} 0 (44) 0 0 0 0 Other 6 0 0 0 0 0 Benefits paid (154) (10) (183) (12) 0 0 Fair value of plan assets at December 31 $ 1,623 $ 348 $ 1,203 $ 288 $ 0 $ 0 Funded status of plans at December 31 $ (1,366) $ (47) $ (961) $ 0 $ (685) $ (694) Amounts recognized in the consolidated balance sheet: Current liabilities (18) 0 (11) 0 (34) (35) Noncurrent liabilities (1,348) (47) (950) 0 (651) (659) Accrued benefit cost $ (1,366) $ (47) $ (961) $ 0 $ (685) $ (694) Pretax amounts in accumulated other comprehensive income: Net loss (gain) $ 1,338 $ 71 $ 785 $ 26 $ (53) $ (23) Prior service cost (credit) 93 0 106 1 (30) (36) (a)The divestiture is related to our discontinued operations in Ireland, as discussed in Note 7 (b)Amount excludes those related to LOOP LLC, an equity method investee with defined benefit pension and postretirement plans for which net losses of $8 million and $10 million were recorded in accumulated other comprehensive income, reflecting our 51 percent share. The accumulated benefit obligation for all defined benefit pension plans was $2,659 million and $1,975 million as of December 31, 2009 and 2008. The following summarizes ou

Stock-Based Compensation Plans

Stock-Based Compensation Plans
	12 Months Ended Dec. 31, 2009 USD / shares
Stock-Based Compensation Plans
23. Stock-Based Compensation Plans	23.Stock-Based Compensation Plans Description of the Plans The Marathon Oil Corporation 2007 Incentive Compensation Plan (the "2007 Plan") was approved by our stockholders in April 2007 and authorizes the Compensation Committee of the Board of Directors to grant stock options, stock appreciation rights, stock awards (including restricted stock and restricted stock unit awards) and performance awards to employees. The 2007 Plan also allows us to provide equity compensation to our non-employee directors. No more than 34million shares of Marathon common stock may be issued under the 2007 Plan and no more than 12million of those shares may be used for awards other than stock options or stock appreciation rights. Shares subject to awards under the 2007 Plan that are forfeited, are terminated or expire unexercised become available for future grants. If a stock appreciation right is settled upon exercise by delivery of shares of common stock, the full number of shares with respect to which the stock appreciation right was exercised will count against the number of shares of Marathon common stock reserved for issuance under the 2007 Plan and will not again become available under the 2007 Plan. In addition, the number of shares of Marathon common stock reserved for issuance under the 2007 Plan will not be increased by shares tendered to satisfy the purchase price of an award, exchanged for other awards or withheld to satisfy tax withholding obligations. Shares issued as a result of awards granted under the 2007 Plan are generally funded out of common stock held in treasury, except to the extent there are insufficient treasury shares, in which case new common shares are issued. After approval of the 2007 Plan, no new grants were or will be made from the 2003 Incentive Compensation Plan (the "2003 Plan"). The 2003 Plan replaced the 1990 Stock Plan, the Non-Officer Restricted Stock Plan, the Non-Employee Director Stock Plan, the deferred stock benefit provision of the Deferred Compensation Plan for Non-Employee Directors, the Senior Executive Officer Annual Incentive Compensation Plan and the Annual Incentive Compensation Plan (the "Prior Plans"). No new grants will be made from the Prior Plans. Any awards previously granted under the 2003 Plan or the Prior Plans shall continue to vest or be exercisable in accordance with their original terms and conditions. Stock-based awards under the Plan Stock options We grant stock options under the 2007 Plan. Our stock options represent the right to purchase shares of Marathon common stock at its fair market value on the date of grant. Through 2004, certain stock options were granted under the 2003 Plan with a tandem stock appreciation right, which allows the recipient to instead elect to receive cash or Marathon common stock equal to the excess of the fair market value of shares of common stock, as determined in accordance with the 2003 Plan, over the option price of the shares. In general, stock options granted under the 2007 Plan and the 2003 Plan vest ratably over a three-year period and have a maximum term of ten years from the date they are granted. Stock appreciation rights Prior to 2005, we gran

Stockholders' Equity

Stockholders' Equity
	1/1/2009 - 12/31/2009 USD / shares
Stockholders' Equity
24. Stockholders' Equity	24.Stockholders' Equity In each year, 2009 and 2008, we issued 2 million in common stock upon the redemption of the Exchangeable Shares described below in addition to treasury shares issued for employee stock-based awards. The Board of Directors has authorized the repurchase of up to $5 billion of Marathon common stock. Purchases under the program may be in either open market transactions, including block purchases, or in privately negotiated transactions. We will use 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. The repurchase program does not include specific price targets or timetables. As of December 31, 2009, we have acquired 66million common shares at a cost of $2,922 million under the program. No shares have been acquired since August 2008. Securities exchangeable into Marathon common stock As discussed in Note 6, we acquired all of the outstanding shares of Western on October18, 2007. The Western shareholders who were Canadian residents received, at their election, cash, Marathon common stock, securities exchangeable into Marathon common stock (the "Exchangeable Shares") or a combination thereof. The Western shareholders elected to receive 5million Exchangeable Shares as part of the acquisition consideration. The Exchangeable Shares are shares of an indirect Canadian subsidiary of Marathon and, at the acquisition date, were exchangeable on a one-for-one basis into Marathon common stock. Subsequent to the acquisition, the exchange ratio is adjusted to reflect cash dividends, if any, paid on Marathon common stock and cash dividends, if any, paid on the Exchangeable Shares. The exchange ratio at December31, 2009, was 1.06109 common shares for each Exchangeable Share. The Exchangeable Shares are exchangeable at the option of the holder at any time and are automatically redeemable on October18, 2011. Holders of Exchangeable Shares are entitled to instruct a trustee to vote (or obtain a proxy from the trustee to vote directly) on all matters submitted to the holders of Marathon common stock. The number of votes to which each holder is entitled is equal to the whole number of shares of Marathon common stock into which such holder's Exchangeable Shares would be exchangeable based on the exchange ratio in effect on the record date for the vote. The voting right is attached to voting preferred shares of Marathon that were issued to a trustee in an amount equivalent to the Exchangeable Shares at the acquisition date as discussed below. Additional shares of voting preferred stock will be issued as necessary to adjust the number of votes to account for changes in the exchange ratio. Preferred shares In connection with the acquisition of Western discussed in Note 6, the Board of Directors authorized a class of voting preferred stock consisting of 6million shares. Upon completion of the acquisition, we issued 5million shares of this voting preferred stock to a trustee, who holds the shares for the benefit o

Leases

Leases
	12 Months Ended Dec. 31, 2009 USD / shares
Leases
25. Leases	25.Leases We lease a wide variety of facilities and equipment under operating leases, including land and building space, office equipment, production facilities and transportation equipment. Most long-term leases include renewal options and, in certain leases, purchase options. Future minimum commitments for capital lease obligations (including sale-leasebacks accounted for as financings) and for operating lease obligations having initial or remaining noncancelable lease terms in excess of one year are as follows: (In millions) Capital Lease Obligations Operating Lease Obligations 2010 $ 46 $ 165 2011 45 140 2012 58 121 2013 44 102 2014 44 84 Later years 466 313 Sublease rentals 0 (16) Total minimum lease payments $ 703 $ 909 Less imputed interest costs (257) Present value of net minimum lease payments $ 446 (a)Capital lease obligations include $164 million related to assets under construction as of December 31, 2009. These leases are currently reported in long-term debt based on percentage of construction completed at $36 million. In connection with past sales of various plants and operations, we assigned and the purchasers assumed certain leases of major equipment used in the divested plants and operations of United States Steel. In the event of a default by any of the purchasers, United States Steel has assumed these obligations; however, we remain primarily obligated for payments under these leases. Minimum lease payments under these operating lease obligations of $16 million have been included above and an equal amount has been reported as sublease rentals. Of the $446 million present value of net minimum capital lease payments, $53 million was related to obligations assumed by United States Steel under the Financial Matters Agreement. Operating lease rental expense was: (In millions) 2009 2008 2007 Minimum rental{a} $ 238 $ 245 $ 209 Contingent rental 19 22 33 Net rental expense $ 257 $ 267 $ 242 (a)Excludes $3 million, $5 million and $8 million paid by United States Steel in 2009, 2008 and 2007 on assumed leases.

Commitments and Contingencies

Commitments and Contingencies
	12 Months Ended Dec. 31, 2009 USD / shares
Commitments and Contingencies
26. Commitments and Contingencies	26.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. Certain of these matters are discussed below. 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. Environmental matters We are subject to federal, state, local and foreign laws and regulations relating to the environment. 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. At December 31, 2009 and 2008, accrued liabilities for remediation totaled $116 million and $111 million. It is not presently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties that may be imposed. Receivables for recoverable costs from certain states, under programs to assist companies in clean-up efforts related to underground storage tanks at retail marketing outlets, were $59 and $60 million at December 31, 2009 and 2008. Legal cases We, along with other refining companies, 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 27 cases arising in four states alleging damages for MTBE contamination.Like the cases that we settled in 2008, 12 of the remaining cases are consolidated in a multi-district litigation ("MDL") in the Southern District of New York for pretrial proceedings.The other 15 cases are in New York state courts (Nassau and Suffolk Counties). Plaintiffs in 26 of the 27 cases allege damages to water supply wells from contamination of groundwater by MTBE, similar to the damages claimed in the cases settled in 2008.In the remaining case, the New Jersey Department of Environmental Protection is seeking the cost of remediating MTBE contamination and natural resources damages allegedly resulting from contamination of groundwater by MTBE.We are vigorously defending these cases.We have engaged in settlement discussions related to the majority of these cases.We do not expect our share of liability for these 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 to one qui tam case, which alleges that Marathon and other defendants violated the False Claims Act with respect to the reporting and payment of royalties on natural gas and natural gas liquids for federal and Indian leases.A qui tam action is an action in which the relator files suit on behalf of himself as well as the federal government.The case currently pending is U.S. ex rel Harrold E. Wright v. Agip Petroleum Co. et al.It is primarily a gas valuation case.Mara