Marathon Oil Corporation (Marathon Oil) has provided an update on market factors and operating conditions that occurred in the first quarter of 2009 that could influence the its quarterly financial results. The liquid hydrocarbon and natural gas production sold during the first quarter is anticipated to be about 404,000 barrels of oil equivalent per day (boepd).

Exploration and Production

Marathon Oil’s revenues are reported based on production sold during the period which can vary from production available for sale mainly as a result of the timing of international crude oil lifting’s and natural gas sales. Liquid hydrocarbon and natural gas production existing for sale during the first quarter is anticipated to be about 429,000 boepd, which is 7% higher than the fourth quarter 2008 result of 402,000 boepd. The available for sale approximation exceeded the 400,000 to 415,000 boepd first quarter guidance due to improved reliability across production operations, highlighted by outstanding performance at the company’s Alvheim oil development in Norway and the Equatorial Guinea natural gas complex, in addition for about 5,000 boepd of production by Marathon Oil Ireland Limited which was not included in the original estimate due to the pending sale of these operations.

Marathon Oil’s average liquid hydrocarbon realization for the first two months of the first quarter, as compared to the fourth quarter of 2008, declined to $13.70 per barrel domestically and $15.18 per barrel internationally, reflecting the general market price movements during the first two months of the quarter. For whole of the first quarter of 2009, the average West Texas Intermediate (WTI) crude oil market price indicator was $15.77 per barrel below the fourth quarter of 2008 while the average Dated Brent indicator decreased $11.02 per barrel.

The company’s domestic average natural gas price realization for January and February 2009 decreased $0.25 per thousand cubic feet (mcf) from Marathon Oil’s average realized price in the fourth quarter of 2008. The average Henry Hub (HH) prompt natural gas price for the first quarter decreased $1.80 per million British thermal units (BTUs) compared with the fourth quarter of 2008, while the average HH bid week natural gas price declined $2.04 per million BTUs during this same period. Global average gas realizations decreased $0.43 per mcf in the first two months of the first quarter compared with the fourth quarter of 2008.

The company’s actual crude oil and natural gas price realizations differ from market indicators mainly due to product quality and location differentials.

First quarter 2009 exploration expense is now anticipated to be about $65 million, which is within earlier guidance.

Oil Sands Mining

The company has reported that for the first quarter 2009, Marathon Oil’s estimates that its share of bitumen production from the Athabasca oil sands project (AOSP) mining operation will be about 25,000 barrels per day (bpd), which is within the earlier guidance of 22,000 to 27,000 bpd for the first quarter. The company’s synthetic crude oil sales from AOSP for the first quarter 2009 are expected to be about 32,000 bpd. The company’s average synthetic crude oil realization (excluding derivative impacts) for the first two months of the first quarter was $35.14 per barrel, as compared with the $48.98 reported for the fourth quarter of 2008. The first quarter realizations reflect the general market price movements during the first two months of the first quarter.

For the first quarter 2009, Marathon Oil’s anticipates the income effect of crude oil derivative instruments intended to mitigate price risk related to sales of synthetic crude oil will not be major. During the first quarter 2009, Marathon Oil’s sold derivative instruments at an average exercise price of $50.50 which effectively offset open put positions. All derivative instruments related to the oil sands mining segment expire at year end 2009.

Refining, Marketing and Transportation

Marathon Oil approximates its refined products sales volume will average about 1,285,000 bpd for the first quarter of 2009 compared with the 1,279,000 bpd in the first quarter of 2008.

Marathon Oil approximates that its first quarter 2009 refining and wholesale marketing gross margin will be about $0.08 per gallon as compared with the negative $0.0026 per gallon earned in the first quarter 2008.

A major factor contributing to the projected quarter-to-quarter increased margin is stronger market-based indicators in the Midwest (Chicago) and Gulf Coast markets, as illustrated by the Light Louisiana Sweet (LLS) 6-3-2-1 crack spreads. Additionally, improved average refined product wholesale price realizations, and a relatively lower cost of crude oil than the average prices revealed that the market indicators additionally enhanced the gross margin. These favorable variances are partly counterbalanced by lower ethanol blending margins mainly due to the lower absolute price of gasoline in the first quarter of 2009 compared with the year-ago quarter. The refining and wholesale marketing per gallon gross margin includes an anticipated loss on derivative instruments of about $60 million in the first quarter of 2009 compared with the loss of $120 million in the first quarter of 2008.

Marathon Oil has reported that the crude oil refined is anticipated to average about 850,000 bpd for the first quarter of 2009, compared with the 845,000 bpd in the year-ago quarter. Total refinery throughputs for the first quarter 2009 are anticipated to be about 1,070,000 bpd compared with the 1,079,000 bpd in the year-ago quarter.

Speedway SuperAmerica LLC’s (SSA) gasoline and distillate gross margin averaged $0.1072 per gallon during January and February 2009 and is anticipated to average about the same amount for the first quarter of 2009. Marathon Oil projects that SSA’s first quarter same store gasoline sales volume will raise about 1% compared year-ago quarter.

Integrated Gas

The coampny has reported that the liquefied natural gas (LNG) operations in Equatorial Guinea and Alaska is anticipated to have sold about 6,750 net metric tonnes per day (mtpd) of LNG in the first quarter of 2009, above the earlier guidance of 5,700 to 6,700 mtpd due to better than estimated reliability.

Other Information

The overall corporate effective income tax rate for the first quarter 2009, excluding special items and foreign currency remeasurement effects, is expected to be between 52 and 57%. The effective tax rate is influenced by a variety of factors comprises of geographic and functional sources of income and the relative magnitude of these sources of income.