Marathon Announces $3.4 Billion Capital, Investment and Exploration Budget for 2006
5 February 2006
Marathon Oil Corporation (NYSE: MRO) today announced that it has approved a $3.4 billion capital, investment and exploration budget for 2006, which represents a 13 percent increase over actual 2005 spending of $3 billion. The 2006 budget excludes payments totaling $732 million associated with Marathon's reentry into Libya.
"Marathon's 2006 capital, investment and exploration budget provides the necessary funding to continue the profitable growth of our upstream business, while also providing the necessary capital to grow our integrated gas and downstream businesses," said Clarence P. Cazalot, Jr., Marathon president and CEO.
The increase over actual 2005 spending is due primarily to higher exploration/exploitation activity levels along with the ramp-up of development projects in the Gulf of Mexico (Neptune), Ireland (Corrib) and Norway (Alvheim and Vilje). Additionally, increases in the cost of materials, equipment and oilfield/refinery contract services are estimated to have increased the 2006 budget by approximately $50 million.
Exploration and Production
Marathon's 2006 worldwide exploration and exploitation budget is $588 million, which represents an increase of $199 million over 2005 spending. Approximately 60 percent of this budget is for exploration activity which includes funds to drill 19 significant exploration wells. The 2006 exploration budget is approximately $80 million higher than 2005 spending and largely reflects increased 2006 activity in Angola. Exploitation activity comprises the remaining 40 percent of this budget and is focused primarily on projects within or adjacent to the Company's onshore producing properties in the United States.
Worldwide production capital spending is projected to be $1.357 billion during 2006. Key investments will continue in Norway where Marathon and its partners are advancing the Alvheim and Vilje developments which are expected to begin producing in the first quarter 2007. In addition, Marathon will be targeting key investments in support of the Company's production growth and development projects in the U.S. onshore, Russia, Ireland, the Gulf of Mexico and Equatorial Guinea.
Refining, Marketing and Transportation
Refining, marketing and transportation capital spending is expected to total $886 million during 2006. Refining investments, which comprise the majority of the 2006 downstream budget, are targeting value added projects primarily aimed at de-bottlenecking various refining components to increase throughput capacity. In addition, the Company will be investing approximately $200 million to meet revised EPA National Ambient Air Quality Standards, best achievable control technology and Tier II Clean Fuels regulations. Also included in the budget is planned spending for the front end engineering and design (FEED) work being undertaken for the potential 180,000 barrel per day Garyville, La., refinery expansion project.
The 2006 budget also includes increased investments in transportation logistics to allow the Company to leverage and strengthen its market position in this strategically important segment of its business. Marathon also is planning increased ethanol related investments during 2006 which will allow the Company to maintain its industry leading position in ethanol blending.
Finally, the Company will be investing in its Speedway SuperAmerica (SSA) marketing network to enable it to continue increasing same store merchandise sales through additional merchandise categories and technology investments.
Integrated Gas
Marathon has budgeted $341 million for integrated gas investments during 2006. These investments will include spending associated with the Company's Equatorial Guinea liquefied natural gas (LNG) Train 1 project currently under construction and ahead of schedule, with first shipments of LNG now projected to begin in the third quarter of 2007. While Marathon holds and funds a 60 percent interest in this LNG project, 100 percent of the related costs are reflected in Marathon's 2006 budget and 2005 actual spending. The remainder is owned and funded by partners GEPetrol, the National Oil Company of Equatorial Guinea, (25 percent), Mitsui (8.5 percent) and Marubeni (6.5 percent).
Corporate and Capitalized Interest
During 2006, corporate spending and capitalized interest is expected to total approximately $210 million. The increase over 2005 reflects the increased capitalized interest due to the large capital projects underway, as well as general corporate operations such as increased information technology spending.
Charts detailing Marathon's 2006 planned capital, investment and exploration budget and preliminary 2005 spending are attached.
This release contains forward-looking statements with respect to expected capital, investment and exploration spending, exploration and drilling plans, the timing of production, a plan for development and operation of the Alvheim and Vilje Fields, and the anticipated startup date of a LNG project. Some factors that could potentially affect the exploration and drilling activities, the timing of production, and the Alvheim and Vilje Field developments include pricing, supply and demand for petroleum products, amount of capital available for exploration and development, occurrence of acquisitions/dispositions of oil and gas properties, regulatory constraints, timing of commencing production from new wells, drilling rig availability, unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response thereto, and other geological, operating and economic considerations. Factors that could affect the LNG project include unforeseen problems arising from construction, inability or delay in obtaining necessary government and third party approvals, unanticipated changes in market demand or supply, environmental issues, availability or construction of sufficient LNG vessels, and unforeseen hazards such as weather conditions. The foregoing factors (among others) could cause actual results to differ materially from those set forth in the forward-looking statements. In accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Marathon Oil Corporation has included in its Annual Report on Form 10-K for the year ended December 31, 2004, and subsequent Forms 10-Q and 8-K, cautionary language identifying other important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in the forward-looking statements.
2006 Capital, Investment and Exploration (non-capital) Spending
(dollars in millions)
Percent Percent
2006 Of 2005 Of Increase/
Budget Total Preliminary Total (Decrease)
Worldwide Exploration and
Production (E&P)
Production
U.S. $616 45 $474 40 $142
International 741 55 713 60 28
Total Production 1,357 100 1,187 100 170
Exploration/Exploitation
U.S. 310 53 214 55 96
International 278 47 175 45 103
Total Exploration/
Exploitation 588 100 389 100 199
Total U.S. E&P 926 48 688 44 238
Total International E&P 1,019 52 888 56 131
Total Worldwide E&P 1,945 100 1,576 100 369
Refining, Marketing and
Transportation (RM&T)
Refining 467 53 511 63 (44)
Marketing 184 21 153 19 31
Transportation 198 22 130 16 68
Other 37 4 20 2 17
Total RM&T (A) 886 100 814 100 72
Total Integrated Gas (B) 341 541 (200)
Corporate and Capitalized
Interest
Corporate 38 17 21
Capitalized Interest 172 83 89
Total Corporate &
Capitalized
Interest 210 100 110
Total Capital, Investment
and Exploration Spending $3,382 $3,031 $351
(A) Includes RM&T at 100 percent for full-year 2005
(B) Includes Equatorial Guinea LNG Holdings Limited at 100 percent
Capital, investment and exploration spending includes capital expenditures, cash investments in equity method investees and exploration costs that are expensed as incurred rather than capitalized, such as geological and geophysical costs and certain staff costs. The components of the 2006 budgeted and 2005 preliminary capital, investment and exploration spending are as follows:
2006 2005 Increase/
Budget Preliminary (Decrease)
Capital expenditures $3,169 $2,890 $279
Cash investments in equity method
investees 29 27 2
Exploration costs other than well
costs 184 114 70
Capital, Investment and
Exploration Spending $3,382 $3,031 $351
The 2005 amounts contained in the foregoing table are preliminary and unaudited. Actual results may differ materially from the estimates given in this update. In accordance with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Marathon Oil Corporation has included in its Annual Report on Form 10-K for the year ended December 31, 2004, and subsequent Forms 10-Q and 8-K, cautionary language identifying important factors, though not necessarily all such factors, that could cause future outcomes to differ materially from those set forth in these forward-looking statements.
Source: prnewswire
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