HOUSTON, Jan. 30 /PRNewswire-FirstCall/ -- Marathon Oil Corporation today announced it has approved a $4.2 billion capital, investment and exploration budget for 2007, which represents a 32 percent increase over 2006 spending of $3.2 billion, excluding major lease acquisitions.
"Marathon's 2007 capital, investment and exploration budget illustrates the confidence we have in our business plans and the significant, value added investments we are making to meet our customers' energy needs while profitably growing all of Marathon's business segments," said Clarence P. Cazalot, Jr., Marathon president and CEO.
The increase over 2006 spending is primarily due to expenditures related to the projected $3.2 billion Garyville, La., refinery expansion and increased upstream development activities in the newly acquired resource plays in the United States.
Exploration and Production
Marathon's 2007 worldwide exploration and production budget is $2.231 billion, reflecting an increase of 21 percent from 2006 spending of $1.848 billion, excluding major lease acquisitions of approximately $463 million in the Bakken Oil Shale of North Dakota and the Piceance Gas Basin of Colorado.
The Company's 2007 worldwide exploration and exploitation budget is $802 million, which represents an increase of 38 percent from 2006 spending of $581 million. Approximately 48 percent of this budget is for exploration activity which includes funds to drill 14-17 significant exploration/appraisal wells. Exploitation activity comprises the remaining 52 percent of this budget and is focused primarily on stepout activity and resource plays within or adjacent to the Company's onshore producing properties in the United States.
Worldwide production capital spending is projected to be $1.429 billion during 2007. Key investments will continue in Marathon's major development projects including Neptune in the Gulf of Mexico, Alvheim/Vilje and Volund offshore Norway, and the Corrib Gas Project in Ireland. In addition, the Company also will be making substantial investments in new U.S. resource plays located in the Bakken Shale, the Piceance Basin and the Barnett Shale in North Central Texas, as well as progressing developments in Angola.
Refining, Marketing and Transportation
Refining, marketing and transportation capital spending is expected to total $1.464 billion during 2007. Refining investments, which comprise the majority of the 2007 downstream budget, include the Garyville refinery expansion, which will increase the refinery's crude processing capacity by 180,000 barrels per day, and the front-end engineering and design (FEED) work for a potential Detroit refinery heavy oil upgrading project which would allow the Company to process increased volumes of Canadian oil sands production. The Detroit FEED estimate is expected to be completed in the fourth quarter of 2007.
The 2007 budget also includes increased investments in transportation and logistics to allow the Company to leverage and strengthen its market position in this strategically important segment of its business. The major investment in this area involves expansion of Marathon's ethanol blending capabilities at company-operated terminals in the Midwest and Southeast. By mid-2008, the Company will be able to blend up to 10 percent ethanol in all of its gasoline throughputs at each company-operated terminal.
Other increased spending primarily reflects Marathon's 50 percent share of the investment in a new 110 million gallon per year ethanol plant, which is currently under construction in Greenville, Ohio.
Finally, the Company will be investing in its Speedway SuperAmerica (SSA) marketing network to enable it to continue increasing same store merchandise and gasoline sales through facility upgrades and technology investments.
Integrated Gas
Marathon has budgeted $331 million gross for integrated gas activities during 2007. These investments will include spending associated with the completion of Train 1 of the Equatorial Guinea liquefied natural gas (LNG) project, as well as FEED expenditures associated with the potential Train 2 LNG project. Marathon's net share of these expenditures is $216 million.
Corporate and Capitalized Interest
During 2007, corporate spending and capitalized interest is expected to total approximately $216 million. The increase over 2006 reflects 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 2007 planned capital, investment and exploration budget and preliminary 2006 spending are attached.
This release contains forward-looking statements with respect to expected capital, investment and exploration spending, the Garyville expansion project, exploration and drilling plans, investments in new resource plays and development projects, a heavy oil refining upgrading project, and the LNG project, including possible expansion plans. Some factors that could potentially affect the exploration and drilling activities, and investments in new resource plays and the development projects include pricing, supply and demand for petroleum products, amount of capital available for exploration and development, occurrence of acquisitions or dispositions of oil and gas properties, regulatory constraints, inability or delay in obtaining government and third-party approvals and permits, 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. The Garyville expansion project may be affected by transportation logistics, availability of materials and labor, unforeseen hazards such as weather conditions, necessary government and third-party approvals, crude oil supply and other risks customarily associated with construction projects. Factors that could affect the heavy oil refining upgrading project include results of front-end engineering and design work, inability or delay in obtaining necessary government and third party approvals, continued favorable investment climate, approval of our board of directors, and other geological, operating and economic considerations. Factors that could affect the LNG project include unforeseen problems arising from commissioning of the facilities, unforeseen hazards such as weather conditions, and other operating considerations, such as shipping of the LNG. In addition to these factors, other factors that could potentially affect the possible expansion of the LNG project and the development of additional LNG capacity through additional projects include partner approvals, access to sufficient natural gas volumes through exploration or commercial negotiations with other resource owners and access to sufficient regasification capacity. 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, 2005, 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.
2007 Capital, Investment and Exploration (non-capital) Spending
(dollars in millions)
2007 Percent 2006 Percent Increase/
Budget Of Total Preliminary Of Total (Decrease)
Worldwide Exploration
and Production (E&P)
Production
U.S. $862 60% $607 48% $255
International(a) 567 40% 660 52% (93)
Total
Production 1,429 100% 1,267 100% 162
Exploration/Exploitation
U.S. 471 59% 294 51% 177
International(a) 331 41% 287 49% 44
Total Exploration/
Exploitation 802 100% 581 100% 221
U.S. - Major lease
acquisitions NA NA 463 100% (463)
Total U.S. E&P 1,333 60% 1,364 59% (31)
Total International
E&P(a) 898 40% 947 41% (49)
Total Worldwide
E&P 2,231 100% 2,311 100% (80)
Refining, Marketing
and Transportation
(RM&T)
Refining 961 66% 498 54% 463
Marketing 171 12% 196 21% (25)
Transportation 256 17% 207 23% 49
Other 76 5% 15 2% 61
Total RM&T 1,464 100% 916 100% 548
Total Integrated
Gas (b) 331 250 81
Corporate and
Capitalized Interest
Corporate 50 23% 42 22% 8
Capitalized Interest 166 77% 152 78% 14
Total Corporate &
Capitalized
Interest 216 100% 194 100% 22
Total Capital,
Investment and
Exploration
Spending $4,242 $3,671 $571
U.S. - Major lease
acquisitions NA 463 (463)
Total Capital,
Investment and
Exploration Spending
excluding major
lease acquisitions $4,242 $3,208 $1,034
(a) 2006 amounts exclude Russia.
(b) Amounts include Equatorial Guinea LNG Holdings Limited (Train 1) at
100 percent; Train 2 FEED expenditures reflect Marathon's share of
such expenditures.
Capital, investment and exploration spending includes capital expenditures, cash investments in equity method investees, exploration costs that are expensed as incurred rather than capitalized, such as geological and geophysical costs and certain staff costs, and other miscellaneous investment expenditures. The components of the 2007 budgeted and 2006 preliminary capital, investment and exploration spending are as follows:
2007 2006 Increase/
Budget Preliminary (Decrease)
Capital expenditures $3,886 $3,433 $453
Cash investments in equity
method investees 107 17 90
Exploration costs other than well costs 249 206 43
Other --- 15 (15)
Capital, Investment and
Exploration Spending $4,242 $3,671 $571
The 2006 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, 2005, 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.
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