Marathon determined to stay in the ranks of major crude oil producers

Implications: Oilvoice Newsletter reported on a Marathon Corporation press release of March 27. CEO Clarence P. Cazelot. Jr. said the company had a resources base of 6.6 billion barrels of oil equivalent. By year-end 2012, proved reserves will be 15% higher than year-end 2007. The company has tripled its resource base since 2001 and today has a growing portfolio of upstream opportunities. A major contributor will be the oil sands mining projects. For 2008, Marathon expects worldwide net upstream production will be in the range of 380,00-420,000 bbl/day. Additionally, oil sand production will add 30,000 bbl/day. The company is spending $3.2 billion to expand its refining capacity at Garyville, Louisiana and expects to double coking capacity by 2011 which will lead to lower costs. New production in 2008 will come from the Gulf of Mexico, and two fields in Norway. New production from Angola Block 31 will go online in 2012. Marathon is pledged to maximize existing assets through technology.

Analysis:  When crude oil prices began rising in 2002, Marathon Corporation was quick to recognize that it was a long-term trend. The company adopted a strategy of maximizing production from existing assets. Angola was part of that strategy and since 2001, 20 discoveries have been announced on Blocks 31 and 32. In 2004, the company resumed operations in Libya when U.S. trade sanctions were lifted. Marathon was active there until 1986 and returning has resulted in significant increases in both production and proved reserves. During 2006, Marathon began acquiring leases in the Bakken Shale region of North Dakota and Montana as well as the Piceance Basin of western Colorado and the Barnett Shale of north central Texas. All of these are non-conventional oil and gas provinces with possible resource additions of 285 million barrels of oil equivalent. The company has estimated that potential new production from these holdings could be as high as 50,000 bbl/day of oil equivalent. Marathon became a major exporter of liquefied natural gas (LNG) from Equatorial Guinea last year. Marathon has many years of experience blending ethanol into gasoline in the middle western region of the United States and in 2006, expanded this portion of the portfolio. With prospects excellent for continued high crude oil prices, the company seems sure to enjoy higher profits in the years ahead.