In the Gulf of Mexico, Marathon sanctioned the Droshky development. The Company has secured the Noble Paul Romano rig to begin drilling in 2009, with first production targeted for 2010.

Marathon has a strong presence in the global energy industry, with the financial strength to sustain operations and fund profitable growth opportunities amid a volatile business environment. Successful exploration and production operations complement a top-tier refining, marketing and transportation business in the United States, integrated gas projects around the world and oil sands mining in Canada.

Solid financial position. Marathon is focused on delivering increased value to shareholders by investing in value-accretive projects, maintaining financial flexibility and paying a competitive dividend. The Company ended 2008 in a solid financial position, with a cash-adjusted debt-to-capital ratio of 22 percent, a substantial cash balance of $1.3 billion and a $3 billion available credit facility capacity.

In 2008, Marathon announced plans to sell between $2 and $4 billion in non-core assets as part of an ongoing review of its global portfolio. At the time of publication, the Company had announced asset sales with transaction values totaling $1.3 billion, and anticipates the remainder of these non-core sales will be announced by the middle of 2009. Assets sold or contracted to be sold to-date include non-operated interests in the Heimdal infrastructure, related producing fields and associated undeveloped acreage offshore Norway; its Kinsale and Seven Heads gas fields in Ireland; and its 50 percent interest in Pilot Travel Centers LLC.

Strong Upstream driving profitable growth. Resource growth from Marathon's Upstream businesses — Exploration and Production, Oil Sands Mining and Integrated Gas — has set the foundation for future reserve additions and production growth. Since 2001, the Company's total risked resource base has more than tripled, growing from 2.1 billion barrels of oil equivalent (boe) to 6.5 billion boe at year-end 2008.

2008 production available for sale from the Upstream businesses was 410 thousand barrels of oil equivalent per day (mboepd), almost a 15 percent increase over 2007. With the Company's large resource base and well defined projects, it anticipates additional significant growth through 2012 and beyond.

Exploration and Production. The Company's core Exploration and Production (E&P) assets are located in the United States, Equatorial Guinea, Libya and the North Sea, with new potential core areas in Angola and Indonesia. In addition, the Company holds certain Canadian oil sands leases that carry significant potential for development utilizing enhanced in-situ extraction processes. In 2008, Marathon remained focused on executing on major growth programs to drive profitable new production. Production from the E&P segment available for sale during the year averaged 385 mboepd as compared to 353 mboepd for 2007, despite the impact on Gulf of Mexico operations from Hurricanes Gustav and Ike, and the sale of the non-core Heimdal assets.

Successful exploration program. Since 2002, Marathon has been successful with 60 percent of its major exploration wells. This continued in 2008, with a 63 percent exploration success rate from eight significant wells drilled. The Company has a strong exploration program in place with plans to drill from 8 to 17 exploration wells and 30 to 70 exploitation wells per year through 2012.

The Company made two additional deepwater discoveries offshore Angola in 2008, bringing total discoveries to 28 across Blocks 31 and 32. Test results on the Dione and Portia discoveries on Block 31 confirmed the capacity of both wells to flow in excess of 5 thousand gross barrels per day (mbpd) under production conditions.

In the Gulf of Mexico, Marathon was awarded 42 deepwater blocks in the 2007 and 2008 lease sales, helping the Company rebuild its inventory of prospects for future exploration activity. The Company has interests in 24 prospects, with more than four years of drilling opportunities. Marathon participated in deepwater discoveries on the Gunflint well (Mississippi Canyon Block 948: 12.5 percent working interest) in late 2008 and the Shenandoah well (Walker Ridge Block 52: 10 percent working interest) in early 2009. The Stones appraisal well (Walker Ridge Block 508: 25 percent working interest) was also successfully drilled. Stones has a large structural footprint across eight blocks in which the Company holds an interest.

Marathon continues its exploration efforts in Norway, a growing core area. The Volund development in PL 150 continues to make progress toward first production in the second half of 2009 and will be tied back to the Alvheim infrastructure. Marathon serves as operator and has a 65 percent interest in both Volund and Alvheim. In 2009, drilling is expected to commence on other satellite prospects with the potential to be tied back to Alvheim. Following a successful appraisal well in 2006 on the Gudrun prospect, Marathon is working with its partners on additional subsurface studies and a development concept, which includes plans for a new platform in the North Sea. The platform is to be developed as a fixed processing facility with seven production wells. A final decision on the development is scheduled for 2009. Marathon holds a 28.2 percent working interest in Gudrun.

In Indonesia, on the Pasangkayu Block, the Company completed 3-D seismic acquisition on this high-potential 1.2 million acreage located predominantly offshore the island of Sulawesi in the Makassar Strait. Marathon holds a 70 percent working interest and is operator of the Pasangkayu Block. Marathon was awarded a 49 percent interest and operatorship in the Bone Bay Block in 2008. Exploration plans call for the acquisition of 2-D seismic starting in 2010, followed by drilling in 2011 on this high-potential, underexplored area. The Bone Bay Block is about 200 miles southeast of Marathon's Pasangkayu Block. Marathon also led a consortium of companies to secure a two-year rig contract for drilling in Indonesia, slated to commence in early 2010.

In addition, the Company continues its active U.S. onshore exploration program in East Texas and Oklahoma.

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