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Upstream

Marathon’s competitive and growing exploration activities, expanding production resource base and selective land acquisitions provide a well-defined portfolio of development opportunities in our upstream operations. Our focus on operational excellence, utilizing leading-edge technology and our business expertise, enables us to realize the full potential of these assets.

The Company’s exploration drilling success rate from 2002 through 2006 has been more than 60 percent. Marathon refocused its exploration program on proven trends in Norway, Equatorial Guinea, Angola and the Gulf of Mexico. Over the past five years, Marathon added more than 650 million barrels of oil equivalent (mmboe) to its resource base from these exploration discoveries. These exploration activities are complemented by an active drilling campaign in the lower 48 states.

 

United States. Marathon continues to maintain strong assets in traditional basins of Alaska, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, Wyoming and the Gulf of Mexico, and recently increased its interest in several non-conventional resource plays.

A major domestic upstream production driver is the Neptune development in the Gulf of Mexico, in which Marathon holds a 30 percent interest. Project development is proceeding on schedule for first production by early 2008. Marathon expects a net peak rate of approximately 15 mboepd.

Reflecting a selective acquisitions strategy, Marathon secured extensive leasehold positions in the Bakken Shale oil play of North Dakota and Eastern Montana, the Barnett Shale gas play in North Central Texas and the Piceance Basin of Western Colorado. Collectively, these new plays expose Marathon to potential net resources of approximately 285 mmboe, with estimated peak net daily production of more than 50 mboepd by 2011.

Europe. In Europe, the Company’s exploration focus is on the Norwegian Continental Shelf, where Marathon has participated in five successful exploration/appraisal wells over the past five years. Production from the Alvheim/Vilje development is scheduled to commence during the second quarter of 2007. Net peak production is expected to reach 75 mboepd in early 2008.

In 2006, Marathon announced a successful appraisal well offshore Norway on the Gudrun prospect that significantly improved the overall potential for a commercial development. Marathon is working with its partners on additional subsurface studies and the evaluation of potential development scenarios. First production from Gudrun is expected in 2012.

In the U.K. sector, Marathon remained active around its Brae infrastructure and also sought to expand its basin evaluation West of Shetland. In 2007, the Company plans to record new 3D seismic over the entire Brae area.

The Corrib project in Ireland and the Volund project in Norway are also expected to support production growth in Marathon’s European portfolio. First production for both Corrib and Volund is expected in 2009. Volund will tie back to the Alvheim infrastructure.

 

Africa. Marathon’s deepwater exploration program is focused on two blocks offshore Angola — Block 31 and Block 32. With 13 successful exploration wells announced on Block 31 and seven successful exploration wells announced on Block 32 since 2001, the Company is continuing exploration and appraisal drilling on Blocks 31 and 32 in 2007.

Current holdings in Equatorial Guinea include working interests in the Alba Field, the Alba liquefied petroleum gas (LPG) plant, the Atlantic Methanol Production Company and an LNG plant currently under construction on Bioko Island.

In Libya, the Company achieved first crude oil liftings and added almost 70 net mmboe to Marathon’s proved reserves in 2006, bringing total net proved reserves for Libya to 214 mmboe at the end of 2006. Activity in Gabon is relatively mature, although still a significant component of production in Africa.

 

Indonesia. In June 2006, Marathon was awarded a 70 percent interest and operatorship in the Pasangkayu Block offshore Indonesia. The Company signed a production-sharing contract with the Indonesian government in late 2006, and current plans call for the collection of geophysical data during 2007, with drilling to follow in 2008 and 2009.