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Dear Fellow Stockholders,

In 2015, Marathon Oil was proactive in taking the necessary actions to address the transition to a much lower commodity price environment, while still advancing our U.S. resource plays. Reducing capital spending, lowering production and general and administrative costs, enhancing productivity and progressing non-core asset sales allowed us to be flexible and adapt as business conditions changed.

With a focus on the elements of our business we can control, we lowered production expenses by approximately 24 percent year over year. We also reduced our workforce by approximately 700 people, or more than 20 percent, which will result in annualized savings of approximately $160 million. Late last year, we announced a quarterly dividend reduction of more than 75 percent to $0.05 per share to address the uncertain commodity price environment and prioritize balance sheet protection, a move that is expected to increase our annual free cash flow by more than $425 million. We expect to capture the full benefits of these cost reductions throughout 2016.

Production exceeded targets on lower capital program 
In 2015, our capital program of $3 billion was 50 percent less than the prior year and $500 million below our original target. Despite this reduction, we exceeded our yearly production targets for both total Company and the U.S. resource plays. Total Company production available for sale, excluding Libya, increased 8 percent to an average of 431,000 net barrels of oil equivalent (boe) per day in 2015. The primary driver was a 21 percent production increase in our U.S. resource plays over the same period.

Cost-effective reserve replacement
Last year, we achieved an organic reserve replacement ratio of 157 percent, excluding revisions and dispositions, at a competitive drillbit finding and development cost of $12 per boe. Our net proved reserves remain at approximately 2.2 billion boe, of which 72 percent were proved developed. Among our peers, Marathon Oil is one of the most focused on liquids, which represented more than 80 percent of 2015 reserves.

Capturing operating and capital efficiencies
Our 2015 operational results reflected consistent execution, high operational availability and more than $350 million in drilling and completions cost savings from ongoing internal efficiency and commercial improvements. For example, drilling efficiency improved across U.S. resource plays, with Eagle Ford average spud to total depth of just nine days in the fourth quarter of 2015 compared to 12 days in the year ago quarter. Both Eagle Ford and Bakken have increased well productivity every year since 2011 through technology application, extensive reservoir modeling, optimization of completion designs and improved artificial lift. Fourth quarter North America E&P production costs were $6.91 per boe, down 28 percent from the year-ago period, with full-year North America E&P unit production costs of $7.38 per boe. 

Ongoing portfolio management
In 2015, we closed or announced non-core asset sales of more than $300 million, excluding closing adjustments, in the Gulf of Mexico, East Texas, North Louisiana and Wilburton, Oklahoma, as well as our East Africa exploration acreage. Based on announced transactions and progress on remaining non-core asset divestitures, we’ve increased our target from $500 million to a range of $750 million to $1 billion.

Capital discipline in 2016
Our $1.4 billion 2016 capital program reflects the current challenging environment and our clear objective of balance sheet protection. This program – which is more than 50 percent lower than last year and 75 percent below 2014 – is designed to maximize capital allocation to the short-cycle investments in our U.S. resource plays, complete long-cycle projects that contribute production and minimize spend on conventional exploration. Given lower capital, reduced activity levels and divestitures, we expect total Company production to decline 6 to 8 percent from last year.

About 70 percent of the capital program will be directed to our U.S. resource plays in the Eagle Ford, STACK/SCOOP and Bakken to maintain execution efficiency, protect high-value term leases and focus on the highest returns. Across the remainder of the portfolio, several long-cycle projects will be completed in 2016 and contribute to production. These include our operated compression project in Equatorial Guinea, the outside-operated Gunflint development in the Gulf of Mexico and the outside-operated Atrush block in the Kurdistan Region of Iraq. Capital allocated to our outside-operated Oil Sands Mining project and for conventional exploration will be down materially from past years.

Committed to balance sheet protection and delivering value through the cycle
Marathon Oil is committed to continuing the momentum we achieved last year in lowering our cost structure, enhancing operational productivity and progressing non-core asset sales.

Input from our board of directors guides Marathon Oil’s long-term success, and during the year, we were pleased to welcome Gaurdie E. Banister, Jr., to our board. Gaurdie brings a wealth of insights gained from more than 35 years of global E&P experience, including eight years as chief executive officer of Aera Energy. We look forward to working with him to continue to strengthen the Company.

Although 2015 was a year of change for the industry, Marathon Oil employees dedicated themselves to executing our plans, delivering results and Living Our Values. We thank them for protecting our license to operate every day and for their ongoing efforts to position the Company to manage through the cycle.

On behalf of the board of directors, we thank our stockholders for the trust you have placed in our management team as we continue transforming Marathon Oil into a premier independent E&P focused on the U.S resource plays.


Lee M. TillmanLee M. Tillman
Lee M. Tillman
President and Chief Executive Officer
Dennis H. ReilleyDennis H. Reilley
Dennis H. Reilley
Chairman of the Board
of Directors


Forward-Looking Statements
The letter to stockholders contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These are statements, other than statements of historical fact, that give current expectations or forecasts of future events, including, without limitation: the Company’s operational, financial and growth strategies, including planned projects, drilling plans, balance sheet protection, workforce reductions and expected savings, cost reductions, the dividend reduction, non-core asset sales and targets, and enhanced operational activity; the Company’s ability to successfully effect those strategies and the expected timing and results thereof; reserve estimates; production guidance; the Company’s financial and operational outlook, and ability to fulfill that outlook; expectations regarding future economic and market conditions and their effects on the Company; the Company’s financial position, liquidity and capital resources; and the Company’s 2016 capital program and the planned allocation thereof.

While the Company believes that the assumptions concerning future events are reasonable, a number of factors could cause actual results to differ materially from those projected, including, but not limited to: conditions in the oil and gas industry, including supply/demand levels and the resulting impact on price; changes in expected reserve or production levels; changes in political or economic conditions in key operating markets, including international markets; capital available for exploration and development; well production timing; availability of drilling rigs, materials and labor; difficulty in obtaining necessary approvals and permits; nonperformance by third parties of contractual obligations; unforeseen hazards such as weather conditions, acts of war or terrorism and the governmental or military response thereto; cyber-attacks; changes in safety, health, environmental and other regulations; other geological, operating and economic considerations; and the risk factors, forward-looking statements and challenges and uncertainties described in the Company’s 2015 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other public flings and press releases, available at The Company undertakes no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise.