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Dear Fellow Stockholders

2011 was a transformational year for Marathon Oil Corporation, highlighted by the successful spin-off of our downstream business on June 30 and the acquisition of approximately 167,000 net acres predominately in the core of the Eagle Ford Shale of South Texas. With these two significant transactions, we enhanced Marathon Oil’s position as a global, independent energy company focused on executing a strategy to profitably increase production at a compound annual growth rate (CAGR) of 5 to 7 percent between 2010 and 2016.

We believe that the Company is uniquely positioned because of our considerable long-life base assets, combined with substantial growth assets that are liquids dominant, and an exploration program that provides upside potential. Our intent is to be able to self-fund our projected growth, as well as maintain a dividend yield near the top of our peer group of companies. Taken together, these factors distinguish Marathon Oil from our peers.

Increased proved reserves
With reserve additions in established areas such as Norway, the North Dakota Bakken Shale, Equatorial Guinea and Canadian Oil Sands, along with the Eagle Ford acquisitions, we replaced 212 percent of 2011 Upstream production. Excluding acquisitions, we replaced 137 percent. This performance increased our proved reserves from 1.6 billion barrels of oil equivalent (boe) at year-end 2010 to 1.8 billion boe at year-end 2011, of which 75 percent are liquid hydrocarbons and 78 percent are developed. We have grown our reserve life to 12.4 years of 2011 production and have the confidence to project a 2012 reserve replacement in excess of 150 percent.

Positioned the Company for better growth and value
Our Eagle Ford acquisition gives us a top-five position in the core of what we believe is the premier resource play in North America. Importantly, we have assembled a high caliber team to execute our program with 14 drilling rigs operating at year-end 2011 and the expectation of 18 rigs operating in the play by the end of 2012. Our Eagle Ford production is estimated to grow from an average 30,000 net barrels of oil equivalent per day (boed) during 2012 to more than 100,000 net boed in 2016, providing a major catalyst for our Company’s overall growth rate.

Our positions in the Bakken and the Anadarko Woodford Shale in Oklahoma, combined with the Eagle Ford and emerging DJ Basin (Niobrara Shale) of southeastern Wyoming and northern Colorado, give us a portfolio of U.S. shale plays that exceeds 1 million net acres. These resource plays, the planned 2012 startup of production from the Angola deepwater Block 31 PSVM development and other defined projects will help drive the Company’s overall estimated 5 to 7 percent CAGR. Approximately 80 percent of the growth assets’ production will be composed of liquids.

Our 2012 total Upstream production is expected to increase 5 percent over 2011, excluding Libya. The turmoil in Libya necessitated suspension of production of approximately 45,000 net boed in February 2011. In January 2012, Libya produced 190,000 gross barrels of oil per day (bbld) (25,000 net bbld), and sales are planned to resume in the first quarter 2012. The return of our operations in Libya to pre-conflict levels is unknown at this time; however, we and our partners in the Waha concessions are assessing the condition of our assets and determining when the full resumption of operations will be viable.

Maintained capital discipline
Marathon Oil’s 2011 capital, investment and exploration (CAPEX) spending, excluding acquisitions, came in slightly under budget at $3.7 billion. We paid $567 million in dividends and repurchased approximately 12 million shares for $300 million, while generating $5.4 billion in cash flow from continuing operations, including $526 million from working capital changes.

Largely driven by higher U.S. spending, we increased our 2012 CAPEX budget 30 percent to $4.8 billion, excluding acquisitions. The budget includes $1.2 billion for base assets in the U.S., Canada, Equatorial Guinea, Libya, Norway and the U.K., and $3 billion for growth assets, $2.7 billion of which we expect to spend on U.S. shale plays. We anticipate having approximately 35 drilling rigs by midyear to drill 250-300 net wells on Company-operated acreage across our U.S resource plays. This is a significant level of activity and Marathon Oil employees are focused on the safe and environmentally responsible execution of this drilling program to profitably grow volumes and stockholder value.

Exploration spending for 2012 is estimated to be just over $430 million, with wells planned for the Gulf of Mexico, the Iraqi Kurdistan Region and Poland. In the Gulf of Mexico, we are participating in two non-operated wells, with plans to reenter the Company-operated Innsbruck well in the third quarter and to spud the Key Largo prospect in late 2012.

In the Iraqi Kurdistan Region, we plan to complete a 2D seismic program on our operated Harir and Safen blocks and start exploratory drilling on Harir. We participated in two non-operated discovery wells in 2011 and started appraisal drilling in 2012, with first production anticipated in the fourth quarter of this year.

In Poland, we operate 11 concessions totaling 1.2 million net acres with shale gas potential. We finished drilling, coring and logging our first vertical exploratory well in January 2012 and expect to drill six to seven gross (three to four net) wells during the year.

Driving stockholder value
Reinvesting in our business to add value remains our top priority. We maintain a strong financial position through self-funding with cash flow from operations and portfolio optimization, which during 2011 included selling a 30 percent undivided working interest in the Niobrara play and our interest in an Alaska liquefied natural gas facility. The total value of sales transactions we entered into during 2011 was $640 million. Our goal is $1.5 to $3 billion in divestitures from 2011 through 2013 and targeted acquisitions in core areas.

Strong new beginning, proud history
Marathon Oil was established in 1887 as an independent energy company and has gone through many transformations over the ensuing 125 years. We are proud of the way our employees stepped up to seamlessly re-launch Marathon Oil on June 30 as the newest, yet possibly oldest, independent energy company in the U.S. Their execution of our business plans created a competitive independent upstream company from day one, and led to operational and financial results that are outstanding by any measure. Their continued focus and dedication will be critical as we reshape Marathon Oil for profitable growth and value. We also remain committed to Living Our Values, as evidenced by our proactive outreach in the communities where we operate and in the way we conduct our business around the world.

Marathon Oil’s board of directors has been an indispensable source of guidance and support during a year of change. We are grateful for their service. We also welcomed Pierre Brondeau and Linda Z. Cook to our board during 2011 and we look forward to their leadership and keen industry insights.

The entire Company is focused on our strategic priority of safe and reliable operations, while meeting production targets and delivering profitable growth. We have the assets, people, technology and resources to achieve our goals and deliver top quartile stockholder returns. We are excited about the opportunities and challenges that lie ahead of us in 2012 and beyond and are proud to represent Marathon Oil stockholders around the world.

Respectfully,

Clarence P. Cazalot Jr. Chairman, President and CEO

The above discussion includes forward-looking statements with respect to the timing and levels of future production, projected 2012 reserve replacement, anticipated future exploratory and development drilling activity, drilling rig activity, planned maintenance downtime, timing of first production from Vilje, Bøyla, Birchwood and the Iraqi Kurdistan Region, plans to achieve first production from the PSVM development on Block 31 offshore Angola and other possible developments, expectations of future production in Libya, spending under the 2012 capital expenditure budget, future mining expansion for the AOSP operations, the Quest Carbon Capture and Storage Project, and the goal of $1.5 to $3.0 billion in divestitures. Some factors which could possibly affect these forward-looking statements include pricing, supply and demand for petroleum products, the amount of capital available for exploration and development, regulatory constraints, drilling rig availability, unforeseen hazards such as weather conditions, natural disasters, acts of war or terrorist acts and the governmental or military response, and other geological, operating and economic considerations. The foregoing forward-looking statements may be further affected by the inability to obtain or delay in obtaining necessary government and third-party approvals and permits. Predicted planned maintenance downtimes are good faith estimates and preliminary, and therefore, subject to change. The Quest carbon sequestration project could be affected by projected costs and the satisfaction of remaining conditions necessary for final investment decision. Factors that could affect the planned divestitures include actions of competitors, the occurrence of acquisitions and dispositions of oil and natural gas properties, future financial condition and operating results, the identification of buyers and the successful negotiation of acceptable prices and other terms. 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 Form 10-K for the year ended December 31, 2011, 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.