Annual Report and Proxy
Dear Fellow Shareholders,
2017 was truly a pivotal year for Marathon Oil, as we solidified high quality, differentiated positions in the four lowest-cost, highest-margin U.S. oil plays. We made significant progress across every element of our playbook, and ended the year with a stronger balance sheet,
a lower cost structure, a more concentrated portfolio, and an outstanding track record of consistent execution across all our assets.
A remarkable 2017 has positioned us well for future success. We’ve transitioned from portfolio transformation to execution delivery at scale across our U.S. resource plays. Our 2018 capital allocation philosophy is fully consistent with how we managed the business in 2017, which is
to deliver a returns-focused program that balances cash flow with our CapEx and dividend, and achieves that at a moderate oil price of $50 WTI while generating meaningful free cash flow at $60. With over 90 percent of our 2018 development capital allocation associated with the U.S. resource plays, our margins will naturally expand as a greater percentage of our production is sourced from these high quality assets.
This margin expansion story, coupled with outstanding financial flexibility, will help drive improvements in corporate cash returns and cash flow per debt-adjusted share. Our actions will always be driven by seeking the greatest long-term value for our shareholders, while remaining steadfast in our core values that include first and foremost being a safe and responsible operator.
We thank all our dedicated employees and contractors who have made such a difference in 2017, driving execution excellence in every asset, every quarter. Their talent and innovation will continue to position us favorably to outperform the competition through 2018 and beyond.
Lee M. Tillman
President and Chief Executive Officer
Dennis H. Reilley
Chairman of the Board of Directors
This 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 2018 capital development program and the allocation thereof; returns, cash flow per debt adjusted share, cash flow, margins and asset quality.
While the Company believes that its assumptions concerning future events are reasonable, we can give no assurance that these expectations will prove to be correct. A number of factors could cause results to differ materially from those indicated by such forward-looking statements including, but not limited to: conditions in the oil and gas industry, including supply/demand levels for crude oil and condensate, NGLs, natural gas and synthetic crude oil and the resulting impact on price; changes in expected reserve or production levels; changes in political or economic conditions in the jurisdictions in which we operate, including changes in foreign currency exchange rates, interest rates, inflation rates, and global and domestic market conditions; risks relating to our hedging activities; capital available for exploration and development; drilling and operating risks; well production timing; availability of drilling rigs, materials and labor, including the costs associated therewith; difficulty in obtaining necessary approvals and permits; non-performance by third parties of their contractual obligations; unforeseen hazards such as weather conditions, acts of war or terrorist acts and the governmental or military response thereto; cyber-attacks; changes in safety, health, environmental, tax and other regulations; other geological, operating and economic considerations; and the risk factors, forwardlooking statements and challenges and uncertainties described in the Company’s 2017 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other public filings and press releases available at www.marathonoil.com. Except as required by law, the Company assumes no duty to revise or update any forward-looking statements whether as a result of new information, future events or otherwise.