AN OPEN LETTER TO OUR STAKEHOLDERS
Marathon Oil is proud to play a role in maintaining U.S. energy security and fueling the world in which we live. Being a safe, responsible and ethical operator, and being mindful of our neighbors and communities, is critical to our ability to run efficiently and create long-term value for shareholders.
At Marathon Oil, this is a foundational belief that’s rooted deep within our culture and forms the basis of our license to operate.
Sustainability Changes and Progress
Our corporate sustainability efforts inform our risk management process and strategy, and this 2018 Sustainability Report outlines the disciplined approach we take in all aspects of our business. For more than a decade, we’ve been proactively disclosing information through our annual sustainability report and it serves as the definitive source for our comprehensive efforts in this area. We’ve made deliberate changes to this report as we continuously seek to improve our disclosure and respond to stakeholder needs. There’s more work to do to meet our own high performance standards as well as our stakeholders’ expectations, but we’re making meaningful progress.
We know that our stakeholders are particularly attuned to environmental, social and governance issues, often referred to as “ESG.” This report is organized around these three concepts. This helps us prioritize and communicate our sustainability work better, even as we share perspectives on a diverse range of topics. In response to your interest in environmentally responsible operations, specifically global climate change and air quality, we’re expanding disclosures related to methane and other air emissions. We also will publish a separate climate report in 2019 consistent with the format advocated by TCFD (Task Force on Climate-related Financial Disclosures) to provide more detail about our governance, strategy, risk management and metrics related to climate risk. We’re also providing additional information on water management in this report.
Importantly, we recognize the growing interest in carbon-related policy initiatives and the role of alternative energy sources. We expect that oil and gas development will remain crucial to the world economy for the foreseeable future and part of a cleaner, stronger, all-of-the-above energy agenda. To that end, we’re constantly evaluating our business model, new technologies and industry innovations to ensure we’re taking steps to sustainably deliver energy that consumers need. For example, we’re adding saltwater disposal and additional pipeline for produced water to further reduce truck hauling and subsequent emissions, as well as doing a trial of water reuse for fracturing jobs. These examples illustrate how reducing our operational impact on the environment can also benefit our business by reducing costs and improving efficiency. In addition, we are a founding member of The Environmental Partnership, a voluntary industry effort focused on technologies and best practices to lower air emissions.
Highlights from Our Commitment to Safe, Responsible and Ethical Operations
Our sustainability achievements in 2018:
- We improved our safety performance, as evidenced by our 2018 Total Recordable Injury Rate (TRIR) of 0.53, a decrease of 17% compared to 2017.
- We achieved a 31% decrease in our methane intensity over a five-year period.
- We demonstrated leadership in industry efforts to adopt best practices to reduce seismic activity, and implemented plans to prevent and mitigate seismic activity in our operations in Oklahoma.
- We were named one of Houston’s Top Workplaces in the large company category in 2018 by The Houston Chronicle. This exemplifies our commitment to fostering an engaged workforce.
- As a leader in proactive community giving, our 2018 social investments in the U.S. totaled more than $3 million, with much of this going to education projects for literacy and STEM, and the balance directed toward economic development, health and conservation efforts in our surrounding communities.
- Our public-private Bioko Island Malaria Elimination Project (BIMEP) in Equatorial Guinea, now in its 15th year, continues to achieve life-saving, positive impacts in the country. The BIMEP’s malaria vaccine component progressed throught its trials, and it is hoped that the combination of control measures and the vaccine will eliminate malaria on Bioko Island.
Disciplined, Returns-First Performance
Turning to our financial performance, our business focused on delivering strong shareholder returns from our multi-basin portfolio, which is concentrated on the lowest-cost, highest-margin U.S. resource plays. Our objective in 2018 was to deliver sustainable free cash flow at conservative oil pricing and prioritize the return of cash back to our shareholders. While most in our peer group raised their capital budgets in response to higher oil prices in 2018, we never wavered. We returned over 25% of our net operating cash flow back to shareholders through our peer-competitive dividend and share repurchases. Our differentiated execution led the way across all four of our U.S. resource plays with successful organic enhancement efforts improving the returns of our already strong inventory of opportunities. Underpinning all of this was our peer-leading balance sheet that delivered the financial flexibility to progress our business plans across a broad range of price outcomes in a very volatile commodity environment. A strong leverage to oil coupled with a low enterprise break-even is a winning combination in any price environment, and we don’t take our performance for granted. Our communities also benefit from the high-quality jobs supported by oil and gas production, and hospitals, schools, homes and businesses maintain access to the energy they need. We seek to form lasting relationships with our communities by operating with integrity and maintaining strong values.
Our stakeholders – from investors and employees to regulatory agencies – want assurances that Marathon Oil will be profitable, safeguard our workforce, work to reduce our operational impacts on the environment, and contribute to the communities where we live and work. We are dedicated to meeting and exceeding these expectations as a responsible, responsive and successful E&P business. By living our values to collaborate, take ownership, be bold and deliver results, we believe we’re securing our future with strong operational, financial and nonfinancial performance through a business strategy guided by sustainability.
On behalf of Marathon Oil, I thank you for your interest in learning about our commitment to sustainability and our progress on our ESG disclosures and efforts. I also want to thank all stakeholders who work proactively with Marathon Oil every day to address issues, develop solutions and constantly improve our performance. We’re committed to continuing to set sustainability goals and make capital investments in ESG-relevant technology. This report was developed with you in mind, so we welcome any feedback you may have to help us continue to improve.
Chairman, President and CEO
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