Annual Report and Proxy
Dear Marathon Oil Corporation Stockholder,
While 2020 was a challenging year for our industry, we are proud of our continued execution of our transparent capital allocation framework that prioritizes free cash flow generation, balance sheet strength and return of capital to investors. Further, we are exceptionally pleased with our record setting safety performance as we successfully managed through the ongoing COVID-19 pandemic as critical essential infrastructure providers.
Marathon Oil is fully committed to best-in-class corporate governance as its foundation for executing its long-term strategy. We have reduced Board and executive compensation for 2021 and modified our framework to enhance alignment with stockholders, incentivize achievement of our core strategic objectives, and encourage the behaviors the Board believe are most likely to maximize long-term stockholder value.
We acknowledge our part in progressing the dual challenge of meeting the world’s energy demands while also addressing global climate goals and we believe our role requires a strategic and pragmatic commitment to innovative solutions for environmental progress. During 2020, we made significant progress in improving our environmental performance. Ultimately, we believe that the oil and gas industry is instrumental in enhancing quality of life and we believe that our products will continue to make up a significant portion of the energy mix even as we transition to a lower carbon future.
We were pleased to welcome two new directors in 2021 with the addition of Brent Smolik, former President and COO of Noble Energy and Holli Ladhani, former President and CEO of Select Energy. We would like to thank Greg Boyce and Doug Foshee for their service to Marathon Oil as they have both informed the board that they will not stand for reelection at our 2021 Annual Meeting. Greg has served as Independent Lead Director since 2019 and has been a board member since 2008.Doug has served as a director since 2018.
Your Board of Directors and management cordially invite you to attend our 2021 Annual Meeting of Stockholders. Due to the public health impact of the Coronavirus and to prioritize the health and safety of meeting participants, the 2021 Annual Meeting will be held virtually at www.virtualshareholdermeeting.com/MRO2021, on Wednesday, May 26, 2021, at 10:00 a.m. Central Time.
We value the communication we have established with our stockholders. We look forward to continuing to hear your views, and we ask for your continued support as we work to maximize the value of your investment in our Company.
We are making our proxy materials accessible online, which allows us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting. Please read the Proxy Statement for more information about how to access the proxy materials online.
On April 14, 2021, we plan to mail to our U.S. stockholders a notice explaining how to access our 2021 Proxy Statement and 2020 Annual Report, request a printed copy of these materials and vote online. All other stockholders will continue to receive copies of the Proxy Statement and Annual Report by mail.
Your vote is important. Whether or not you plan to attend the meeting, we encourage you to vote promptly so that your shares will be represented and properly voted at the meeting.
Dear fellow shareholders,
While 2020 was a challenging year for our industry, we are proud of our many accomplishments, especially our record setting safety performance as we successfully managed through the ongoing COVID-19 pandemic as critical essential infrastructure providers.
During 2020, Marathon Oil took aggressive and decisive action in response to a challenging commodity price and business environment. As a result, we successfully reduced our cash costs by more than 20% compared to 2019, protected our investment grade balance sheet, meaningfully improved our GHG emissions intensity, and ultimately generated sufficient free cash flow to fully fund $150 million of dividends and share repurchases and $100 million of gross debt reduction.
We believe continuously improving all elements of our environmental, social, and governance (ESG) performanceisessentialtosuccessfullyexecutingourlong-termstrategyofmaximizingshareholdervalue, includingthedeliveryofstrongfinancialreturnsandsustainablefreecashflowwhilemaintainingasolid balance sheet and returning capital to shareholders.
Marathon Oil views safety as a core value and a key component of our ESG performance. During 2020, we successfully managed through the ongoing COVID-19 pandemic with record setting safety performance, as measured by a total recordable incident rate (TRIR). This was Marathon Oil’s second consecutive year of record TRIR performance. Peer leading safety performance will remain a component of our executive compensation scorecard.
During 2020, Marathon Oil made significant progress in improving environmental performance, achieving a greater than 20% reduction in GHG emissions intensity relative to 2019 and improving total gas capture to approximately 98.5% for fourth quarter 2020. For 2021, we established a quantitative GHG intensity target, representing a reduction of more than 30% relative to 2019, which has been added to our executive compensation scorecard. Further, Marathon Oil announced a medium-term goal to reduce GHG intensity by at least 50% by 2025 relative to 2019, highlighting our commitment to significant ongoing improvement to environmental performance.
In addition, we remain committed to best-in-class corporate governance with actions such as modifying our executive compensation framework to enhance alignment with shareholders and incentivize achievement of our core strategic objectives. Specifically, for 2021,we reduced annual Board compensation by approximately 25% with the mix more heavily weighted toward equity, and reduced CEO total direct compensation by 25%, including a 35% reduction to long-term incentive awards.
As we turn to 2021 and beyond, Marathon Oil remains committed to delivering strong corporate returns and sustainable free cash flow. Marathon Oil announced a $1.0 billion capital expenditure budget for 2021 designed to continue prioritizing balance sheet enhancement and direct return of capital to investors, including a targeted $500 million gross debt reduction in 2021.
Finally, we would like to thank all of our dedicated employees and contractors who made 2020 another year of exceptional execution for our company.