Attached files
| file | filename |
|---|---|
| 8-K - MARATHON OIL CORPORATION FORM 8-K DATED JUNE 30, 2011. - MARATHON OIL CORP | form8k2011july7.htm |
Exhibit 99.1
MARATHON OIL CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On June 30, 2011, Marathon Oil Corporation (“Marathon”) completed the spin-off of our downstream (Refining, Marketing and Transportation) business, by creating two independent energy companies: Marathon Oil Corporation (“MRO”) and Marathon Petroleum Corporation (“MPC”). On June 30, 2011, stockholders of record as of the close of business on June 27, 2011 (the “Record Date”) received one common share of MPC stock for every two common shares of Marathon stock held as of the Record Date.
Prior to the completion of the spin-off, Marathon and MPC entered into a Separation and Distribution Agreement and other agreements that will govern the post-spin relationship. These agreements allow for a settlement process surrounding the transfer of certain assets and liabilities, for which future adjustments could occur as these transfers are resolved.
The unaudited pro forma consolidated financial data of Marathon presented below was derived from our historical consolidated financial statements and is being presented to give effect to the spin-off of our downstream business, which will be reported as a discontinued operation. The unaudited pro forma consolidated balance sheet assumes the spin-off of our downstream business occurred on March 31, 2011. The unaudited pro forma consolidated statements of income give effect to the spin-off of our downstream business as if the spin-off occurred on January 1, 2008. The following unaudited pro forma consolidated financial information should be read in conjunction with our historical financial statements and accompanying notes.
The pro forma adjustments are based on the best information available and assumptions that management believes are factually supportable and recurring. The unaudited pro forma consolidated information is for illustrative and informational purposes only and is not intended to reflect what our financial position and results of operations would have been had the spin-off occurred on the dates indicated and is not necessarily indicative of our future financial position and future results of operations.
The pro forma adjustments remove all of our downstream business assets, liabilities and results of operations, and give effect to the following items:
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·
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The elimination of interest and other financing costs (including loss on early debt extinguishment) related to the retirement of $2,498 million of long-term debt which occurred in February 2011;
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·
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A reduction of capitalized interest associated with lower interest expense;
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·
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An adjustment to cash required to establish an initial cash balance of approximately $1,625 million for MPC (based on the Separation and Distribution Agreement);
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·
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The reduction in interest income earned as a result of the established MPC $1,625 million cash balance (only reflected in periods ended March 31, 2011 and December 31, 2010);
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·
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Reclassification of crude oil sales to MPC and the related cost of revenues previously eliminated in consolidation as third party transactions, as such sales will continue after the spin-off;
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·
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Reclassification of accounts receivable from and payable to MPC previously eliminated in consolidation as third party accounts receivable and payable;
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·
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An adjustment to reclassify the remaining tax balances after the spin-off of MPC on the balance sheet.
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Our unaudited pro forma consolidated statements of income do not include adjustments for all of the costs of operating after the spin-off of our downstream business, since they are not factually supportable and recurring. Transaction costs that were incurred to affect the spin-off of $17 million for the three months ended March 31, 2011, are reflected in the Spin-off of MPC column in the pro forma consolidated statement of income ($12 million in net interest and other; $5 million in selling, general and administrative expenses). There are no transaction costs included in the consolidated statements of income for the three months ended March 31, 2010 or the year ended December 31, 2010.
1
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MARATHON OIL CORPORATION
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||||||||||||||
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PRO FORMA CONSOLIDATED STATEMENT OF INCOME (Unaudited)
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||||||||||||||
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For the Three Months ended March 31, 2011
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||||||||||||||
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Spin-off
|
Pro Forma
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|||||||||||||
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(In millions, except per share data)
|
Historical
|
of MPC
|
Adjustments
|
Pro Forma
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||||||||||
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Revenues and other income:
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||||||||||||||
|
Sales and other operating revenues (including consumer excise taxes)
|
$ | 20,867 | (17,819 | ) | 608 |
(a)
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$ | 3,656 | ||||||
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Sales to related parties
|
37 | (22 | ) | - | 15 | |||||||||
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Income from equity method investments
|
126 | (9 | ) | - | 117 | |||||||||
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Net gain on disposal of assets
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6 | (1 | ) | - | 5 | |||||||||
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Other income
|
35 | (19 | ) | - | 16 | |||||||||
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Total revenues and other income
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21,071 | (17,870 | ) | 608 | 3,809 | |||||||||
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Costs and expenses:
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||||||||||||||
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Cost of revenues (excludes items below)
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16,023 | (15,227 | ) | 608 |
(a)
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1,404 | ||||||||
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Purchases from related parties
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179 | (123 | ) | - | 56 | |||||||||
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Consumer excise taxes
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1,209 | (1,209 | ) | - | - | |||||||||
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Depreciation, depletion and amortization
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852 | (217 | ) | - | 635 | |||||||||
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Selling, general and administrative expenses
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353 | (216 | ) | - | 137 | |||||||||
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Other taxes
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122 | (64 | ) | - | 58 | |||||||||
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Exploration expenses
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230 | - | - | 230 | ||||||||||
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Total costs and expenses
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18,968 | (17,056 | ) | 608 | 2,520 | |||||||||
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Income from operations
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2,103 | (814 | ) | - | 1,289 | |||||||||
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Net interest and other
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(65 | ) | 46 | 5 |
(b)
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(14 | ) | |||||||
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Loss on early extinguishment of debt
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(279 | ) | - | 279 |
(c)
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- | ||||||||
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Income from continuing operations before income taxes
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1,759 | (768 | ) | 284 | 1,275 | |||||||||
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Provision for income taxes
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763 | (227 | ) | 102 |
(d)
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638 | ||||||||
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Net income from continuing operations
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$ | 996 | (541 | ) | 182 | $ | 637 | |||||||
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Per Share Data
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Earnings per share
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||||||||||||||
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Basic
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$ | 1.40 | $ | 0.90 | ||||||||||
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Diluted
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$ | 1.39 | $ | 0.89 | ||||||||||
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Shares outstanding
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||||||||||||||
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Basic
|
711 | 711 | ||||||||||||
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Diluted
|
715 | 715 | ||||||||||||
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See accompanying notes to the unaudited pro forma consolidated financial statements.
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2
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MARATHON OIL CORPORATION
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PRO FORMA CONSOLIDATED STATEMENT OF INCOME (Unaudited)
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For the Three Months ended March 31, 2010
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Spin-off
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Pro Forma
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|||||||||||||
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(In millions, except per share data)
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Historical
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of MPC
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Adjustments
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Pro Forma
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||||||||||
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Revenues and other income:
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||||||||||||||
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Sales and other operating revenues (including consumer excise taxes)
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$ | 15,694 | (13,337 | ) | 298 |
(a)
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$ | 2,655 | ||||||
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Sales to related parties
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20 | (8 | ) | - | 12 | |||||||||
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Income from equity method investments
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105 | (20 | ) | - | 85 | |||||||||
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Net gain on disposal of assets
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813 | (1 | ) | - | 812 | |||||||||
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Other income
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33 | (8 | ) | - | 25 | |||||||||
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Total revenues and other income
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16,665 | (13,374 | ) | 298 | 3,589 | |||||||||
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Costs and expenses:
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||||||||||||||
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Cost of revenues (excludes items below)
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12,726 | (11,977 | ) | 298 |
(a)
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1,047 | ||||||||
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Purchases from related parties
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133 | (93 | ) | - | 40 | |||||||||
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Consumer excise taxes
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1,212 | (1,212 | ) | - | - | |||||||||
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Depreciation, depletion and amortization
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649 | (219 | ) | - | 430 | |||||||||
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Long-lived asset impairment
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434 | - | - | 434 | ||||||||||
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Selling, general and administrative expenses
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298 | (196 | ) | - | 102 | |||||||||
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Other taxes
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115 | (66 | ) | - | 49 | |||||||||
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Exploration expenses
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98 | - | - | 98 | ||||||||||
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Total costs and expenses
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15,665 | (13,763 | ) | 298 | 2,200 | |||||||||
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Income from operations
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1,000 | 389 | - | 1,389 | ||||||||||
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Net interest and other
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(30 | ) | 8 | 8 |
(b)
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(14 | ) | |||||||
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Income from continuing operations before income taxes
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970 | 397 | 8 | 1,375 | ||||||||||
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Provision for income taxes
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513 | 212 | 3 |
(d)
|
728 | |||||||||
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Net income from continuing operations
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$ | 457 | 185 | 5 | $ | 647 | ||||||||
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Per Share Data
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Earnings per share
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||||||||||||||
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Basic
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$ | 0.64 | $ | 0.91 | ||||||||||
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Diluted
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$ | 0.64 | $ | 0.91 | ||||||||||
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Shares outstanding
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||||||||||||||
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Basic
|
709 | 709 | ||||||||||||
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Diluted
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711 | 711 | ||||||||||||
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See accompanying notes to the unaudited pro forma consolidated financial statements.
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3
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MARATHON OIL CORPORATION
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PRO FORMA CONSOLIDATED STATEMENT OF INCOME (Unaudited)
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For the Year Ended December 31, 2010
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Spin-off
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Pro Forma
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|||||||||||||
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(In millions, except per share data)
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Historical
|
of MPC
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Adjustments
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Pro Forma
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||||||||||
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Revenues and other income:
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||||||||||||||
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Sales and other operating revenues (including consumer excise taxes)
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$ | 72,204 | (62,387 | ) | 1,817 |
(a)
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$ | 11,634 | ||||||
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Sales to related parties
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117 | (61 | ) | - | 56 | |||||||||
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Income from equity method investments
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414 | (70 | ) | - | 344 | |||||||||
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Net gain on disposal of assets
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777 | (11 | ) | - | 766 | |||||||||
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Other income
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109 | (36 | ) | - | 73 | |||||||||
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Total revenues and other income
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73,621 | (62,565 | ) | 1,817 | 12,873 | |||||||||
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Costs and expenses:
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||||||||||||||
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Cost of revenues (excludes items below)
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56,734 | (53,765 | ) | 1,817 |
(a)
|
4,786 | ||||||||
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Purchases from related parties
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624 | (452 | ) | - | 172 | |||||||||
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Consumer excise taxes
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5,208 | (5,208 | ) | - | - | |||||||||
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Depreciation, depletion and amortization
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2,965 | (909 | ) | - | 2,056 | |||||||||
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Long-lived asset impairment
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479 | (32 | ) | - | 447 | |||||||||
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Selling, general and administrative expenses
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1,363 | (872 | ) | - | 491 | |||||||||
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Other taxes
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433 | (234 | ) | - | 199 | |||||||||
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Exploration expenses
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498 | - | - | 498 | ||||||||||
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Total costs and expenses
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68,304 | (61,472 | ) | 1,817 | 8,649 | |||||||||
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Income from operations
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5,317 | (1,093 | ) | - | 4,224 | |||||||||
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Net interest and other
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(103 | ) | 28 | 43 |
(b)
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(32 | ) | |||||||
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Loss on early extinguishment of debt
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(92 | ) | - | - | (92 | ) | ||||||||
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Income from continuing operations before income taxes
|
5,122 | (1,065 | ) | 43 | 4,100 | |||||||||
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Provision for income taxes
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2,554 | (404 | ) | 15 |
(d)
|
2,165 | ||||||||
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Net income from continuing operations
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$ | 2,568 | (661 | ) | 28 | $ | 1,935 | |||||||
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Per Share Data
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||||||||||||||
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Earnings per share
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||||||||||||||
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Basic
|
$ | 3.62 | $ | 2.73 | ||||||||||
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Diluted
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$ | 3.61 | $ | 2.72 | ||||||||||
|
Shares outstanding
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||||||||||||||
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Basic
|
710 | 710 | ||||||||||||
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Diluted
|
712 | 712 | ||||||||||||
|
See accompanying notes to the unaudited pro forma consolidated financial statements.
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4
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MARATHON OIL CORPORATION
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||||||||||||||
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PRO FORMA CONSOLIDATED STATEMENT OF INCOME (Unaudited)
|
||||||||||||||
|
For the Year Ended December 31, 2009
|
||||||||||||||
|
Spin-off
|
Pro Forma
|
|||||||||||||
|
(In millions, except per share data)
|
Historical
|
of MPC
|
Adjustments
|
Pro Forma
|
||||||||||
|
Revenues and other income:
|
||||||||||||||
|
Sales and other operating revenues (including consumer excise taxes)
|
$ | 53,190 | (45,461 | ) | 736 |
(a)
|
$ | 8,465 | ||||||
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Sales to related parties
|
97 | (38 | ) | - | 59 | |||||||||
|
Income from equity method investments
|
298 | (30 | ) | - | 268 | |||||||||
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Net gain on disposal of assets
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205 | (3 | ) | - | 202 | |||||||||
|
Other income
|
166 | (76 | ) | - | 90 | |||||||||
|
Total revenues and other income
|
53,956 | (45,608 | ) | 736 | 9,084 | |||||||||
|
Costs and expenses:
|
||||||||||||||
|
Cost of revenues (excludes items below)
|
40,377 | (37,943 | ) | 736 |
(a)
|
3,170 | ||||||||
|
Purchases from related parties
|
485 | (339 | ) | - | 146 | |||||||||
|
Consumer excise taxes
|
4,924 | (4,924 | ) | - | - | |||||||||
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Depreciation, depletion and amortization
|
2,604 | (670 | ) | - | 1,934 | |||||||||
|
Long-lived asset impairment
|
19 | (1 | ) | - | 18 | |||||||||
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Selling, general and administrative expenses
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1,263 | (812 | ) | - | 451 | |||||||||
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Other taxes
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387 | (214 | ) | - | 173 | |||||||||
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Exploration expenses
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307 | - | - | 307 | ||||||||||
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Total costs and expenses
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50,366 | (44,903 | ) | 736 | 6,199 | |||||||||
|
Income from operations
|
3,590 | (705 | ) | - | 2,885 | |||||||||
|
Net interest and other
|
(149 | ) | 27 | 25 |
(b)
|
(97 | ) | |||||||
|
Income from continuing operations before income taxes
|
3,441 | (678 | ) | 25 | 2,788 | |||||||||
|
Provision for income taxes
|
2,257 | (210 | ) | 9 |
(d)
|
2,056 | ||||||||
|
Net income from continuing operations
|
$ | 1,184 | (468 | ) | 16 | $ | 732 | |||||||
|
Per Share Data
|
||||||||||||||
|
Earnings per share
|
||||||||||||||
|
Basic
|
$ | 1.67 | $ | 1.03 | ||||||||||
|
Diluted
|
$ | 1.67 | $ | 1.03 | ||||||||||
|
Shares outstanding
|
||||||||||||||
|
Basic
|
709 | 709 | ||||||||||||
|
Diluted
|
711 | 711 | ||||||||||||
|
See accompanying notes to the unaudited pro forma consolidated financial statements.
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||||||||||||||
5
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MARATHON OIL CORPORATION
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||||||||||||||
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PRO FORMA CONSOLIDATED STATEMENT OF INCOME (Unaudited)
|
||||||||||||||
|
For the Year Ended December 31, 2008
|
||||||||||||||
|
Spin-off
|
Pro Forma
|
|||||||||||||
|
(In millions, except per share data)
|
Historical
|
of MPC
|
Adjustments
|
Pro Forma
|
||||||||||
|
Revenues and other income:
|
||||||||||||||
|
Sales and other operating revenues (including consumer excise taxes)
|
$ | 74,710 | (62,445 | ) | 845 |
(a)
|
$ | 13,110 | ||||||
|
Sales to related parties
|
1,879 | (1,827 | ) | - | 52 | |||||||||
|
Income from equity method investments
|
765 | (138 | ) | - | 627 | |||||||||
|
Net gain on disposal of assets
|
423 | (152 | ) | - | 271 | |||||||||
|
Other income
|
188 | (47 | ) | - | 141 | |||||||||
|
Total revenues and other income
|
77,965 | (64,609 | ) | 845 | 14,201 | |||||||||
|
Costs and expenses:
|
||||||||||||||
|
Cost of revenues (excludes items below)
|
59,512 | (55,386 | ) | 845 |
(a)
|
4,971 | ||||||||
|
Purchases from related parties
|
715 | (475 | ) | - | 240 | |||||||||
|
Consumer excise taxes
|
5,065 | (5,065 | ) | - | - | |||||||||
|
Depreciation, depletion and amortization
|
2,108 | (595 | ) | - | 1,513 | |||||||||
|
Long-lived asset impairment
|
21 | (12 | ) | - | 9 | |||||||||
|
Goodwill impairment
|
1,412 | - | - | 1,412 | ||||||||||
|
Selling, general and administrative expenses
|
1,382 | (941 | ) | - | 441 | |||||||||
|
Other taxes
|
482 | (189 | ) | - | 293 | |||||||||
|
Exploration expenses
|
489 | - | - | 489 | ||||||||||
|
Total costs and expenses
|
71,186 | (62,663 | ) | 845 | 9,368 | |||||||||
|
Income from operations
|
6,779 | (1,946 | ) | - | 4,833 | |||||||||
|
Net interest and other
|
(28 | ) | 5 | 82 |
(b)
|
59 | ||||||||
|
Income from continuing operations before income taxes
|
6,751 | (1,941 | ) | 82 | 4,892 | |||||||||
|
Provision for income taxes
|
3,367 | (749 | ) | 30 |
(d)
|
2,648 | ||||||||
|
Net income from continuing operations
|
$ | 3,384 | (1,192 | ) | 52 | $ | 2,244 | |||||||
|
Per Share Data
|
||||||||||||||
|
Earnings per share
|
||||||||||||||
|
Basic
|
$ | 4.77 | $ | 3.16 | ||||||||||
|
Diluted
|
$ | 4.75 | $ | 3.15 | ||||||||||
|
Shares outstanding
|
||||||||||||||
|
Basic
|
709 | 709 | ||||||||||||
|
Diluted
|
713 | 713 | ||||||||||||
|
See accompanying notes to the unaudited pro forma consolidated financial statements.
|
||||||||||||||
6
|
MARATHON OIL CORPORATION
|
||||||||||||||
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PRO FORMA CONSOLIDATED BALANCE SHEET (Unaudited)
|
||||||||||||||
|
As of March 31, 2011
|
||||||||||||||
|
(In millions, except for share data)
|
Historical
|
Spin-off MPC
|
Pro Forma Adjustments
|
Pro Forma
|
||||||||||
|
Assets
|
||||||||||||||
|
Current Assets:
|
||||||||||||||
|
Cash and cash equivalents
|
$ | 5,716 | (1,801 | ) | 176 |
(e)
|
$ | 4,091 | ||||||
|
Receivables, less allowance for doubtful accounts
|
6,498 | (4,748 | ) | 262 |
(f)
|
2,012 | ||||||||
|
Receivables from related parties
|
59 | (6 | ) | - | 53 | |||||||||
|
Inventories
|
3,088 | (2,728 | ) | - | 360 | |||||||||
|
Other current assets
|
414 | (108 | ) | 149 |
(g)
|
455 | ||||||||
|
Total current assets
|
15,775 | (9,391 | ) | 587 | 6,971 | |||||||||
|
Equity method investments
|
1,846 | (316 | ) | - | 1,530 | |||||||||
|
Property, plant and equipment less accumulated depreciation, depletion and amortization
|
32,189 | (11,757 | ) | - | 20,432 | |||||||||
|
Goodwill
|
1,376 | (839 | ) | - | 537 | |||||||||
|
Other noncurrent assets
|
679 | (361 | ) | 534 |
(g)
|
852 | ||||||||
|
Total assets
|
$ | 51,865 | (22,664 | ) | 1,121 | $ | 30,322 | |||||||
|
Liabilities
|
||||||||||||||
|
Current Liabilities:
|
||||||||||||||
|
Accounts payable
|
$ | 8,341 | (6,766 | ) | 1 |
(f)
|
$ | 1,576 | ||||||
|
Payables to related parties
|
63 | (33 | ) | - | 30 | |||||||||
|
Payroll and benefits payable
|
359 | (228 | ) | - | 131 | |||||||||
|
Accrued and deferred taxes
|
2,077 | (539 | ) | 149 |
(g)
|
1,687 | ||||||||
|
Other current liabilities
|
593 | (417 | ) | - | 176 | |||||||||
|
Long-term debt due within one year
|
349 | (12 | ) | - | 337 | |||||||||
|
Total current liabilities
|
11,782 | (7,995 | ) | 150 | 3,937 | |||||||||
|
Long-term debt
|
7,992 | (3,265 | ) | - | 4,727 | |||||||||
|
Deferred income taxes
|
3,333 | (1,391 | ) | 534 |
(g)
|
2,476 | ||||||||
|
Defined benefit postretirement plan obligations
|
2,199 | (1,520 | ) | - | 679 | |||||||||
|
Asset retirement obligations
|
1,368 | (49 | ) | - | 1,319 | |||||||||
|
Deferred credits and other liabilities
|
486 | (232 | ) | - | 254 | |||||||||
|
Total liabilities
|
27,160 | (14,452 | ) | 684 | 13,392 | |||||||||
|
Commitments and contingencies
|
||||||||||||||
|
Stockholders' Equity
|
||||||||||||||
|
Preferred Stock - no shares issued and outstanding (no par value, 26 million shares authorized)
|
- | - | - | - | ||||||||||
|
Common Stock:
|
||||||||||||||
|
Issued - 770 million shares (par value $1 per share, 1.1 billion shares authorized)
|
770 | - | - | 770 | ||||||||||
|
Securities exchangeable into common stock - no shares issued and outstanding (no par value, 29 million shares authorized)
|
- | - | - | - | ||||||||||
|
Held in treasury, at cost - 58 million shares
|
(2,582 | ) | - | - | (2,582 | ) | ||||||||
|
Additional paid-in-capital
|
6,763 | (5 | ) | - | 6,758 | |||||||||
|
Retained earnings
|
20,725 | (8,840 | ) | 437 |
(e)(f)
|
12,322 | ||||||||
|
Accumulated other comprehensive loss
|
(971 | ) | 633 | - | (338 | ) | ||||||||
|
Total stockholders' equity
|
24,705 | (8,212 | ) | 437 | 16,930 | |||||||||
|
Total liabilities and stockholders' equity
|
$ | 51,865 | (22,664 | ) | 1,121 | $ | 30,322 | |||||||
|
See accompanying notes to the unaudited pro forma consolidated financial statements.
|
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7
MARATHON OIL CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
|
(a)
|
Represents the reclassification of crude oil sales to MPC and the related cost of revenues previously eliminated in consolidation as third party since such sales will continue after the spin-off.
|
|
(b)
|
Reflects the elimination of interest expense, other financing costs related to $2,498 million of long-term debt which Marathon retired (weighted average interest rates below) in February 2011, the reduction of capitalized interest as a result of lower interest expense and the reduction of interest income (average federal funds interest rate 0.16% for the three months ended March 31, 2011 and 0.18% for the year ended December 31, 2010 only) related to the $1,625 million initial cash balance established for MPC (per the Separation and Distribution Agreement). Detail for this adjustment follows:
|
|
(dollars in millions)
|
3/31/2011
|
3/31/2010
|
12/31/2010
|
12/31/2009
|
12/31/2008
|
||||||||||||||||
|
Weighted average interest rate of retired debt
|
6.0 | % | 5.8 | % | 5.8 | % | 6.1 | % | 6.8 | % | |||||||||||
|
Interest expense and other financing costs
|
$ | 22 | $ | 40 | $ | 161 | $ | 132 | $ | 84 | |||||||||||
|
Capitalized interest
|
(16 | ) | (32 | ) | (115 | ) | (107 | ) | (2 | ) | |||||||||||
|
Interest income
|
(1 | ) | - | (3 | ) | - | - | ||||||||||||||
|
TOTAL
|
$ | 5 | $ | 8 | $ | 43 | $ | 25 | $ | 82 | |||||||||||
|
(c)
|
Reflects the loss on the early extinguishment of debt related to the $2,498 million of long-term debt retired in February 2011.
|
|
(d)
|
Represents the tax effect of the pro forma adjustments to income using a statutory rate of 36% for all periods.
|
|
(e)
|
Represents an adjustment to the Spin-Off MPC cash balance to establish an initial MPC cash balance of approximately $1,625 million.
|
|
(f)
|
Represents accounts receivable from and payable to MPC previously eliminated in consolidation as third party accounts receivable and payable.
|
|
(g)
|
Represents the adjustment to reclassify the remaining tax balances after the spin-off of MPC on the balance sheet.
|
8