MARATHON OIL CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 PROFORMA FINANCIAL STATEMENTS - June 5, 2017

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Exhibit 99.1
MARATHON OIL CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
 
On May 31, 2017, Marathon Oil Corporation (the "Corporation") completed the sale of its shares in its wholly owned subsidiary Marathon Oil Corporation Canada (the "Canadian business"), which includes the Corporation's 20 percent non-operated interest in the Athabasca Oil Sands Project, to 10084751 Canada Limited ("Shell"), an affiliate of Shell Canada Limited, and Canadian Natural Resources Limited ("CNRL" and, together with Shell, the "Purchasers") for proceeds of approximately $2.5 billion, before closing adjustments. Under the terms of the share purchase agreement, approximately $1.75 billion was paid to the Corporation upon closing and the remaining $750 million in proceeds will be paid in the first quarter of 2018. The effective date of the transaction is January 1, 2017. Full-year 2016 net synthetic crude oil production in the Canadian business averaged approximately 48,000 net barrels per day. Marathon Oil Corporation Canada and Shell Canada Limited are both party to the Athabasca Oil Sands Project joint venture and related agreements.
Our Form 10-Q for the quarterly period ended March 31, 2017 reflected the Canadian business as discontinued operations for all periods presented in the consolidated statements of income and reflected the Canadian assets and liabilities as held for sale in the March 31, 2017 consolidated balance sheet for all periods presented.
Our unaudited pro forma consolidated financial data was derived from our historical consolidated financial statements. The unaudited pro forma consolidated balance sheet assumes the disposition of the Canadian business occurred on March 31, 2017. The unaudited pro forma consolidated statements of income give effect to the disposition of the Canadian business as if the disposition occurred on January 1, 2014. The following unaudited pro forma consolidated financial information should be read in conjunction with our historical financial statements and notes, and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017, and our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
The pro forma adjustments are based on the best information available and assumptions that management believes are factually supportable and reasonable; however, such adjustments are subject to change. In addition, such adjustments are estimates. The unaudited pro forma consolidated information is for illustrative and informational purposes only and is not intended to reflect what our consolidated financial position and results of operations would have been had the disposition occurred on the dates indicated and is not necessarily indicative of our future consolidated financial position and results of operations.
The pro forma adjustments remove all of the Canadian business’ assets, liabilities and results of operations, and give effect to an adjustment to reflect the net cash proceeds and loss from the sale of the Canadian business.





MARATHON OIL CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (Unaudited)
For the Year ended December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
(In millions, except per share data)
Historical
 
Disposition (a)
 
Pro Forma
Revenues and other income:
 
 
 
 
 
   Sales and other operating revenues, including related party
$
3,753

 
$
(823
)
 
$
2,930

   Marketing revenues
278

 
(38
)
 
240

   Income from equity method investments
175

 
—

 
175

   Net gain on disposal of assets
389

 
—

 
389

   Other income
55

 
(2
)
 
53

             Total revenues and other income
4,650

 
(863
)
 
3,787

Costs and expenses:
 

 
 

 


   Production
1,313

 
(601
)
 
712

   Marketing, including purchases from related parties
282

 
(37
)
 
245

   Other operating
511

 
(27
)
 
484

   Exploration
330

 
(7
)
 
323

   Depreciation, depletion and amortization
2,395

 
(239
)
 
2,156

   Impairments
67

 
—

 
67

   Taxes other than income
168

 
(17
)
 
151

   General and administrative
484

 
(3
)
 
481

            Total costs and expenses
5,550

 
(931
)
 
4,619

 
 

 
 

 


Loss from operations
(900
)
 
68

 
(832
)
   Net interest and other
(335
)
 
3

 
(332
)
Loss from continuing operations before income taxes
(1,235
)
 
71

 
(1,164
)
   Provision for income taxes
905

 
18

 
923

Loss from continuing operations
$
(2,140
)
 
$
53

 
$
(2,087
)
 
 

 
 

 
 

Per Share Data
 

 
 

 
 

 
 

 
 

 
 

Loss from continuing operations
 

 
 

 
 

         Basic
$
(2.61
)
 
 

 
$
(2.55
)
         Diluted
$
(2.61
)
 
 

 
$
(2.55
)
 
 
 
 
 
 
Weighted average shares
 
 
 
 
 
         Basic
819

 
 

 
819

         Diluted
819

 
 

 
819

See accompanying notes to the unaudited pro forma consolidated financial statements.






MARATHON OIL CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (Unaudited)
For the Year ended December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
(In millions, except per share data)
Historical
 
Disposition (a)
 
Pro Forma
Revenues and other income:
 
 
 
 
 
   Sales and other operating revenues, including related party
$
4,951

 
$
(815
)
 
$
4,136

   Marketing revenues
571

 
(72
)
 
499

   Income from equity method investments
145

 
—

 
145

   Net gain on disposal of assets
120

 
—

 
120

   Other income
74

 
(21
)
 
53

             Total revenues and other income
5,861

 
(908
)
 
4,953

Costs and expenses:
 

 
 

 
 
   Production
1,694

 
(715
)
 
979

   Marketing, including purchases from related parties
569

 
(69
)
 
500

   Other operating
438

 
(28
)
 
410

   Exploration
1,318

 
(347
)
 
971

   Depreciation, depletion and amortization
2,957

 
(236
)
 
2,721

   Impairments
752

 
(31
)
 
721

   Taxes other than income
234

 
(18
)
 
216

   General and administrative
590

 
(2
)
 
588

            Total costs and expenses
8,552

 
(1,446
)
 
7,106

 
 

 
 

 
 
Loss from operations
(2,691
)
 
538

 
(2,153
)
   Net interest and other
(267
)
 
(19
)
 
(286
)
Loss from continuing operations before income taxes
(2,958
)
 
519

 
(2,439
)
   Provision (benefit) for income taxes
(754
)
 
16

(b) 
(738
)
Loss from continuing operations
$
(2,204
)
 
$
503

 
$
(1,701
)
 
 

 
 

 
 

Per Share Data
 

 
 

 
 

 
 

 
 

 
 

Loss from continuing operations
 

 
 

 
 

         Basic
$
(3.26
)
 
 

 
$
(2.51
)
         Diluted
$
(3.26
)
 
 

 
$
(2.51
)
 
 

 
 

 
 

Weighted average shares
 
 
 
 
 
         Basic
677

 
 

 
677

         Diluted
677

 
 

 
677

See accompanying notes to the unaudited pro forma consolidated financial statements.







MARATHON OIL CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (Unaudited)
For the Year ended December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
(In millions, except per share data)
Historical
 
Disposition (a)
 
Pro Forma
Revenues and other income:
 
 
 
 
 
   Sales and other operating revenues, including related party
$
8,736

 
$
(1,556
)
 
$
7,180

   Marketing revenues
2,110

 
(52
)
 
2,058

   Income from equity method investments
424

 
—

 
424

   Net loss on disposal of assets
(90
)
 
—

 
(90
)
   Other income
78

 
(4
)
 
74

             Total revenues and other income
11,258

 
(1,612
)
 
9,646

Costs and expenses:
 

 
 

 
 
   Production
2,246

 
(968
)
 
1,278

   Marketing, including purchases from related parties
2,105

 
(52
)
 
2,053

   Other operating
462

 
(40
)
 
422

   Exploration
793

 
(1
)
 
792

   Depreciation, depletion and amortization
2,861

 
(206
)
 
2,655

   Impairments
132

 
—

 
132

   Taxes other than income
406

 
(20
)
 
386

   General and administrative
654

 
(3
)
 
651

            Total costs and expenses
9,659

 
(1,290
)
 
8,369

 
 

 
 

 
 
Income from operations
1,599

 
(322
)
 
1,277

   Net interest and other
(238
)
 
(18
)
 
(256
)
Income from continuing operations before income taxes
1,361

 
(340
)
 
1,021

   Provision for income taxes
392

 
(81
)
 
311

Income from continuing operations
$
969

 
$
(259
)
 
$
710

 
 

 
 

 
 

Per Share Data
 

 
 

 
 

 
 

 
 

 
 

Income from continuing operations
 

 
 

 
 

         Basic
$
1.42

 
 
 
$
1.04

         Diluted
$
1.42

 
 
 
$
1.04

 
 
 
 
 
 
Weighted average shares
 
 
 
 
 
         Basic
680

 
 

 
680

         Diluted
683

 
 

 
683

See accompanying notes to the unaudited pro forma consolidated financial statements.







MARATHON OIL CORPORATION

PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
As of March 31, 2017
 
 
 
 
 
 
(In millions, except per share data)
Historical
 
Disposition
 
Pro Forma
Assets
 
 
 
 
 
Current Assets:
 
 
 
 
 
     Cash and cash equivalents
$
2,490

 
$
1,822

(c) 
$
4,312

     Receivables, less reserve of $5
751

 
741

(d) 
1,492

     Inventories
145

 
—

 
145

     Other current assets
134

 
—

 
134

     Current assets held for sale
223

 
(222
)
(e) 
1

          Total current assets
3,743

 
2,341

 
6,084

Equity method investments
906

 
—

 
906

Property, plant and equipment less accumulated depreciation, depletion and amortization of $20,692
16,533

 
—

 
16,533

Goodwill
115

 
—

 
115

Other noncurrent assets
698

 
—

 
698

Noncurrent assets held for sale
2,542

 
(2,541
)
(e) 
1

          Total assets
$
24,537

 
$
(200
)
 
$
24,337

Liabilities
 

 
 
 
 

Current Liabilities:
 

 
 
 
 

     Accounts payable
$
1,081

 
$
—

 
$
1,081

Payroll and benefits payable
70

 
—

 
70

     Accrued taxes
81

 
—

 
81

     Other current liabilities
222

 
—

 
222

     Long-term debt due within one year
1,541

 
—

 
1,541

     Current liabilities held for sale
104

 
(104
)
(e) 
—

          Total current liabilities
3,099

 
(104
)
 
2,995

Long-term debt
5,723

 
—

 
5,723

Deferred tax liabilities
800

 
—

 
800

Defined benefit postretirement plan obligations
365

 
—

 
365

Asset retirement obligations
1,622

 
—

 
1,622

Deferred credits and other liabilities
221

 
—

 
221

Noncurrent liabilities held for sale
123

 
(116
)
(e) 
7

          Total liabilities
11,953

 
(220
)
 
11,733

Commitments and contingencies
 

 
 
 
 

Stockholders' Equity
 

 
 
 
 

Preferred Stock - no shares issued and outstanding (no par value, 26 million shares authorized)
—

 
—

 
—

Common stock:
 
 
 
 

Issued - 937 million shares (par value $1 per share, 1.1 billion shares authorized)
937

 
—

 
937

Securities exchangeable into common stock - no shares issued or outstanding (no par value, 29 million shares authorized)
—

 
—

 
—

Held in treasury, at cost - 87 million shares
(3,314
)
 
—

 
(3,314
)
Additional paid-in-capital
7,336

 
—

 
7,336

Retained earnings
7,673

 
20

(f) 
7,693

Accumulated other comprehensive loss
(48
)
 
—

 
(48
)
          Total stockholders' equity
12,584

 
20

 
12,604

          Total liabilities and stockholders' equity
$
24,537

 
$
(200
)
 
$
24,337

See accompanying notes to the unaudited pro forma consolidated financial statements.







MARATHON OIL CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 
(a)  
Amounts reflect the pro forma effect of eliminating the results of operations of our Canadian business for the years ended December 31, 2016, 2015 and 2014 from the presentation of continuing operations in the unaudited pro forma consolidated statements of income.
(b)
Includes $135 million of deferred tax expense related to Alberta provincial corporate tax rate increase.
(c)  
Represents net cash proceeds received at closing from the sale of our Canadian business, including $72 million related to closing adjustments.
(d)
Represents the estimated fair value of the remaining net cash proceeds from the sale of our Canadian business to be received in the first quarter of 2018.
(e)
Represents the removal of the assets and liabilities held for sale from the balance sheet.
(f)
Represents the non-recurring estimated loss on sale that would have been recorded if we had completed the Canadian business sale on March 31, 2017.



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