Exploration and Production
In the Gulf of Mexico, the Petronius production facility resumed operation in March. Petronius production had been shut-in for nearly six months due to weather-related damage from Hurricane Ivan. Currently, Petronius is producing at pre-Ivan levels of approximately 25,000 net boepd. Upstream segment income for the quarter will also include a positive income benefit of approximately $35 million for business interruption insurance recoveries net of damage accruals related to Petronius.
While crude oil and natural gas market price indicators have remained strong during the first quarter, actual price realizations continued to be negatively impacted by wide differentials. During the first quarter, approximately 80 percent of Marathon's domestic crude oil production was comprised of sour crudes. Marathon's actual crude oil and natural gas price realizations also vary from these market indicators primarily due to other product quality and location differentials.
Exploration expense for the first quarter is now estimated to be in the range of approximately $35-45 million. U.S. exploration expense is estimated to be $15-20 million, and international exploration expense is estimated to be $20-25 million.
During the first quarter 2005, the 18-month forward gas price curve in the United Kingdom strengthened compared to the fourth quarter 2004 resulting in an estimated $57 million, non-cash mark-to-market loss in the first quarter on two long-term gas sales contracts related to Marathon's Brae gas production.
Due to the volatility of the forward gas sales curve in the United Kingdom, Marathon will continue to exclude these non-cash mark-to-market gains and losses related to these United Kingdom contracts from "net income adjusted for special items."
Refining, Marketing and Transportation
Crude run rates remained strong in January and February averaging nearly 928,000 barrels per day (bpd). The company estimates that crude runs for the quarter will average approximately 920,000 bpd.
The Speedway SuperAmerica LLC gasoline and distillate gross margin has averaged $.1067 per gallon in the first two months of the first quarter 2005, which is lower than both the first quarter 2004 and fourth quarter 2004.
Due to the strength in crack spreads during the first quarter, charges for derivative contracts that Marathon Ashland Petroleum LLC (MAP) has entered into to protect crack spread values are anticipated to total approximately $75 million for the quarter, approximately $60 million of which is due to crack spread contracts that will expire over the last three quarters of 2005. In addition, due to the increase in the price of crude oil during the quarter, MAP will record a crude oil in-transit charge of approximately $75 million in the first quarter of 2005. This adjustment is related to internationally- sourced crude oil that had not been priced as of the end of the first quarter.
Unallocated Administrative Expense
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