Exploration and Production
Oil and natural gas production sold during the fourth quarter is estimated to be between 385,000 and 390,000 barrels of oil equivalent per day (boepd). Revenues are reported based on production sold during the period which can vary from production available for sale, primarily as a result of the timing of international crude oil liftings. Production available for sale during the fourth quarter is expected to be at the high end of the previous guidance of 350,000 to 370,000 boepd.
Sales volumes for the fourth quarter are up significantly compared to the third quarter primarily due to balancing the third quarter underlift position, seasonal gas sales and the restoration of Gulf of Mexico production.
As shown in the attached table, crude oil and natural gas market price indicators have remained strong during the fourth quarter. Marathon's actual crude oil and natural gas price realizations vary from these market indicators primarily due to product quality and location differentials.
Estimated fourth quarter exploration expense remains unchanged from previous guidance of between $60 and $80 million.
Refining, Marketing and Transportation
Market indicators for refining margins (crack spreads) in the Midwest and Gulf Coast were very strong during the fourth quarter of 2005. As a result of these very strong refining margins, favorable wholesale margins, widened sweet/sour differentials and continued solid operating performance during the fourth quarter, as described below, the company estimates its refining and wholesale marketing margin per gallon will be more than double that reported for the fourth quarter 2004.
Crude run rates remained strong during October and November averaging 961,000 barrels per day (bpd). The company estimates that crude runs for the quarter will average approximately 975,000 bpd.
The Speedway SuperAmerica LLC gasoline and distillate gross margin averaged approximately 15 cents per gallon in the first two months of the fourth quarter 2005, up substantially from both the fourth quarter 2004 and third quarter 2005. However, the fourth quarter 2005 retail gasoline and distillate margin is expected to be somewhat lower than 15 cents per gallon due to substantially lower retail margins in December.
Unallocated Administrative Expense
Total administrative expense for the quarter is expected to be approximately $70 to $85 million. This includes non-cash equity-based compensation expense estimated to be $10 to $15 million for the fourth quarter.
Select Operating and Financial Data (unaudited) 4Q 3Q Oct.-Nov. 4Q 2004 2005 2005 2005 Actual Actual Actual Actual Exploration and Production (E&P) Net Sales Domestic - Liquid Hydrocarbons (MBPD) 65.4 70.7 77.0 --- Domestic - Natural Gas (MMCFD) 585.3 561.8 601.4 --- International - Liquid Hydrocarbons (MBPD) 96.9 86.3 150.2 --- International - Natural Gas (MMCFD) 411.1 245.0 395.2 --- MBOED 328.4 291.5 393.3 --- Marker Prices NYMEX prompt WTI oil price ($/BBL) 48.27 63.31 60.35 60.05 HH spot natural gas ($/MMBTU) 6.26 9.77 12.07 12.38 HH bid Week natural gas price ($/MMBTU) 7.07 8.53 13.89 13.00 Average Sales Prices Excluding Derivatives Liquid Hydrocarbons: Domestic ($/BBL) 34.84 52.38 48.79 --- International ($/BBL) 38.72 48.24 48.48 --- Natural Gas Domestic ($/MCF) 5.09 6.56 8.97 --- International ($/MCF) 3.79 3.12 5.64 --- Refining, Marketing and Transportation Chicago 6-3-2-1 crack spread ($/BBL) 0.93 10.52 10.38 8.37 Gulf 6-3-2-1 crack spread ($/BBL) 0.14 11.06 8.44 7.10 Chicago 3-2-1 crack spread ($/BBL) 5.33 17.29 15.18 12.92 Gulf 3-2-1 crack spread ($/BBL) 4.39 18.01 13.09 11.57 *Sour Differential ($/BBL) (11.15) (9.52) (11.68) (12.17) Refinery Runs: Crude oil refined (MBPD) 974.7 979.6 960.5 --- Other charge & blend stocks (MBPD) 200.4 215.2 264.8 --- Total (MBPD) 1,175.1 1,194.8 1,225.3 --- Crude oil capacity utilization (%) 103 103 100 --- Refined products sales volumes (MBPD) 1,414.1 1,466.8 1,510.5 --- SSA gasoline and distillate sales (MMGal) 793 825 556 --- SSA gasoline and distillates gross margin ($/gal) 0.1219 0.1232 .1531 --- SSA merchandise gross margin ($million) 145 162 102 --- BBL - barrel MMBTU - million British Thermal Units MCF - thousand cubic feet MBPD - thousand barrels per day MBOED - thousand barrels of oil equivalent per day MMGal - millions of gallons MMCFD - million cubic feet per day * 15% Bow River, 15% Maya, 35% Kuwait, 35% Arab Medium
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