Marathon has provided information on market factors and operating conditions that occurred during the fourth quarter of 2008 that could impact the Company's quarterly financial results. The market indicators and Company estimates noted below and in the attached schedule may differ significantly from actual results. The Company will report fourth quarter results on Feb. 3, 2009, and will conduct a conference call and webcast that same day.
Exploration and Production
Liquid hydrocarbon and natural gas production sold during the fourth quarter is estimated to be approximately 415,000 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 and natural gas sales. Liquid hydrocarbon and natural gas production available for sale during the fourth quarter is expected to be approximately 401,000 boepd, which is 3 percent higher than the third quarter 2008 result of 389,000 boepd. The available for sale estimate was at the bottom of the 400,000 to 440,000 boepd fourth quarter guidance due primarily to three major factors: longer than expected downtime at the offshore Equatorial Guinea Alba platform due to pipeline issues; lower than expected Gulf of Mexico production from continued impacts related to 2008 hurricanes; and, the Oct. 31, 2008 sale of Marathon's non-core interests in the Heimdal area offshore Norway.
Marathon's average liquid hydrocarbon realization for the first two months of the fourth quarter, as compared to the third quarter of 2008, decreased $51.11 per barrel domestically and $49.80 per barrel internationally, reflecting the general market price movements during the first two months of the quarter. For the entire fourth quarter of 2008, the average West Texas Intermediate (WTI) crude oil market price indicator was $59.14 per barrel lower than the third quarter of 2008 while the average Dated Brent indicator decreased $59.61 per barrel.
Marathon's domestic average natural gas price realization for October and November decreased $3.11 per thousand cubic feet (mcf) from the Company's average realized price in the third quarter of 2008. The average Henry Hub (HH) prompt natural gas price for the fourth quarter decreased $2.75 per million British Thermal Units (BTUs), while the average HH bid week natural gas price decreased $3.30 per million BTUs during this same period. International average gas realizations decreased $0.05 per mcf in the first two months of the fourth quarter compared to the third quarter of 2008.
Marathon's actual crude oil and natural gas price realizations vary from market indicators primarily due to product quality and location differentials.
Fourth quarter 2008 exploration expense is now expected to be between $125 to $175 million, which is within previous guidance.
Oil Sands Mining
For the fourth quarter 2008, the Company estimates that its net share of bitumen production before royalties from the Athabasca Oil Sands Project (AOSP) mining operation will be approximately 25,000 barrels per day (bpd), which is within the previous guidance of 23,000 to 28,000 bpd for the fourth quarter. Marathon's synthetic crude oil sales from AOSP for fourth quarter 2008 are estimated to be approximately 32,000 bpd. Marathon's average synthetic crude oil realization (excluding derivative impacts) for the first two months of the fourth quarter, as compared to third quarter 2008, decreased $54.43 per barrel, reflecting the general market price movements during the first two months of the fourth quarter.
For the fourth quarter 2008, the Company expects a net after-tax gain of approximately $134 million on crude oil derivative instruments intended to mitigate price risk related to sales of synthetic crude oil, of which approximately $6 million is realized and approximately $128 million is unrealized mark-to-market. The last of these derivative instruments expire at year end 2009.
Marathon's liquefied natural gas (LNG) operations in Equatorial Guinea and Alaska are estimated to have sold approximately 5,750 net metric tonnes per day (mtpd) of LNG in the fourth quarter of 2008, within the previous guidance of 5,500 to 6,100 mtpd.
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