Financial Data and Key Metrics Changes - In Q1 2022, the company generated $1.3 billion of cash flow from operations and $940 million of free cash flow, with a reinvestment rate of just 27% [10][11] - The company returned $640 million, or 50% of cash flow from operations, back to shareholders [10][11] - Over the trailing two quarters, approximately 60% of cash flow from operations, or over $1.4 billion, was returned to shareholders [9][14] Business Line Data and Key Metrics Changes - The company reported oil production of 168,000 barrels per day in Q1 2022 [10] - The capital spending for the quarter was $348 million, consistent with prior guidance [10][24] - The company raised its equity income guidance from Equatorial Guinea by $200 million, or 67% [11][19] Market Data and Key Metrics Changes - The company rebased its 2022 financial outlook to reflect pricing of $100 WTI and $6 Henry Hub, expecting to generate over $4.5 billion of free cash flow at a reinvestment rate of just 20% [11][19] - The company noted that the inflationary environment is impacting costs, with expectations of inflation rising to 15-20% due to higher commodity prices [20][52] Company Strategy and Development Direction - The company emphasizes a return of capital to shareholders, with a commitment to return a minimum of 40% of cash flow from operations when WTI is above $60 per barrel [14][15] - The strategy focuses on sustainable free cash flow and meaningful returns to shareholders, supported by a high-quality portfolio and a strong balance sheet [8][27] - The company aims to balance cash returns with portfolio renewal, dedicating a portion of capital to organic growth initiatives [37][41] Management Comments on Operating Environment and Future Outlook - Management highlighted the geopolitical tensions and inflationary pressures affecting the energy market, emphasizing the need for a responsible energy transition that includes oil and gas [5][7] - The company believes it is well-positioned to meet growing energy demands while maintaining strong financial returns for shareholders [8][27] - Management expressed confidence in the company's ability to generate significant free cash flow and return capital to shareholders, even in a volatile market [35][50] Other Important Information - The company has increased its buyback authorization to $2.5 billion, indicating confidence in its stock valuation [9][16] - The company expects to continue to outperform its minimum cash flow return commitments, with potential for significant returns in 2022 [16][35] Q&A Session Summary Question: Broader LNG strategy and operational leverage - Management discussed the balanced exposure to commodities and the unique asset in Equatorial Guinea, which is well-positioned to benefit from global LNG market dynamics [30][31] Question: Cash return strategy and portfolio renewal - Management clarified that the cash return strategy is designed to be flexible and responsive to market conditions, with a commitment to return significant capital to shareholders while maintaining a strong balance sheet [32][33] Question: Impact of owning Chevron assets on cash flow - Management indicated that owning additional gas assets would generate incremental value, but emphasized the need for any acquisition to be accretive to the existing high-return organic case [40][41] Question: Capital allocation in the current gas environment - Management noted that the current commodity pricing environment is uplifting the economics of the entire portfolio, allowing for increased capital allocation to gas projects [45][46] Question: Inflationary pressures and planning for 2023 - Management acknowledged the challenges posed by inflation and supply chain constraints, indicating a proactive approach to securing contracts and planning for 2023 [52][53]

Financial Data and Key Metrics Changes - In Q4 2021, the company returned over 70% of cash from operations, equating to more than $800 million to equity investors, significantly exceeding the minimum commitment of 40% [8][19] - The company achieved over $2.2 billion of free cash flow in 2021, with a reinvestment rate of 32%, and over $900 million of free cash flow at a 22% reinvestment rate in Q4 alone [11][12] - The company executed $1 billion in share repurchases since October, resulting in an 8% reduction in outstanding shares [9][19] Business Line Data and Key Metrics Changes - The capital program for 2022 is set at $1.2 billion, focusing on free cash flow generation over production growth [24] - The company plans to allocate approximately 75% of its capital budget to the Eagle Ford and Bakken, with the remainder going to the Permian and Oklahoma [25] Market Data and Key Metrics Changes - The company expects to deliver over $3 billion of free cash flow at a reinvestment rate of less than 30%, assuming $80 WTI and $4 Henry Hub prices [12][24] - The company retains significant leverage to commodity price upside, with a $1 increase in oil price translating to approximately $60 million in incremental free cash flow [28] Company Strategy and Development Direction - The company is committed to a disciplined capital allocation framework that prioritizes sustainable free cash flow generation and return of capital [12][24] - The focus remains on maximizing capital efficiency and free cash flow generation rather than production output [26][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering superior financial outcomes compared to E&P peers and the broader S&P 500, emphasizing the importance of competitive financial performance [10][11] - The company aims to maintain a competitive and sustainable base dividend while also focusing on share repurchases to enhance per share metrics [21][70] Other Important Information - The company achieved a GHG intensity reduction target of at least 30% relative to its 2019 baseline and improved gas capture to 98.8% for the full year [32][33] - The company has a strong commitment to ESG excellence, with new quantitative goals for GHG intensity and methane intensity [33][34] Q&A Session Summary Question: Expected return of free cash flow to shareholders - Management indicated they are on pace to return over 50% of cash flow from operations to investors in Q1, with potential for delivery exceeding 70% as demonstrated in Q4 [40][44] Question: Details on the 2022 program and asset-level color - Management provided insights on the well mix in Bakken and Eagle Ford, with a focus on longer laterals to enhance efficiencies [45][46] Question: Acquisition capital spent during the quarter - The acquisition was a small Eagle Ford bolt-on that allowed for extended laterals in Karnes County, reflecting a disciplined approach to A&D activities [48][50] Question: Allocation of cash flow and preferences between buybacks and dividends - Management emphasized the strong value proposition of share repurchases while maintaining a competitive base dividend, with synergies between the two [52][55] Question: Plans for debt maturities and capital returns - The base case is to pay off small maturities with cash, with no need to accelerate debt reduction [57][59] Question: Future capital allocation shifts towards Oklahoma and Delaware - Management indicated that the capital allocation weighting will remain consistent over the next five years, with no radical shifts expected [60][61] Question: Confidence in drilling programs and inventory depth - Management expressed confidence in the inventory depth across basins, with over a decade of high-quality inventory available [63][64]

Financial Performance & Capital Allocation - In 2021, Marathon Oil generated over $2.2 billion of free cash flow (FCF) [4], with a 32% reinvestment rate [9] - The company executed $1 billion of share repurchases from October 1, 2021, to February 16, 2022, reducing the share count by 8% in 4.5 months [9] - The company raised the base dividend for the fourth consecutive quarter, representing a cumulative increase of 133% [9] - The 2022 capital budget is set at $1.2 billion, expected to deliver >$3 billion of FCF at <30% reinvestment rate, assuming $80/bbl WTI and $4.00/MMBtu HH [8, 9] - Marathon Oil expects to return a minimum of 40% of CFO to equity investors in 2022 [9] Operational Performance & Outlook - 4Q21 oil production was 181 mbopd, and FY21 oil production was 173 mbopd [7] - The company anticipates total oil and oil-equivalent production to be flat with 2021 averages in 2022 [23] - The company's corporate FCF breakeven is below $35/bbl WTI [9, 10, 25] ESG Performance - The company achieved a >30% reduction in GHG intensity in 2021 [8, 36] - The company achieved 98.8% gas capture in 2021 [8, 36] - New short, medium, and long-term objectives have been set for GHG intensity, methane intensity, and gas capture [8, 33]

Part I [Business and Properties](index=7&type=section&id=Items%201.%20and%202.%20Business%20and%20Properties) Marathon Oil Corporation is an independent exploration and production company focused on U.S. resource plays and international operations in Equatorial Guinea, prioritizing free cash flow generation and shareholder returns - The company operates through two reportable segments: United States, focusing on U.S. resource plays, and International, including operations in Equatorial Guinea (E.G.) for crude oil, natural gas, LNG, and methanol[14](index=14&type=chunk) - Marathon Oil's business strategy centers on delivering competitive returns, free cash flow, and cash returns to shareholders by maintaining a disciplined capital reinvestment rate[15](index=15&type=chunk) Total Proved Reserves as of December 31, 2021 | Category | Crude Oil & Condensate (million barrels) | Natural Gas Liquids (million barrels) | Natural Gas (billion cubic feet) | Total (million barrels of oil equivalent) | Total (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | **U.S.** | 541 | 200 | 1,446 | 982 | 89% | | **E.G.** | 29 | 18 | 466 | 124 | 11% | | **Total Proved Reserves** | **570** | **218** | **1,912** | **1,106** | **100%** | Net Sales Volumes (thousand barrels of oil equivalent per day) | Region | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **United States** | 286 | 306 | 323 | | **International** | 61 | 77 | 91 | | **Total** | **347** | **383** | **414** | Major Customers (% of Total Commodity Sales) | Customer | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Marathon Petroleum Corporation | 17% | 13% | 13% | | Valero Marketing and Supply | 10% | N/A | 11% | | Koch Resources LLC | N/A | 12% | 13% | | Shell Trading | N/A | N/A | 10% | [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from volatile commodity prices, subjective reserve estimations, and transportation constraints, alongside substantial regulatory and compliance risks related to climate change, hydraulic fracturing, and environmental liabilities, compounded by **$4.0 billion** in debt as of year-end 2021 - A substantial decline in crude oil, NGLs, and natural gas prices is a primary risk that could reduce operating results, cash flows, and the carrying value of assets, influenced by global supply/demand, OPEC actions, and geopolitical conditions[79](index=79&type=chunk) - Estimates of proved reserves are subjective and depend on numerous assumptions, where material changes in commodity prices or other factors could impair the quantity and value of the company's reserves[80](index=80&type=chunk)[82](index=82&type=chunk) - The company is subject to various climate-related risks, including policy and legal risks from increased regulation, market risks from shifts in demand to lower-carbon energy, and physical risks from extreme weather events[90](index=90&type=chunk) - As of December 31, 2021, total debt was **$4.0 billion**, which may limit financial flexibility, increase vulnerability to adverse economic conditions, and restrict the use of cash flow for other purposes[99](index=99&type=chunk) - The company faces significant regulatory compliance risks, including potential costs and operating restrictions related to environmental laws, hydraulic fracturing, induced seismicity, and climate change initiatives from the current U.S. administration[104](index=104&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) [Legal Proceedings](index=33&type=section&id=Item%203.%20Legal%20Proceedings) Marathon Oil is a defendant in various legal proceedings, including royalty, contract, and environmental claims, and lawsuits related to greenhouse gas emissions, with ongoing negotiations with the EPA regarding a Clean Air Act Notice of Violation - The company is a defendant in lawsuits filed by government entities seeking to hold fossil fuel producers liable for the alleged impacts of greenhouse gas emissions[126](index=126&type=chunk) - In January 2020, the company received a Notice of Violation from the EPA related to the Clean Air Act and is actively negotiating the terms of a consent decree, which will likely result in monetary sanctions and injunctive terms[126](index=126&type=chunk) Part II [Market for Common Equity, Stockholder Matters, and Issuer Purchases](index=34&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Marathon Oil's common stock trades on the NYSE under 'MRO', with **45.5 million** shares repurchased for approximately **$723 million** in Q4 2021, leaving **$1.9 billion** remaining under the authorized share repurchase program as of year-end 2021 Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Shares Purchased | Average Price per Share | Shares Purchased as Part of Program | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | Oct 2021 | 9,976,809 | $15.92 | 9,959,789 | $1,161,719,576 | | Nov 2021 | 10,178,355 | $16.49 | 10,177,722 | $2,373,902,569 | | Dec 2021 | 25,409,775 | $15.63 | 25,409,775 | $1,976,852,884 | | **Total** | **45,564,939** | **$15.88** | **45,547,286** | **$1,976,852,884** | - As of December 31, 2021, the company has **$1.9 billion** of authorization remaining under its share repurchase program[129](index=129&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=35&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Marathon Oil's 2021 financial performance significantly improved due to higher commodity prices, resulting in **$946 million** net income and **$3.2 billion** cash from operations, enabling debt reduction and share repurchases, with a **$1.2 billion** capital budget for 2022 focused on free cash flow generation Key Financial Highlights: 2021 vs. 2020 (in millions) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Revenues from contracts | $5,601 | $3,097 | +$2,504 | | Net Income (Loss) | $946 | ($1,451) | +$2,397 | | Net Income (Loss) per Share | $1.20 | ($1.83) | +$3.03 | | Cash from Operations | $3,239 | $1,473 | +$1,766 | - The company enhanced its balance sheet by redeeming **$1.4 billion** of senior notes in 2021, with the next significant maturity of **$1.0 billion** due in 2027[135](index=135&type=chunk) - For 2022, the company announced a **$1.2 billion** capital budget that prioritizes free cash flow generation over production growth, aiming to maintain 2021 oil production levels[136](index=136&type=chunk) Average Realized Prices: 2021 vs. 2020 (United States) | Product | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Crude oil and condensate (per barrel) | $66.88 | $35.93 | +86% | | Natural gas liquids (per barrel) | $28.89 | $11.28 | +156% | | Natural gas (per thousand cubic feet) | $4.57 | $1.77 | +158% | - At year-end 2021, the company had approximately **$3.7 billion** of liquidity, comprising **$580 million** in cash and **$3.1 billion** available under its revolving credit facility[178](index=178&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Marathon Oil is primarily exposed to commodity price and interest rate risks, utilizing derivative instruments like three-way collars and swaps to manage exposure and support cash flow predictability - The company periodically uses commodity derivative instruments, including futures, swaps, and options, to manage price risk on a portion of its forecasted U.S. sales[213](index=213&type=chunk) Commodity Derivative Fair Value Sensitivity (as of Dec 31, 2021) | Scenario | Fair Value Change (in millions) | | :--- | :--- | | **Current Net Liability** | **($7)** | | Hypothetical 10% Price Increase | ($31) | | Hypothetical 10% Price Decrease | $10 | - The company's debt portfolio consists of fixed-rate instruments, and it uses interest rate swaps to manage exposure to interest rate movements on future obligations, such as lease payments[215](index=215&type=chunk) [Financial Statements and Supplementary Data](index=55&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The audited consolidated financial statements for 2021 show a significant turnaround with **$5.47 billion** in total revenues and **$946 million** net income, reflecting **$17.0 billion** in total assets and **$3.2 billion** net cash from operations, with proved reserves totaling **1,106 million barrels of oil equivalent** and a standardized measure of discounted future net cash flows of **$12.4 billion** Consolidated Statement of Income (in millions) | Line Item | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total revenues and other income | $5,467 | $3,086 | $5,190 | | Total costs and expenses | $4,159 | $4,266 | $4,554 | | Income (loss) from operations | $1,308 | ($1,180) | $636 | | **Net income (loss)** | **$946** | **($1,451)** | **$480** | Consolidated Balance Sheet (in millions) | Line Item | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total current assets | $1,821 | $1,612 | | Property, plant and equipment, net | $14,499 | $15,638 | | **Total assets** | **$16,994** | **$17,956** | | Total current liabilities | $1,637 | $1,213 | | Long-term debt | $3,978 | $5,404 | | **Total liabilities** | **$6,308** | **$7,395** | | **Total stockholders' equity** | **$10,686** | **$10,561** | Consolidated Statement of Cash Flows (in millions) | Line Item | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $3,239 | $1,473 | $2,749 | | Net cash used in investing activities | ($1,010) | ($1,303) | ($2,818) | | Net cash used in financing activities | ($2,391) | ($286) | ($535) | | **Net (decrease) in cash** | **($162)** | **($116)** | **($604)** | - Supplementary data shows a standardized measure of discounted future net cash flows from proved reserves of **$12.4 billion** at year-end 2021, a significant increase from **$4.0 billion** at year-end 2020, primarily due to higher commodity prices[419](index=419&type=chunk) [Controls and Procedures](index=118&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2021, with no material changes during Q4 2021 - Based on an evaluation, the CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[423](index=423&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021, a conclusion audited by PricewaterhouseCoopers LLP[423](index=423&type=chunk)[666](index=666&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, and Related Matters](index=119&type=section&id=Items%2010%2C%2011%2C%2012%2C%2013%2C%20and%2014) This section covers directors, executive officers, corporate governance, executive compensation, security ownership, and principal accountant fees, with detailed information incorporated by reference from the company's 2022 Proxy Statement - Information regarding Directors, Executive Officers, Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership (Item 12), Certain Relationships and Related Transactions (Item 13), and Principal Accountant Fees (Item 14) is incorporated by reference from the company's 2022 Proxy Statement[425](index=425&type=chunk)[426](index=426&type=chunk)[428](index=428&type=chunk) Securities Authorized for Issuance Under Equity Compensation Plans (as of Dec 31, 2021) | Plan Category | Securities to be Issued Upon Exercise | Weighted-Average Exercise Price | Securities Remaining for Future Issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by stockholders | 7,506,052 | $17.50 | 25,948,349 | Part IV [Exhibits, Financial Statement Schedules](index=120&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Form 10-K report, including financial statements from Item 8, notes on omitted financial schedules, and a comprehensive index of all exhibits - This section contains the list of financial statements, financial statement schedules, and exhibits filed with the Form 10-K[431](index=431&type=chunk)

Financial Performance & Capital Allocation - Marathon Oil expects greater than $2 billion of free cash flow (FCF) in 2021 based on strip pricing[6, 21] - The company is targeting approximately $500 million of share repurchases during the fourth quarter of 2021, with $200 million already executed[5, 17] - Marathon Oil anticipates returning around 50% of its fourth-quarter cash flow from operations to equity holders through increased base dividend and share repurchases[5, 7, 29] - The board increased the share repurchase authorization to $2.5 billion[5, 7, 17] - The company reduced total 2021 gross debt by $1.4 billion, contributing to approximately $50 million of annualized interest savings[17, 23, 24] Sustainability & Operational Efficiency - Marathon Oil is working toward a 2021 greenhouse gas (GHG) emissions intensity target of at least a 30% reduction and a 2025 goal of at least a 50% reduction, both versus a 2019 baseline[15, 17] - The company achieved a 3Q21 company-wide gas capture rate of greater than 99%[15] - The company's 2021 reinvestment rate is tracking below 35%[17, 21] Production & Exploration - 4Q21 total oil production is expected to increase to 176-180 MBOPD compared to 3Q21 production of 168 MBOPD[21, 69] - Initial productivity from the Texas Delaware Oil Play multi-well pad is exceeding expectations[6, 38] - 3Q21 equity earnings from Equatorial Guinea were $86 million, compared to cash dividends of $47 million[39] 2022 Outlook - Marathon Oil is positioned for continued top-tier FCF generation and a leading return of capital profile in 2022[7, 44] - The company targets to return at least 40% of CFO to equity investors at $60/bbl or higher WTI, providing a peer-leading return of capital profile, with a minimum return to equity holders of ~$1.6B at recent strip and ~$1.1B at $60/bbl WTI[16, 44]

Marathon Oil Corporation (NYSE:MRO) Q3 2021 Earnings Conference Call November 4, 2021 9:00 AM ET Company Participants Lee Tillman – Chairman, President, and CEO Guy Baber – Vice President Investor Relations Dane Whitehead – Executive VP and CFO Pat Wagner – Executive VP of Corporate Development strategy Mike Henderson – Executive VP of Operations Conference Call Participants Jeanine Way – Barclays Arun Jayaram – JP Morgan Scott Hanold – RBC Capital Market Doug Leggate – Bank of America Neal Dingmann – tours ...

Part I [Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Marathon Oil Corporation for the third quarter and first nine months of 2021, including detailed notes [Consolidated Statements of Income](index=3&type=section&id=Consolidated%20Statements%20of%20Income%20(Unaudited)) This section details the company's revenues, expenses, and net income for the third quarter and first nine months of 2021 and 2020 Q3 & Nine Months 2021 vs 2020 Income Statement Highlights (in millions, except per share data) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | **Revenues from contracts with customers** | $1,438 | $761 | $3,869 | $2,275 | | **Total revenues and other income** | $1,453 | $754 | $3,667 | $2,256 | | **Income (loss) from operations** | $347 | $(242) | $569 | $(930) | | **Net income (loss)** | $184 | $(317) | $297 | $(1,113) | | **Diluted EPS** | $0.23 | $(0.40) | $0.38 | $(1.41) | [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) This section presents the company's net income and other comprehensive income components for the third quarter and first nine months of 2021 and 2020 Q3 & Nine Months 2021 vs 2020 Comprehensive Income (in millions) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | **Net income (loss)** | $184 | $(317) | $297 | $(1,113) | | **Other comprehensive income (loss)** | $5 | $20 | $9 | $(48) | | **Comprehensive income (loss)** | $189 | $(297) | $306 | $(1,161) | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)) This section provides a snapshot of the company's assets, liabilities, and equity as of September 30, 2021, and December 31, 2020 Balance Sheet Highlights (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $485 | $742 | | **Total current assets** | $1,655 | $1,612 | | **Property, plant and equipment, net** | $14,734 | $15,638 | | **Total assets** | $17,161 | $17,956 | | **Long-term debt** | $3,977 | $5,404 | | **Total liabilities** | $6,365 | $7,395 | | **Total stockholders' equity** | $10,796 | $10,561 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for the first nine months of 2021 and 2020 Nine Months Ended Sep 30 Cash Flow Summary (in millions) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $2,093 | $1,055 | | **Net cash used in investing activities** | $(728) | $(1,060) | | **Net cash provided by (used in) financing activities** | $(1,622) | $266 | | **Net (decrease) increase in cash** | $(257) | $261 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed disclosures supporting the consolidated financial statements, covering accounting policies, revenue disaggregation, segment performance, derivatives, debt management, and contingencies - The company's revenues are primarily from the sale of crude oil, condensate, NGLs, and natural gas in the United States and Equatorial Guinea[24](index=24&type=chunk) - The company operates through two reportable segments: United States (U.S.) and International (Int'l), which is primarily focused on Equatorial Guinea (E.G.)[31](index=31&type=chunk) - In the first nine months of 2021, the company redeemed **$1.4 billion** of senior notes, incurring **$121 million** in costs for early extinguishment[82](index=82&type=chunk)[12](index=12&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results of operations for the third quarter of 2021, highlighting free cash flow generation, balance sheet enhancement, and capital discipline - The company's strategy focuses on capital investment in U.S. resource plays to prioritize free cash flow generation for shareholder returns and balance sheet enhancement[108](index=108&type=chunk) - For the first nine months of 2021, the company generated **$2.1 billion** in cash from operations, which funded **$1.4 billion** in debt redemption, **$772 million** in capital expenditures, and **$94 million** in dividends[109](index=109&type=chunk) - The 2021 capital budget is set at a maintenance level of **$1.0 billion**, designed to keep total company oil production consistent with the Q4 2020 exit rate[113](index=113&type=chunk) [Operations](index=31&type=section&id=Operations) This section details the company's net sales volumes and factors influencing production across its segments Net Sales Volumes (mboed) | Segment | Q3 2021 | Q3 2020 | % Change | YTD 2021 | YTD 2020 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **United States** | 281 | 297 | (5)% | 280 | 314 | (11)% | | **International** | 61 | 71 | (14)% | 64 | 79 | (19)% | | **Total** | 342 | 368 | (7)% | 344 | 393 | (12)% | - Lower sales volumes in both the U.S. and International segments were attributed to reduced capital investment, natural decline, and timing of wells coming to sales[116](index=116&type=chunk)[121](index=121&type=chunk) [Market Conditions](index=33&type=section&id=Market%20Conditions) This section analyzes the impact of commodity price fluctuations on the company's financial performance - Commodity prices increased through the first nine months of 2021 due to rising oil demand, increased global economic activity, and ongoing OPEC supply limitations, significantly impacting revenues and profitability[123](index=123&type=chunk) U.S. Average Price Realizations (Q3 2021 vs Q3 2020) | Product | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | **Crude oil and condensate (per bbl)** | $69.40 | $37.78 | +84% | | **Natural gas liquids (per bbl)** | $30.68 | $11.80 | +160% | | **Natural gas (per mcf)** | $4.17 | $1.78 | +134% | International Average Price Realizations (Q3 2021 vs Q3 2020) | Product | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | **Crude oil and condensate (per bbl)** | $56.36 | $30.28 | +86% | | **Natural gas (per mcf)** | $0.24 | $0.24 | 0% | [Results of Operations](index=35&type=section&id=Results%20of%20Operations) This section provides a detailed comparison of the company's financial performance for the third quarter and nine-month periods of 2021 and 2020 - For Q3 2021, U.S. segment income was **$305 million**, a significant turnaround from a **$135 million loss** in Q3 2020, driven by higher price realizations[140](index=140&type=chunk) - International segment income for Q3 2021 was **$93 million**, up from **$8 million** in Q3 2020, also due to higher price realizations[140](index=140&type=chunk) - A loss on early extinguishment of debt of **$102 million** was recorded in Q3 2021 related to the redemption of **$900 million** in senior notes[138](index=138&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financial flexibility, cash position, debt management, and capital allocation strategies - As of September 30, 2021, the company had approximately **$3.6 billion** of liquidity, comprising **$485 million** in cash and an undrawn **$3.1 billion** revolving credit facility[158](index=158&type=chunk) - The company redeemed **$500 million** of 2.8% Senior Notes due 2022 in April 2021 and **$900 million** of 3.85% Senior Notes due 2025 in September 2021[160](index=160&type=chunk) - Subsequent to the quarter, the company resumed its share repurchase program and the Board increased the authorization from **$1.1 billion** to **$2.5 billion**[165](index=165&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to commodity price and interest rate risks, using derivatives to manage commodity price fluctuations Commodity Derivative Fair Value Sensitivity (in millions) | Scenario | Crude Oil | Natural Gas | NGL | Total | | :--- | :--- | :--- | :--- | :--- | | **Fair Value at Sep 30, 2021** | $(81) | $(51) | $(21) | $(153) | | **+10% Price Change** | $(135) | $(63) | $(24) | $(222) | | **-10% Price Change** | $(41) | $(41) | $(17) | $(99) | - The company's debt portfolio consists of fixed-rate instruments, so interest rate movements only affect results when debt is retired at prices different from carrying value; interest rate swaps are used to hedge future lease payments[173](index=173&type=chunk) [Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[175](index=175&type=chunk) Part II [Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The company faces an EPA Notice of Violation and royalty underpayment lawsuits, but believes these will not materially affect its financial position - The company received a Notice of Violation from the EPA regarding the Clean Air Act, with potential for monetary sanctions and corrective actions[177](index=177&type=chunk) - Marathon Oil is defending against various lawsuits alleging royalty underpayments in its domestic operations, with some plaintiffs seeking class certification[177](index=177&type=chunk) [Risk Factors](index=46&type=page&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2020 Annual Report on Form 10-K - No material changes to risk factors from the 2020 Annual Report on Form 10-K were reported[178](index=178&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2021, Marathon Oil did not repurchase shares under its program but acquired shares from employees for tax withholding, with **$1.3 billion** remaining authorization - No shares were repurchased under the publicly announced plan in Q3 2021[179](index=179&type=chunk)[180](index=180&type=chunk) - **25,352 shares** were acquired from employees at an average price of **$12.04 per share** to satisfy tax withholding obligations[179](index=179&type=chunk)[180](index=180&type=chunk) [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section references the Exhibit Index accompanying the Form 10-Q, which lists all exhibits filed with the report

Financial Performance & Capital Allocation - Marathon Oil generated over $850 million of free cash flow in the first half of 2021[4] - The company is increasing its return of capital target to at least 40% of cash flow from operations, assuming an oil price of $60/bbl WTI or higher[5] - The company expects to return >$1 billion per annum to equity investors in a $60/bbl WTI or higher price environment[13] - The 2021 capital budget is $1 billion, expected to deliver $1.9 billion of free cash flow assuming $65/bbl WTI and $3.00 Henry Hub[13] - The company is accelerating its gross debt reduction objective through full redemption of $900 million of 2025 maturity notes, increasing total 2021 gross debt reduction to $1.4 billion[13, 22] Sustainability & ESG - The company is working toward a 2021 GHG emissions intensity target of at least a 30% reduction and a 2025 goal of at least a 50% reduction, both versus a 2019 baseline[12, 13] - CEO and Board compensation has been reduced by 25%, and the compensation framework has been optimized and redesigned[13] - The company achieved a 2Q21 company-wide gas capture rate of 98.5%[12] Production & Operations - 2021 U S oil-equivalent production guidance was raised by 5 MBOED[16] - The company is raising 2021 equity income guidance by >70% to $180 million to $200 million[52] - The company's corporate free cash flow breakeven is below $35/bbl WTI[13, 16]