MARATHON OIL CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - March 7, 2018

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Exhibit 99.1



MARATHON OIL CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
 
On March 1, 2018, Marathon Oil Corporation completed the sale of its subsidiary, Marathon Oil Libya Limited, which held the Company’s 16.33 percent non-operated interest in the Waha concessions in Libya, to a subsidiary of Total S.A. (Elf Aquitaine SAS) for cash consideration of $450 million. The effective date of the transaction is January 1, 2018.
The closing of this transaction continues the simplification and concentration of our portfolio to the high margin, high return U.S. resource plays. During 2017, our 16.33 percent non-operated interest in the Waha concessions in Libya generated approximately $28 million in after-tax income, which reflects the impact of the 93.5% Libyan income tax rate. Upon the closing of this transaction we expect to generate an after-tax gain in our consolidated statements of income.
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 our subsidiary, Marathon Oil Libya Limited, occurred on December 31, 2017. The unaudited pro forma consolidated statement of income gives effect to the disposition of our subsidiary, Marathon Oil Libya Limited, as if the disposition occurred on January 1, 2017. 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2017.
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 assets, liabilities and results of operations of Marathon Oil Libya Limited, and gives effect to an adjustment to reflect the net cash proceeds and gain from the sale of the subsidiary.




MARATHON OIL CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (Unaudited)
For the Year Ended December 31, 2017
 
 
 
 
 
 
 
 
 
Pro Forma Adjustments
 
 
(In millions, except per share data)
Historical
 
Libya Sale (a)
 
Pro Forma
Revenues and other income:
 
 
 
 
 
   Sales and other operating revenues, including related party
$
4,211

 
$
(431
)
 
$
3,780

   Marketing revenues
162

 
—

 
162

   Income from equity method investments
256

 
—

 
256

   Net gain on disposal of assets
58

 
—

 
58

   Other income
78

 
—

 
78

             Total revenues and other income
4,765

 
(431
)
 
4,334

Costs and expenses:
 

 
 

 


   Production
706

 
(40
)
 
666

   Marketing, including purchases from related parties
168

 
—

 
168

   Other operating
431

 
(4
)
 
427

   Exploration
409

 
—

 
409

   Depreciation, depletion and amortization
2,372

 
(21
)
 
2,351

   Impairments
229

 
—

 
229

   Taxes other than income
183

 
—

 
183

   General and administrative
400

 
(3
)
 
397

            Total costs and expenses
4,898

 
(68
)
 
4,830

 
 

 
 

 


Income (loss) from operations
(133
)
 
(363
)
 
(496
)
   Net interest and other
(270
)
 
—

 
(270
)
 Loss on early extinguishment of debt
(51
)
 
—

 
(51
)
Income (loss) from continuing operations before income taxes
(454
)
 
(363
)
 
(817
)
   Provision for income taxes
376

 
(335
)
 
41

Income (loss) from continuing operations
$
(830
)
 
$
(28
)
 
$
(858
)
 
 

 
 

 
 

Per Share Data
 

 
 

 
 

 
 

 
 

 
 

Income (loss) from continuing operations
 

 
 

 
 

         Basic
$
(0.97
)
 
 

 
$
(1.01
)
         Diluted
$
(0.97
)
 
 

 
$
(1.01
)
 
 
 
 
 
 
Weighted average shares
 
 
 
 
 
         Basic
850

 
 

 
850

         Diluted
850

 
 

 
850

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







MARATHON OIL CORPORATION

PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
As of December 31, 2017
 
 
 
 
 
 
 
 
 
Pro Forma Adjustments
 
 
(In millions, except per share data)
Historical
 
Libya Sale
 
Pro Forma
Assets
 
 
 
 
 
Current Assets:
 
 
 
 
 
     Cash and cash equivalents
$
563

 
$
439

(b) 
$
1,002

     Receivables, less reserve of $6
1,082

 
(102
)
(c) 
980

Notes receivable
748

 
—

 
748

     Inventories
126

 
(25
)
(c) 
101

     Other current assets
36

 
(11
)
(c) 
25

     Current assets held for sale
11

 
—

 
11

          Total current assets
2,566

 
301

 
2,867

Equity method investments
847

 
—

 
847

Property, plant and equipment less accumulated depreciation, depletion and amortization of $21,564
17,665

 
(758
)
(c) (d) 
16,907

Goodwill
115

 
(17
)
(c) 
98

Other noncurrent assets
764

 
(7
)
(c) 
757

Noncurrent assets held for sale
55

 
—

 
55

          Total assets
$
22,012

 
$
(481
)
 
$
21,531

Liabilities
 

 
 
 
 

Current Liabilities:
 

 
 
 
 

     Accounts payable
$
1,395

 
$
(82
)
(c) 
$
1,313

Payroll and benefits payable
108

 
—

 
108

     Accrued taxes
177

 
(68
)
(c) 
109

     Other current liabilities
288

 
—

 
288

     Long-term debt due within one year
—

 
—

 
—

     Current liabilities held for sale
—

 
—

 
—

          Total current liabilities
1,968

 
(150
)
 
1,818

Long-term debt
5,494

 
—

 
5,494

Deferred tax liabilities
833

 
(595
)
(c) (e) 
238

Defined benefit postretirement plan obligations
362

 
—

 
362

Asset retirement obligations
1,428

 
(1
)
(c) 
1,427

Deferred credits and other liabilities
217

 
—

 
217

Noncurrent liabilities held for sale
2

 
—

 
2

          Total liabilities
10,304

 
(746
)
 
9,558

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

Held in treasury, at cost - 87 million shares
(3,325
)
 
—

 
(3,325
)
Additional paid-in-capital
7,379

 
—

 
7,379

Retained earnings
6,779

 
265

(f) 
7,044

Accumulated other comprehensive loss
(62
)
 
—

 
(62
)
          Total stockholders' equity
11,708

 
265

 
11,973

          Total liabilities and stockholders' equity
$
22,012

 
$
(481
)
 
$
21,531

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 subsidiary, Marathon Oil Libya Limited, for the year ended December 31, 2017 from the presentation of continuing operations in the unaudited pro forma consolidated statement of income.
(b)
Includes cash proceeds of $450 million that would be received at closing, adjusted for cash and cash equivalents that would transfer to the buyer if we had completed the sale of our subsidiary, Marathon Oil Libya Limited, on December 31, 2017.
(c)
These adjustments reflect the elimination of assets and liabilities attributable to our subsidiary, Marathon Oil Libya Limited.
(d)
Includes accumulated depreciation, depletion, and amortization of $289 million as of December 31, 2017, related to our subsidiary, Marathon Oil Libya Limited.
(e)
Represents our deferred tax liability related to historical purchase price adjustments.
(f)
Represents the non-recurring estimated gain on sale that would have been recorded if we had completed the sale of our subsidiary, Marathon Oil Libya Limited, on December 31, 2017. This estimated gain on sale would be subject to taxes in the U.S. where we would utilize net operating loss carryforwards and therefore pay no incremental cash taxes.




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