e424b3
The
information in this preliminary prospectus supplement is not
complete and may be changed. This preliminary prospectus
supplement and the accompanying prospectus are not an offer to
sell these securities and we are not soliciting an offer to buy
these securities in any jurisdiction where the offer or sale is
not permitted.
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Filed
Pursuant to Rule 424(b)(3)
Registration No. 333-144874
Subject to Completion, dated
February 11, 2009
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus dated July 26, 2007)
$
®
MARATHON OIL
CORPORATION
$ % Senior
Notes due
$ % Senior
Notes due
The notes will bear interest at
the rate of % per year.
The notes will bear interest at the
rate of % per year. We will pay
interest on each series of notes
on
and of each year, beginning
on ,
2009. The notes will mature
on .
The notes will mature
on .
We may redeem some or all of each series of notes at any time at
a redemption price equal to the principal amount of the notes we
redeem plus a make-whole premium. The redemption prices are
discussed in this prospectus supplement under the caption
Description of the Notes Optional
Redemption.
The notes will be unsecured, unsubordinated obligations of our
company and will rank equally with all of our other existing and
future unsecured, unsubordinated indebtedness.
Investing in the notes involves
risks. See Risk Factors beginning on
page S-5
of this prospectus supplement.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the accuracy or adequacy of this
prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
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Per Note
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Total
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Per Note
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Total
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Public Offering Price
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%
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$
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%
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$
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Underwriting Discount
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%
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$
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%
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$
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Proceeds to Marathon (before expenses)
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%
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$
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Interest on the notes will accrue from
February , 2009.
The notes will not be listed on any securities exchange.
Currently, there is no public market for the notes.
We expect to deliver the notes to investors in registered
book-entry form only through the facilities of The Depository
Trust Company on or about February , 2009.
Joint
Book-Running Managers
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Morgan
Stanley |
Banc of America Securities LLC |
J.P. Morgan |
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Citi |
Deutsche Bank Securities |
February , 2009
No person is authorized to give any information or to make
any representations other than those contained or incorporated
by reference in this prospectus supplement, the accompanying
prospectus or any free-writing prospectus prepared by us or on
our behalf, and, if given or made, such information or
representations must not be relied upon as having been
authorized. This prospectus supplement and the accompanying
prospectus do not constitute an offer to sell or the
solicitation of an offer to buy securities other than the
securities described in this prospectus supplement or an offer
to sell or the solicitation of an offer to buy any securities in
any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this prospectus supplement or
the accompanying prospectus nor any sale made under this
prospectus supplement or the accompanying prospectus shall,
under any circumstances, create any implication that there has
been no change in the affairs of Marathon Oil Corporation or any
of its subsidiaries since the date of this prospectus supplement
or that the information contained or incorporated by reference
in this prospectus supplement or the accompanying prospectus is
correct as of any time subsequent to the date of such
information.
As used in this prospectus supplement, the terms
Marathon, we, us and
our may, depending upon the context, refer to
Marathon Oil Corporation or to Marathon Oil Corporation and its
consolidated subsidiaries taken as a whole.
TABLE OF
CONTENTS
Prospectus
Supplement
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Page
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S-2
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S-5
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S-6
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S-7
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S-8
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S-13
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S-14
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S-14
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S-15
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Prospectus
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About This Prospectus
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2
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The Company
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2
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Where You Can Find More Information
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3
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Forward-Looking Statements
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4
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Use of Proceeds
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5
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Ratios of Earnings to Fixed Charges and Earnings to Combined
Fixed Charges and Preferred Stock Dividends
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5
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Selected Historical Consolidated Financial Data
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6
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Description of Debt Securities
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7
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Description of Capital Stock
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16
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Description of Warrants
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20
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Description of Stock Purchase Contracts and Stock Purchase
Units
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22
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Plan of Distribution
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23
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Legal Matters
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24
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Experts
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24
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S-1
MARATHON
OIL CORPORATION
General
Marathon Oil Corporation, a Delaware corporation, is an
integrated international energy company. Together with its
subsidiaries, Marathon is engaged in:
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worldwide exploration, production and marketing of liquid
hydrocarbons and natural gas;
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mining, extraction and transportation of bitumen from oil sands
deposits in Alberta, Canada, and upgrading of the bitumen for
the production and marketing of synthetic crude oil and
by-products;
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domestic refining, marketing and transportation of crude oil and
petroleum products, primarily in the Midwest, upper Great
Plains, Gulf Coast and southeastern regions of the United
States; and
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worldwide marketing and transportation of products manufactured
from natural gas, such as liquefied natural gas and methanol,
and development of other projects to link stranded natural gas
resources with key demand areas.
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Our principal exploration and production activities are in the
United States, Angola, Canada, Equatorial Guinea, Gabon,
Indonesia, Ireland, Libya, Norway and the United Kingdom. We are
also the fifth-largest refiner in the United States and have a
retail marketing system in the United States, comprising
approximately 6,000 locations in 17 states.
Our principal executive offices are located at 5555
San Felipe Road, Houston, Texas
77056-2723,
and our telephone number at that location is
(713) 629-6600.
Our common stock trades on the New York Stock Exchange and the
Chicago Stock Exchange under the symbol MRO.
Recent
Developments
Preliminary
Fourth Quarter and Full Year 2008 Results (Unaudited)
On February 3, 2009, we announced our fourth quarter and
full year 2008 preliminary financial results. For the fourth
quarter of 2008, we reported a net loss of $41 million, or
$0.06 per diluted share, compared with net income of
$668 million, or $0.94 per diluted share, in the fourth
quarter of 2007. Results for the fourth quarter of 2008 included
the following after-tax items, which are not included in the
segment income amounts discussed below:
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a non-cash $1.412 billion impairment of goodwill related to
our Oil Sands Mining segment;
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a $241 million gain on the sale of our 50 percent
ownership interest in Pilot Travel Centers LLC and the sale of
our non-operated assets and associated undeveloped acreage in
the Heimdal area of Norway; and
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a non-cash $130 million gain on our natural gas contracts
in the United Kingdom.
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For the fiscal year 2008, we reported net income of
$3.528 billion, or $4.95 per diluted share, compared with
net income of $3.956 billion, or $5.69 per diluted share,
in 2007.
Sales and other operating revenues (including consumer excise
taxes) for the fourth quarter of 2008 totaled
$14.331 billion, 19 percent lower than
$17.704 billion in the fourth quarter of 2007. For fiscal
2008, sales and other operating revenues (including consumer
excise taxes) were $75.314 billion, 20 percent higher
than $62.800 billion in 2007.
Exploration and Production segment income totaled
$264 million in the fourth quarter of 2008, compared to
$465 million in the fourth quarter of 2007, primarily as a
result of significantly lower liquid hydrocarbon and natural gas
realizations. Refining, Marketing and Transportation segment
income totaled $325 million in the fourth quarter of 2008,
compared to $4 million in the fourth quarter of 2007. This
increase primarily reflects an improved refining and wholesale
marketing gross margin, in part attributable to a substantial
drop in crude oil prices in the fourth quarter of 2008. Oil
Sands Mining segment income totaled $100 million in the
S-2
fourth quarter of 2008, compared to a loss of $63 million
in the fourth quarter of 2007. The Oil Sands Mining segment
fourth quarter 2008 results included a $128 million
after-tax gain on derivatives, compared to a $40 million
after-tax loss in the fourth quarter of 2007. Integrated Gas
segment income totaled $36 million in the fourth quarter of
2008, compared to $49 million in the fourth quarter of
2007. The decrease was primarily a result of reduced methanol
volumes and realizations and a higher segment tax rate relative
to the fourth quarter of 2007, partially offset by increased
sales at our Equatorial Guinea liquefied natural gas facility.
Average sales volumes for our Exploration and Production segment
were 417,000 barrels of oil equivalent (BOE) per day for
the fourth quarter of 2008, an 18 percent increase over
354,000 BOE per day for fourth quarter 2007, and 381,000 BOE per
day for the full year 2008, a more than 8 percent increase
over the 351,000 BOE per day in 2007. We estimate 2009
production available for sale will be between 390,000 and
410,000 BOE per day, which excludes production from the
announced sale of Marathon Oil Ireland Limited, which is
expected to close in the first quarter 2009, and excludes the
effect of any acquisitions or additional dispositions. During
2008, we added net proved liquid hydrocarbon and natural gas
reserves of 110 million BOE, excluding dispositions of
3 million BOE, while producing 137 million BOE,
resulting in a reserve replacement ratio of 80 percent. At
December 31, 2008, our net proved liquid hydrocarbon and
natural gas reserves totaled 1.2 billion BOE and our
estimated quantities of proved bitumen reserves were
388 million BOE.
In addition to the financial and operating results discussed
above, we announced that we have completed our evaluation of the
potential separation of Marathon into two separate companies,
one focused on our upstream, integrated gas and oil sands mining
businesses, and the other focused on our downstream business. We
noted that, during our evaluation, the overall business
environment witnessed a period of unprecedented financial and
commodity market uncertainty. Given that environment, we
concluded it was in the best interest of our shareholders to
remain a fully integrated energy company. We intend to continue
seeking out alternatives to increasing shareholder value.
Although we determined not to proceed with a separation of our
businesses, it is possible that we could consider such a
transaction in the future. The terms of the notes would not
restrict our ability to effect such a transaction.
Liquidity
and Capital Requirements
As of December 31, 2008, we had a cash balance of
approximately $1.3 billion and approximately
$3.0 billion in available credit facility capacity.
On February 3, 2009, we announced a $5.7 billion
capital, investment and exploration budget for 2009, which
represents a 24 percent decrease from 2008 capital spending
of $7.6 billion. Our 2008 capital spending was
5 percent less than the original $8 billion budget for
the year. In addition, we announced that the scheduled
start-up
date of the heavy oil upgrading and expansion project at our
Detroit, Michigan refinery has been deferred until mid-2012 to
better align timing of the projects completion with
changes in Canadian oil sands production projections and to
optimize project completion. The estimated cost of the project
has increased approximately 15 percent to $2.2 billion
due to additional costs associated with the project deferral, as
well as a scope change that will allow the Detroit refinery to
process heavier and higher acidic crudes.
Our estimated $3.35 billion Garyville, Louisiana refinery
expansion project is approximately 75 percent complete,
with an on-schedule startup expected in the fourth quarter 2009.
When completed, this expansion will increase the refinerys
capacity by 180,000 barrels per day, improving scale
efficiencies and feedstock flexibility.
The estimated project costs referenced above for the heavy oil
upgrading and expansion project at our Detroit refinery and the
expansion project at our Garyville refinery exclude amounts for
capitalized interest.
During 2009, we expect our funding requirements will include,
among other things, contributions of up to $439 million
which we expect to make to our defined benefit plans.
S-3
Forward-Looking
Statements
The above discussion contains forward-looking statements with
respect to the timing and levels of our worldwide liquid
hydrocarbon and natural gas production, the sale of Marathon Oil
Ireland Limited, our estimated quantities of proved liquid
hydrocarbon, natural gas and bitumen reserves, our 2009 capital,
investment and exploration budget, our Detroit refinery heavy
oil upgrading and expansion project and our Garyville refinery
expansion project. Some factors that could potentially affect
the timing and levels of our worldwide liquid hydrocarbon and
natural gas production include pricing, supply and demand for
petroleum products, the amount of capital available for
exploration and development, regulatory constraints, the
inability or delay in obtaining government and third-party
approvals and permits, timing of commencing production from new
wells, drilling rig availability, unforeseen hazards such as
weather conditions, acts of war or terrorist acts and the
governmental or military response thereto, and other geological,
operating and economic considerations. Factors that could affect
the sale of Marathon Oil Ireland Limited include customary
closing conditions. The estimated quantities of proved liquid
hydrocarbon, natural gas and bitumen reserves are based on a
number of assumptions, including (among others) commodity
prices, presently known physical data concerning size and
character of the reservoirs, economic recoverability, technology
developments, industry economic conditions, levels of cash flow
from operations and other operating considerations. The capital,
investment and exploration budget is based on current
expectations, estimates and projections. Some factors that could
cause actual results to differ materially include prices of and
demand for crude oil, natural gas and refined products, actions
of competitors, disruptions or interruptions of our production
or refining operations due to the shortage of skilled labor and
unforeseen hazards such as weather conditions, acts of war or
terrorist acts and the governmental or military response, and
other operating and economic considerations. Factors that could
affect the Detroit refinery heavy oil upgrading and expansion
project and the Garyville refinery expansion project include
transportation logistics, availability of materials and labor,
unforeseen hazards such as weather conditions, delays in
obtaining or conditions imposed by necessary government and
third-party approvals, and other risks customarily associated
with construction projects. To the extent these assumptions
prove inaccurate, actual recoveries could be different than
current estimates. The foregoing factors (among others) could
cause actual results to differ materially from those set forth
in the forward-looking statements. In accordance with the
safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, we have included in our Annual
Report on
Form 10-K
for the year ended December 31, 2007, and subsequent
Forms 10-Q
and 8-K,
cautionary language identifying other important factors, though
not necessarily all such factors, that could cause future
outcomes to differ materially from those set forth in our
forward-looking statements.
S-4
RISK
FACTORS
Before making an investment in the notes, you should consider
carefully the risk factors identified in Part I,
Item 1A. Risk Factors of our Annual Report on
Form 10-K
for the year ended December 31, 2007, together with the
risk factor information set forth below, which updates the risk
factors discussed in that Annual Report on
Form 10-K.
We will continue to incur substantial capital expenditures
and operating costs as a result of compliance with, and changes
in environmental health, safety and security laws and
regulations, and, as a result, our profitability could be
materially reduced.
Our businesses are subject to numerous laws and regulations
relating to the protection of the environment, including those
relating to the discharge of materials into the environment,
waste management, pollution prevention measures, greenhouse gas
emissions, and characteristics and composition of gasoline and
diesel fuels, as well as laws and regulations relating to public
and employee safety and health and facility security. We have
incurred and will continue to incur substantial capital,
operating and maintenance, and remediation expenditures as a
result of these laws and regulations. To the extent these
expenditures, as with all costs, are not ultimately reflected in
the prices of our products and services, our operating results
will be adversely affected. The specific impact of these laws
and regulations on us and our competitors may vary depending on
a number of factors, including the age and location of operating
facilities, marketing areas and production processes. We may
also be required to make material expenditures to modify
operations, install pollution control equipment, perform site
cleanups or curtail operations. We may become subject to
liabilities that we currently do not anticipate in connection
with new, amended or more stringent requirements, stricter
interpretations of existing requirements or the future discovery
of contamination. In addition, any failure by us to comply with
existing or future laws could result in civil or criminal fines
and other enforcement actions against us.
We believe it is likely that the scientific and political
attention to issues concerning the extent, causes of and
responsibility for climate change will continue, with the
potential for further regulations that could affect our
operations. Currently, various legislative and regulatory
measures to address greenhouse gas emissions (including carbon
dioxide, methane and nitrous oxides) are in various phases of
review, discussion or implementation in the United States,
Canada and the European Union. These include proposed federal
legislation and state actions to develop statewide or regional
programs, each of which could impose reductions in greenhouse
gas emissions. These actions could result in increased costs to
(1) operate and maintain our facilities, (2) install
new emission controls at our refineries and other facilities and
(3) administer and manage any potential greenhouse gas
emissions or carbon tax program. Although uncertain, these
developments could increase our costs, reduce the demand for the
products we sell, and create delays in our obtaining air
pollution permits for new or modified facilities.
Our operations and those of our predecessors could expose us to
civil claims by third parties for alleged liability resulting
from contamination of the environment or personal injuries
caused by releases of hazardous substances. For example, we have
been, and presently are, a defendant in various litigation and
other proceedings involving products liability and other claims
related to alleged contamination of groundwater with the
oxygenate Methyl Tertiary Butyl Ether, or MTBE. We may become
involved in further litigation or other proceedings, or we may
be held responsible in existing or future litigation or
proceedings, the costs of which could be material.
Environmental laws are subject to frequent change and many of
them have become more stringent. In some cases, they can impose
liability for the entire cost of cleanup on any responsible
party, without regard to negligence or fault, and impose
liability on us for the conduct of others or conditions others
have caused, or for our acts that complied with all applicable
requirements when we performed them.
In 2007, the U.S. Congress passed the Energy Independence
and Security Act, which, among other things, sets a target of
35 miles per gallon for the combined fleet of cars and
light trucks in the United States by model year 2020, and
contains a multiple-part Renewable Fuel Standard
(RFS). The RFS is 9.0 billion gallons of
renewable fuel in 2008, increasing to 36.0 billion gallons
in 2022. In the near term, the RFS will be
S-5
satisfied primarily with fuel ethanol blended into gasoline. The
RFS presents production and logistics challenges for both the
fuel ethanol and petroleum refining industries. The RFS has
required, and may in the future continue to require, additional
capital expenditures or expenses by us to accommodate increased
fuel ethanol use. The advanced biofuels programs will present
specific challenges in that we may have to enter into
arrangements with other parties to meet our obligations to use
advanced biofuels, including biomass-based diesel and cellulosic
biofuel, with potentially uncertain supplies of these new fuels.
There will be compliance costs and uncertainties regarding how
we will comply with the various requirements contained in this
law and related regulations. We may experience a decrease in
demand for refined petroleum products due to an increase in
combined fleet mileage or due to refined petroleum products
being replaced by renewable fuels. In addition, tax incentives
and other subsidies have made renewable fuels more competitive
with refined products than they otherwise would have been which
may have reduced and may further reduce refined product margins
and their ability to compete with renewable fuels.
The
recent distress in the financial markets may impact our ability
to obtain future financing.
In the future we may require financing to grow our business.
Financial institutions participate in our revolving credit
facility and provide us with business insurance coverage, cash
management services, commercial letters of credit and short-term
investments. The recent distress affecting the financial markets
and the possibility that financial institutions may consolidate
or go out of business has resulted in a tightening in the credit
markets. This could diminish the amount of financing available
to companies. In addition, such turmoil in the financial markets
could significantly increase our costs associated with
borrowing. Our liquidity and our ability to access the credit or
capital markets may also be adversely affected by changes in the
financial markets and the global economy. Continuing turmoil in
the financial markets could make it more difficult for us to
access capital, sell assets, refinance our existing
indebtedness, enter into agreements for new indebtedness, or
obtain funding through the issuance of our securities. In
addition, there could be a number of follow-on effects from the
credit crisis on us, including insolvency of customers, key
suppliers and counterparties to our commodity and foreign
exchange derivative instruments.
Litigation
by private plaintiffs or government officials could adversely
affect our performance.
We are currently defending litigation and anticipate that we
will be required to defend new litigation in the future. The
subject matter of such litigation may include releases of
hazardous substances from our facilities, products liability,
consumer credit or privacy laws, product pricing or antitrust
laws or any other laws or regulations that apply to our
operations. While an adverse outcome in most litigation matters
would not be expected to be material to us, in some cases the
plaintiff or plaintiffs seek alleged damages involving large
classes of potential litigants, and may allege damages relating
to extended periods of time or other alleged facts and
circumstances. If we are not able to successfully defend such
claims, they may result in substantial liability. We do not have
insurance covering all of these potential liabilities. There has
been a trend in recent years of litigation by attorneys general
and other government officials seeking to recover civil damages
from companies. We are defending litigation of that type and
anticipate that we will be required to defend new litigation of
that type in the future. In addition to substantial liability,
litigation may also seek injunctive relief which could have an
adverse effect on our future operations.
USE OF
PROCEEDS
We estimate that the net proceeds we will receive from the sale
of the notes in this offering will be approximately
$ ,
after deducting underwriting discounts and our expenses of the
offering. We currently intend to use the net proceeds for
general corporate purposes, including the replenishment of our
working capital.
S-6
RATIOS OF
EARNINGS TO FIXED CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Our ratios of earnings to fixed charges and earnings to combined
fixed charges and preferred stock dividends for each of the
periods indicated, in each case determined on a total enterprise
basis are as follows:
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Year Ended December 31,
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Nine Months Ended
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2003
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2004
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2006
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2007
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September 30, 2008
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Ratio of earnings to fixed charges
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6.47
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7.57
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11.84
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24.10
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15.68
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15.31
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Except for shares of preferred stock we designated as
special voting stock and issued in connection with
our October 2007 acquisition of Western Oil Sands Inc., we had
no preferred stock outstanding for any period presented in the
table above. The special voting stock is not entitled to any
dividends or other distributions, other than dividends payable
solely in shares of special voting stock. Accordingly, our ratio
of earnings to combined fixed charges and preferred stock
dividends is the same as our ratio of earnings to fixed charges.
We have computed the ratios shown in the table above on the same
basis as we described under the caption Ratios of Earnings
to Fixed Charges and Earnings to Combined Fixed Charges and
Preferred Stock Dividends in the accompanying prospectus.
S-7
DESCRIPTION
OF THE NOTES
The following description of the notes offered by this
prospectus supplement is intended to supplement, and to the
extent inconsistent to replace, the more general terms and
provisions of the debt securities described in the accompanying
prospectus, to which we refer you. Each series of notes is a
separate series of debt securities. This description of the
notes is only a summary. You should read the indenture we refer
to below and the notes for more details regarding our
obligations and your rights with respect to the notes.
General
The notes will mature
on , .
The notes will mature
on , .
The notes will be issued in fully registered form only in
denominations of $1,000 and integral multiples of $1,000.
The notes and the notes are initially
being offered in the respective principal amounts of
$ and
$ . We may, without the
consent of the holders, increase such principal amounts in the
future, on the same terms and conditions and with the same CUSIP
numbers, as the notes being offered by this prospectus
supplement. We will not issue any such additional notes unless
the additional notes are fungible with the notes being issued
hereby for U.S. federal income tax purposes. Interest on
the notes will accrue at the respective rates
of %
and % and will be payable
semiannually on
and of each year, beginning
on ,
2009, to the persons in whose names the notes are registered at
the close of business on
and
preceding the respective interest payment dates, except that
interest payable at maturity shall be paid to the same persons
to whom principal of the notes is payable. Interest on the notes
will be paid on the basis of a
360-day year
consisting of twelve
30-day
months. The notes will be issued under an indenture dated as of
February 26, 2002, between The Bank of New York Mellon
Trust Company, National Association, as trustee (the
Trustee), and us.
Optional
Redemption
The notes of each series will be redeemable in whole or in part
at any time and from time to time, at our option, at a
redemption price equal to the greater of:
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100% of the principal amount of the notes of that series to be
redeemed; or
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the sum of the present values of the remaining scheduled
payments of principal and interest on the notes to be redeemed
(exclusive of interest accrued to the date of redemption)
discounted to the date of redemption on a semiannual basis
(assuming a
360-day year
consisting of twelve
30-day
months) at the then current Treasury Rate
plus basis points for
the notes
and basis points for
the notes.
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In each case we will pay accrued and unpaid interest on the
principal amount being redeemed to the date of redemption.
For purposes of the foregoing discussion of optional redemption,
the following definitions are applicable:
Business Day means any calendar day that is not a
Saturday, Sunday or legal holiday in New York, New York or
Houston, Texas and on which commercial banks are open for
business in New York, New York and Houston, Texas.
Comparable Treasury Issue means the United States
Treasury security selected by an Independent Investment Banker
as having a maturity comparable to the remaining term
(Remaining Life) of the notes to be redeemed that
would be utilized, at the time of selection and in accordance
with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the
remaining term of such notes.
Comparable Treasury Price means, with respect to any
redemption date, (1) the average of the Reference Treasury
Dealer Quotations for such redemption date, after excluding the
highest and lowest Reference Treasury Dealer Quotations, or
(2) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such quotations.
S-8
Independent Investment Banker means one of the
Reference Treasury Dealers that we appoint to act as the
Independent Investment Banker from time to time.
Reference Treasury Dealer means each of Morgan
Stanley & Co. Incorporated, Banc of America Securities
LLC, J.P. Morgan Securities Inc., Citigroup Global Markets
Inc. and Deutsche Bank Securities Inc. (each a Primary
Treasury Dealer) and their respective successors which we
specify from time to time; provided, however, that if any of
them ceases to be a Primary Treasury Dealer, we will substitute
therefor another Primary Treasury Dealer.
Reference Treasury Dealer Quotations means, with
respect to each Reference Treasury Dealer and any redemption
date, the average, as determined by the Trustee, of the bid and
asked prices for the Comparable Treasury Issue (expressed in
each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at
5:00 p.m., New York City time, on the third Business Day
preceding such redemption date.
Treasury Rate means, with respect to any redemption
date, the rate per year equal to: (1) the yield, under the
heading which represents the average for the immediately
preceding week, appearing in the most recently published
statistical release designated H.15(519) or any
successor publication which is published weekly by the Board of
Governors of the Federal Reserve System and which establishes
yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption Treasury
Constant Maturities, for the maturity corresponding to the
Comparable Treasury Issue; provided that, if no maturity is
within three months before or after the Remaining Life of the
notes to be redeemed, yields for the two published maturities
most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be interpolated
or extrapolated from those yields on a straight line basis,
rounding to the nearest month; or (2) if such release (or
any successor release) is not published during the week
preceding the calculation date or does not contain such yields,
the rate per year equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, calculated using a
price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date. The Treasury Rate shall
be calculated on the third Business Day preceding the redemption
date.
Notice of redemption will be mailed at least 30 but not more
than 60 days before the redemption date to each holder of
record of the notes to be redeemed at its registered address.
The notice of redemption for the notes will state, among other
things, the series and amount of notes to be redeemed, the
redemption date, the redemption price and the place or places
that payment will be made upon presentation and surrender of
notes to be redeemed. Unless we default in the payment of the
redemption price, interest will cease to accrue on any notes
that have been called for redemption at the redemption date. If
fewer than all of the notes of a series are to be redeemed at
any time, the Trustee will select, not more than 60 days
prior to the redemption date, the particular notes or portions
thereof for redemption from the outstanding notes not previously
called by such method as the Trustee deems fair and appropriate.
Sinking
Fund
There is no provision for a sinking fund for the notes.
Ranking
The notes will constitute unsecured and unsubordinated
obligations of Marathon Oil Corporation and will rank equally
with all its other existing and future unsecured and
unsubordinated indebtedness.
We derive substantially all of our operating income from, and
hold substantially all of our assets through, our subsidiaries.
As a result, the notes will be structurally subordinated to the
liabilities of our subsidiaries, including trade payables. For a
discussion of our holding company structure and our ability to
obtain distributions of earnings and cash flows from our
subsidiaries, see Description of Debt
Securities General in the accompanying
prospectus.
S-9
As of December 31, 2008, our consolidated subsidiaries had
approximately $631 million of indebtedness, excluding
intercompany loans. As of December 31, 2008, as adjusted to
give effect to the issuance of the notes and our application of
the net proceeds from that issuance as described under Use
of Proceeds, we would have had an aggregate of
$ of
consolidated indebtedness.
Certain
Covenants
Certain covenants in the indenture limit our ability and the
ability of our subsidiaries to:
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create or permit to exist mortgages and other liens; and
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enter into sale and leaseback transactions.
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For a description of these covenants, see Description of
Debt Securities Restrictive Covenants Under the
Senior Indenture in the accompanying prospectus.
Defeasance
Under certain circumstances, we will be deemed to have
discharged the entire indebtedness on all of the outstanding
notes by defeasance. See Description of the Debt
Securities Satisfaction and Discharge; Defeasance
Under the Senior Indenture in the accompanying prospectus
for a description of the terms of any discharge or defeasance.
Book-Entry
System
We will issue the notes of each series in the form of one or
more global notes in fully registered form initially in the name
of Cede & Co., as nominee of The Depository
Trust Company (DTC), or such other name as may
be requested by an authorized representative of DTC. The global
notes will be deposited with DTC and may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of
DTC to DTC or another nominee of DTC or by DTC or any nominee to
a successor of DTC or a nominee of such successor.
DTC has advised us and the underwriters as follows:
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DTC is a limited-purpose trust company organized under the New
York Banking Law, a banking organization within the
meaning of the New York Banking Law, a member of the Federal
Reserve System, a clearing corporation within the
meaning of the New York Uniform Commercial Code, and a
clearing agency registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of
1934, as amended.
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DTC holds securities that its participants deposit with DTC and
facilitates the settlement among direct participants of
securities transactions, such as transfers and pledges, in
deposited securities, through electronic computerized book-entry
changes in direct participants accounts, thereby
eliminating the need for physical movement of securities
certificates.
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Direct participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other
organizations.
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DTC is a wholly owned subsidiary of The Depository
Trust & Clearing Corporation (DTCC). DTCC
is the holding company for DTC, National Securities Clearing
Corporation and Fixed Income Clearing Corporation, all of which
are registered clearing agencies. DTCC is owned by the users of
its regulated subsidiaries.
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Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly.
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The rules applicable to DTC and its direct and indirect
participants are on file with the Securities and Exchange
Commission.
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S-10
Purchases of notes under the DTC system must be made by or
through direct participants, which will receive a credit for the
notes in DTCs records. The ownership interest of each
actual purchaser of notes is in turn to be recorded on the
direct and indirect participants records. Beneficial
owners of the notes will not receive written confirmation from
DTC of their purchase, but beneficial owners are expected to
receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings,
from the direct or indirect participant through which the
beneficial owner entered into the transaction. Transfers of
ownership interests in the notes are to be accomplished by
entries made on the books of direct and indirect participants
acting on behalf of beneficial owners. Beneficial owners will
not receive certificates representing their ownership interests
in the notes, except in the event that use of the book-entry
system for the notes is discontinued.
To facilitate subsequent transfers, all notes deposited by
direct participants with DTC are registered in the name of
DTCs partnership nominee, Cede & Co., or such
other name as may be requested by an authorized representative
of DTC. The deposit of notes with DTC and their registration in
the name of Cede & Co. or such other nominee do not
effect any change in beneficial ownership. DTC has no knowledge
of the actual beneficial owners of the notes; DTCs records
reflect only the identity of the direct participants to whose
accounts such notes are credited, which may or may not be the
beneficial owners. The direct and indirect participants will
remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants,
and by direct participants and indirect participants to
beneficial owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in
effect from time to time.
The laws of some jurisdictions may require that certain persons
take physical delivery in definitive form of securities which
they own. Consequently, those persons may be prohibited from
purchasing beneficial interests in the global notes from any
beneficial owner or otherwise.
So long as DTCs nominee is the registered owner of the
global notes, such nominee for all purposes will be considered
the sole owner or holder of the notes for all purposes under the
indenture. Except as provided below, beneficial owners will not
be entitled to have any of the notes registered in their names,
will not receive or be entitled to receive physical delivery of
the notes in definitive form and will not be considered the
owners or holders thereof under the indenture.
Neither DTC nor Cede & Co. (nor such other DTC
nominee) will consent or vote with respect to the notes. Under
its usual procedures, DTC mails an omnibus proxy to the issuer
as soon as possible after the record date. The omnibus proxy
assigns Cede & Co.s consenting or voting rights
to those direct participants to whose accounts the notes are
credited on the record date (identified in a listing attached to
the omnibus proxy).
All payments on the global notes will be made to
Cede & Co., or such other nominee as may be requested
by an authorized representative of DTC. DTCs practice is
to credit direct participants accounts upon DTCs
receipt of funds and corresponding detail information from
trustees or issuers on payment dates in accordance with their
respective holdings shown on DTCs records. Payments by
participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or
registered in street name, and will be the
responsibility of such participant and not of DTC, the Trustee
or us, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal and
interest to Cede & Co. (or such other nominee as may
be requested by an authorized representative of DTC) shall be
the responsibility of the Trustee or us, disbursement of such
payments to direct participants shall be the responsibility of
DTC, and disbursement of such payments to the beneficial owners
shall be the responsibility of direct and indirect participants.
DTC may discontinue providing its service as securities
depositary with respect to the notes at any time by giving
reasonable notice to us or the Trustee. In addition, we may
decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depositary). Under those
circumstances, in the
S-11
event that a successor securities depositary is not obtained,
note certificates in fully registered form are required to be
printed and delivered to beneficial owners of the global notes
representing such notes.
The information in this section concerning DTC and DTCs
book-entry system has been obtained from sources that we believe
to be reliable (including DTC), but we take no responsibility
for its accuracy.
Neither Marathon, the Trustee nor the underwriters will have any
responsibility or obligation to direct participants, or the
persons for whom they act as nominees, with respect to the
accuracy of the records of DTC, its nominee or any direct
participant with respect to any ownership interest in the notes,
or payments to, or the providing of notice to direct
participants or beneficial owners.
So long as the notes are in DTCs book-entry system,
secondary market trading activity in the notes will settle in
immediately available funds. We will make all applicable
payments on the notes issued as global notes in immediately
available funds.
See Description of Debt Securities in the
accompanying prospectus for additional information concerning
the notes, the indenture and the book-entry system.
S-12
UNDERWRITING
Morgan Stanley & Co. Incorporated, Banc of America
Securities LLC, J.P. Morgan Securities Inc., Citigroup
Global Markets Inc. and Deutsche Bank Securities Inc. are acting
as joint book-running managers of the offering and as
representatives of the underwriters named below.
Subject to the terms and conditions stated in the underwriting
agreement dated the date of this prospectus supplement, each
underwriter named below has agreed to purchase, and we have
agreed to sell to that underwriter, the principal amount of
notes set forth opposite the underwriters name.
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Principal Amount
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Principal Amount
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Underwriter
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of Notes
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of Notes
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Morgan Stanley & Co. Incorporated
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$
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$
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Banc of America Securities LLC
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J.P. Morgan Securities Inc.
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Citigroup Global Markets Inc.
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Deutsche Bank Securities Inc.
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Total
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$
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$
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Under the terms and conditions of the underwriting agreement, if
the underwriters purchase any of the notes, then the
underwriters are obligated to purchase all of the notes.
Each series of notes is a new issue of securities with no
established trading market and will not be listed on any
national securities exchange. The underwriters have advised us
that they intend to make a market for the notes, but they have
no obligation to do so and may discontinue market making at any
time without providing notice. No assurance can be given as to
the liquidity of any trading market for the notes.
The underwriters propose to offer some of the notes directly to
the public at the public offering price set forth on the cover
page of this prospectus supplement and some of the notes to
dealers at the public offering price less a concession not to
exceed % of the principal amount in
the case of the notes
and % of the principal amount in
the case of the notes. The
underwriters may allow, and dealers may reallow a concession to
certain other dealers not to
exceed % of the principal amount in
the case of
the
notes and % of the principal amount
in the case of the notes. After
the initial offering of the notes to the public, the
representatives may change the public offering prices and
concessions.
The following table shows the underwriting discounts and
commissions that we are to pay to the underwriters in connection
with this offering (expressed as a percentage of the principal
amount of the notes):
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Paid By Marathon
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Per note
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%
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Per note
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%
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In connection with the offering, Morgan Stanley & Co.
Incorporated, Banc of America Securities LLC, J.P. Morgan
Securities Inc., Citigroup Global Markets Inc. and Deutsche Bank
Securities Inc., on behalf of the underwriters, may purchase and
sell notes in the open market. These transactions may include
over-allotment, syndicate covering transactions and stabilizing
transactions. Over-allotment involves syndicate sales of notes
in excess of the principal amount of notes to be purchased by
the underwriters in the offering, which creates a syndicate
short position. Syndicate covering transactions involve
purchases of the notes in the open market after the distribution
has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of
notes made for the purpose of preventing or retarding a decline
in the market price of the notes while the offering is in
progress. Finally, the underwriting syndicate may reclaim
selling concessions allowed for distributing the notes in this
offering, if the syndicate repurchases previously distributed
notes in syndicate covering transactions, stabilization
transactions or otherwise. Any of these activities may have the
effect of preventing or retarding a decline in the market price
of the notes. They may also cause the price of the notes to be
higher than the price that otherwise would exist in the open
market in the absence of these transactions. The underwriters
may conduct these transactions in the over-the-counter
S-13
market or otherwise. If the underwriters commence any of these
transactions, they may discontinue them at any time.
We estimate that our total expenses for this offering will be
$1.7 million.
Some of the underwriters and their affiliates have, from time to
time, performed various investment or commercial banking,
financial advisory and lending services for us in the ordinary
course of business for which they have received customary fees
and expenses. Some of the underwriters or affiliates of some of
the underwriters are lenders under some of our credit facilities.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of
1933, as amended, or to contribute to payments the underwriters
may be required to make because of any of those liabilities.
LEGAL
MATTERS
Baker Botts L.L.P., Houston, Texas, will pass on the validity of
the notes offered in this prospectus supplement. Cravath, Swaine
and Moore LLP, New York, New York, will pass on various legal
matters for the underwriters in connection with this offering.
EXPERTS
The consolidated financial statements and managements
assessment of the effectiveness of internal control over
financial reporting (which is included in Managements
Report on Internal Control over Financial Reporting)
incorporated in this prospectus supplement by reference to the
Annual Report on
Form 10-K
for the year ended December 31, 2007 have been so
incorporated in reliance on the report (which contains an
explanatory paragraph on the effectiveness of internal control
over financial reporting due to the exclusion of certain
elements of the internal control over financial reporting of
Marathon Oil Canada Corporation that the Company acquired as of
December 31, 2007) of PricewaterhouseCoopers LLP, an
independent registered public accounting firm, given on the
authority of said firm as experts in auditing and accounting.
S-14
WHERE YOU
CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You can read and copy these
materials at the SECs public reference room at
100 F Street, N.E., Washington, D.C. 20549. You
can obtain information about the operation of the SECs
public reference room by calling the SEC at
1-800-SEC-0330.
The SEC also maintains an Internet site that contains
information we have filed electronically with the SEC, which you
can access over the Internet at
http://www.sec.gov.
You can also obtain information about us at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
This prospectus supplement and the accompanying prospectus form
part of a registration statement we have filed with the SEC
relating to, among other things, the notes. As permitted by SEC
rules, this prospectus supplement and the accompanying
prospectus do not contain all the information we have included
in the registration statement and the accompanying exhibits and
schedules we have filed with the SEC. You may refer to the
registration statement, exhibits and schedules for more
information about us and the notes. The statements this
prospectus supplement and the accompanying prospectus make
pertaining to the content of any contract, agreement or other
document that is an exhibit to the registration statement
necessarily are summaries of their material provisions, and we
qualify them in their entirety by reference to those exhibits
for complete statements of their provisions. The registration
statement, exhibits and schedules are available at the
SECs public reference room or through its Internet site.
The SEC allows us to incorporate by reference the
information we have filed with the SEC, which means that we can
disclose important information to you by referring you to those
documents. The information we incorporate by reference is an
important part of this prospectus supplement and the
accompanying prospectus, and later information that we file with
the SEC will automatically update and supersede that
information. We incorporate by reference the documents listed
below and any future filings we make with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until all the notes are sold:
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our annual report on
Form 10-K
for the year ended December 31, 2007;
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our quarterly reports on
Form 10-Q
for the quarters ended March 31, 2008, June 30, 2008
and September 30, 2008;
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our current reports on
Form 8-K
dated January 30, 2008, February 28, 2008,
March 17, 2008, April 30, 2008, May 13, 2008,
October 29, 2008 and January 30, 2009; and
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the description of our common stock contained in our
registration statement on
Form 8-A/A
filed with the SEC on July 17, 2007.
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You may request a copy of these filings, other than an exhibit
to these filings unless we have specifically incorporated that
exhibit by reference into the filing, at no cost, by writing or
telephoning us at the following address:
Marathon Oil Corporation
5555 San Felipe Road
Houston, Texas
77056-2723
Attention: Corporate Secretary
Telephone:
(713) 629-6600
S-15
PROSPECTUS
®
Marathon Oil Corporation
5555 San Felipe Road
Houston, Texas
77056-2723
(713) 629-6600
Senior
Debt Securities
Subordinated Debt Securities
Common Stock
Preferred Stock
Warrants
Stock Purchase Contracts
Stock Purchase Units
We will provide additional terms of our securities in one or
more supplements to this prospectus. You should read this
prospectus and the related prospectus supplement carefully
before you invest in our securities. No person may use this
prospectus to offer and sell our securities unless a prospectus
supplement accompanies this prospectus.
The
Offering
We may offer from time to time:
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senior debt securities;
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subordinated debt securities;
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common stock;
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preferred stock;
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warrants;
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stock purchase contracts; and
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stock purchase units.
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Our common stock is listed on the New York Stock Exchange and
the Chicago Stock Exchange under the symbol MRO.
Neither the Securities and Exchange Commission nor any
state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is July 26, 2007.
Table of
Contents
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5
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5
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6
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7
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16
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20
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24
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24
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About
This Prospectus
This prospectus is part of a registration statement that we have
filed with the U.S. Securities and Exchange Commission
using a shelf registration process. Using this
process, we may offer any combination of the securities this
prospectus describes in one or more offerings. This prospectus
provides you with a general description of the securities we may
offer. Each time we use this prospectus to offer securities, we
will provide a prospectus supplement and, if applicable, a
pricing supplement that will describe the specific terms of the
offering. The prospectus supplement and any pricing supplement
may also add to, update or change the information contained in
this prospectus. Please carefully read this prospectus, the
prospectus supplement and any pricing supplement, in addition to
the information contained in the documents we refer to under the
heading Where You Can Find More Information.
The
Company
Marathon Oil Corporation, a Delaware corporation
(Marathon), is an integrated international energy
company. Together with its subsidiaries, Marathon is engaged in:
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worldwide exploration, production and marketing of crude oil and
natural gas;
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domestic refining, marketing and transportation of crude oil and
petroleum products; and
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worldwide marketing and transportation of products manufactured
from natural gas, such as liquefied natural gas
(LNG) and methanol, and development of other
projects to link stranded natural gas resources with key demand
areas.
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In this prospectus, we refer to Marathon, its wholly owned and
majority owned subsidiaries and its ownership interest in equity
affiliates as we or us, unless we
specifically state otherwise or the context indicates otherwise.
Our principal executive offices are located at 5555
San Felipe Road, Houston, Texas
77056-2723,
and our telephone number at that location is
(713) 629-6600.
2
Where You
Can Find More Information
Marathon files annual, quarterly and current reports, proxy
statements and other information with the SEC. You can read and
copy these materials at the SECs public reference room at
100 F Street, N.E., Washington, D.C. 20549. You
can obtain information about the operation of the SECs
public reference room by calling the SEC at
1-800-SEC-0330.
The SEC also maintains an Internet site that contains
information Marathon has filed electronically with the SEC,
which you can access over the Internet at
http://www.sec.gov.
You can also obtain information about Marathon at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
This prospectus is part of a registration statement we have
filed with the SEC relating to the securities we may offer. As
permitted by SEC rules, this prospectus does not contain all the
information we have included in the registration statement and
the accompanying exhibits and schedules we have filed with the
SEC. You may refer to the registration statement, exhibits and
schedules for more information about us and the securities. The
registration statement, exhibits and schedules are available at
the SECs public reference room or through its Internet
site.
The SEC allows us to incorporate by reference the
information Marathon has filed with it, which means that we can
disclose important information to you by referring you to those
documents. The information we incorporate by reference is an
important part of this prospectus, and later information that
Marathon files with the SEC will automatically update and
supersede this information. We incorporate by reference the
documents listed below and any future filings Marathon makes
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until the termination of this
offering. The documents we incorporate by reference are:
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our annual report on
Form 10-K
for the year ended December 31, 2006;
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our quarterly report on
Form 10-Q
for the quarter ended March 31, 2007;
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our current reports on
Form 8-K
filed February 1, 2007 (Items 5.02 and 8.01 only),
March 6, 2007, April 25, 2007, May 14, 2007 and
May 30, 2007; and
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the description of our common stock contained in our
registration statement on
Form 8-A/A
filed with the SEC on July 17, 2007.
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The consolidated financial statements included in our annual
report on
Form 10-K
for the year ended December 31, 2006 and our quarterly
report on
Form 10-Q
for the quarter ended March 31, 2007 do not reflect the
two-for-one split of Marathons common stock which was
effected in the form of a stock dividend distributed on
June 18, 2007 to stockholders of record at the close of
business on May 23, 2007.
You may request a copy of these filings, other than an exhibit
to these filings unless we have specifically incorporated that
exhibit by reference into the filing, at no cost, by writing or
telephoning Marathon at the following address:
Marathon Oil Corporation
5555 San Felipe Road
Houston, Texas
77056-2723
Attention: Corporate Secretary
Telephone:
(713) 629-6600
You should rely only on the information contained or
incorporated by reference in this prospectus, the prospectus
supplement and any pricing supplement. We have not authorized
any person, including any salesman or broker, to provide
information other than that provided in this prospectus, the
prospectus supplement or any pricing supplement. We have not
authorized anyone to provide you with different information. We
are not making an offer of the securities in any jurisdiction
where the offer is not permitted. You should assume that the
information in this prospectus, the prospectus supplement and
any pricing supplement is accurate only as of the date on its
cover page and that any information we have incorporated by
reference is accurate only as of the date of the document
incorporated by reference.
3
Forward-Looking
Statements
This prospectus, including the information we incorporate by
reference, includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. You can
identify our forward-looking statements by words such as
anticipates, believes,
estimates, expects,
forecasts, plans, predicts,
targets, projects, could,
may, should or would or
other similar expressions that convey the uncertainty of future
events or outcomes. When considering these forward-looking
statements, you should keep in mind the risk factors and other
cautionary statements contained in this prospectus, any
prospectus supplement and the documents we have incorporated by
reference.
Forward-looking statements may include, but are not limited to,
statements that relate to (or statements that are subject to
risks, contingencies or uncertainties that relate to): levels of
revenues, gross margins, income from operations, net income or
earnings per share; levels of capital, exploration,
environmental or maintenance expenditures; the success or timing
of completion of ongoing or anticipated capital, exploration or
maintenance projects; volumes of production, sales, throughput
or shipments of liquid hydrocarbons, natural gas and refined
products; levels of worldwide prices of liquid hydrocarbons,
natural gas and refined products; levels of proved reserves, of
liquid hydrocarbons and natural gas; the acquisition or
divestiture of assets; the effect of restructuring or
reorganization of business components; the potential effect of
judicial proceedings on our business and financial condition;
and the anticipated effects of actions of third parties such as
competitors, or federal, foreign, state or local regulatory
authorities.
The forward-looking statements are not guarantees of future
performance, and we caution you not to rely unduly on them. We
have based many of these forward-looking statements on
expectations and assumptions about future events that may prove
to be inaccurate. While our management considers these
expectations and assumptions to be reasonable, they are
inherently subject to significant business, economic,
competitive, regulatory and other risks, contingencies and
uncertainties, most of which are difficult to predict and many
of which are beyond our control.
4
Use of
Proceeds
Unless we inform you otherwise in the prospectus supplement, the
net proceeds from the sale of the securities will be used for
general corporate purposes, including repayment or refinancing
of debt and funding for acquisitions, working capital
requirements, capital expenditures and repurchases and
redemptions of securities. Pending any specific application, we
may initially invest funds in short-term marketable securities
or apply them to the reduction of short-term indebtedness.
Ratios of
Earnings to Fixed Charges and Earnings to
Combined Fixed Charges and Preferred Stock Dividends
Our ratios of earnings to fixed charges and earnings to combined
fixed charges and preferred stock dividends for each of the
periods indicated, in each case determined on a total enterprise
basis are as follows:
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Three Months
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Years Ended December 31,
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Ended
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2002
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2003
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2004
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2005
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2006
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March 31, 2007
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Ratio of earnings to fixed charges
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3.63
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6.47
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7.57
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11.84
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24.10
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13.30
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We had no preferred stock outstanding for any period presented
in the table above, and, accordingly, our ratio of earnings to
combined fixed charges and preferred stock dividends is the same
as our ratio of earnings to fixed charges.
The term earnings is the amount resulting from
adding the following items:
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pre-tax income from continuing operations before adjustment for
minority interests in consolidated subsidiaries or income or
loss from equity investees;
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fixed charges;
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amortization of capitalized interest;
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distributed income of equity investees; and
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our share of pre-tax losses of equity investees for which
charges arising from guarantees are included in fixed charges;
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and subtracting from the total the following:
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interest capitalized;
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preference security dividend requirements of consolidated
subsidiaries; and
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the minority interest in pre-tax income of subsidiaries that
have not incurred fixed charges.
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For this purpose, fixed charges consists of:
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interest expense on all indebtedness and amortization of debt
discount and expense, including discontinued operations;
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interest capitalized, including discontinued operations;
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an estimate of the portion of annual rental expense on operating
leases that represents the interest factor attributable to
rentals, including discontinued operations; and
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pre-tax earnings required to cover preferred stock dividend
requirements of consolidated subsidiaries.
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5
Selected
Historical Consolidated Financial Data
On April 25, 2007, our stockholders approved an increase in
the number of authorized shares of common stock from
550 million to 1.1 billion shares. After that approval
was obtained, our Board of Directors declared a two-for-one
split of our common stock. The split was effected in the form of
a stock dividend distributed on June 18, 2007 to
stockholders of record at the close of business on May 23,
2007. Stockholders received one additional share of Marathon Oil
Corporation common stock for each share of common stock held as
of the close of business on the record date. The per share data
below has been restated to reflect the stock split.
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Quarters Ended
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March 31,
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Years Ended December 31,
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(In millions, except per share data)
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2007
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2006
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2006(1)
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2005(1)
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2004
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2003
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2002
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Statement of Income Data:
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Revenues(2)
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$
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12,869
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$
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16,418
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$
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64,896
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$
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62,986
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$
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49,465
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$
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40,907
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$
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31,295
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Income from continuing operations
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717
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771
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4,957
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3,006
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1,294
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1,010
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|
|
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507
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Net income
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717
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784
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5,234
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3,032
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1,261
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1,321
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516
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Basic per share data:
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Income from continuing operations
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$
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1.04
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$
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1.05
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$
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6.92
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$
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4.22
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$
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1.92
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$
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1.63
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$
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0.82
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Net income
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$
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1.04
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$
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1.07
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$
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7.31
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$
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4.26
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$
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1.87
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$
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2.13
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$
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0.83
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Diluted per share data:
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Income from continuing operations
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$
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1.03
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$
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1.04
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$
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6.87
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$
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4.19
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$
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1.91
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$
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1.63
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$
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0.82
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Net income
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$
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1.03
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$
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1.06
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$
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7.25
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$
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4.22
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$
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1.86
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$
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2.13
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$
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0.83
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Statement of Cash Flows Data:
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Capital expenditures from continuing operations
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$
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737
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$
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572
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$
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3,433
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$
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2,796
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$
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2,141
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$
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1,873
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$
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1,520
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Dividends paid
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138
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121
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547
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436
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348
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298
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285
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Dividends paid per share
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$
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0.20
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$
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0.16
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$
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0.76
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$
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0.61
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$
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0.51
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$
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0.48
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$
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0.46
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Balance Sheet Data as of period end:
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Total assets
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$
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31,396
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$
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27,804
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$
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30,831
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$
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28,498
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$
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23,423
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$
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19,482
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$
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17,812
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Total long-term debt, including capitalized leases
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2,654
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3,687
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3,061
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3,698
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4,057
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4,085
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4,410
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(1) |
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On June 30, 2005, we acquired the 38 percent ownership
interest in Marathon Petroleum Company LLC previously held by
Ashland Inc., making it wholly owned by us. |
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(2) |
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Effective April 1, 2006, we changed our accounting for
matching buy/sell transactions. This change had no effect on
income from continuing operations or net income, but the
revenues and cost of revenues recognized after April 1,
2006 are less than the amounts that would have been recognized
under our previous accounting practices. |
6
Description
of Debt Securities
The debt securities this prospectus covers will be
Marathons general unsecured obligations. The debt
securities will be either senior debt securities or subordinated
debt securities. Marathon will issue senior debt securities
under a senior indenture dated February 26, 2002 between
Marathon and The Bank of New York (as successor to JPMorgan
Chase Bank), as trustee, and Marathon will issue subordinated
debt securities under a subordinated indenture dated
February 26, 2002 between Marathon and The Bank of New York
(as successor to JPMorgan Chase Bank), as trustee. In this
description, we sometimes call the senior indenture and the
subordinated indenture the indentures.
We have summarized the provisions of the indentures and the debt
securities below. You should read the indentures for more
details regarding the provisions described below and for other
provisions that may be important to you. We have filed the
indentures with the SEC as exhibits to the registration
statement, and we will include any other instrument establishing
the terms of any debt securities we offer as exhibits to a
filing we will make with the SEC in connection with that
offering. See Where You Can Find More Information.
The following description primarily relates to senior debt
securities that we may issue under the senior indenture. We have
summarized some of the provisions of the subordinated indenture
below under the caption Subordinated Debt
Securities. If we offer subordinated debt securities, we
will provide more specific terms in the related prospectus
supplement. In this summary description of the debt securities,
all references to Marathon, we or
us mean Marathon Oil Corporation only, unless we
state otherwise or the context clearly indicates otherwise.
General
The senior debt securities will constitute senior debt of
Marathon and will rank equally with all its unsecured and
unsubordinated debt. The subordinated debt securities will be
subordinated to, and thus have a position junior to, any senior
debt securities and all other senior debt of Marathon. Neither
indenture limits the amount of debt we may issue under the
indentures, and neither limits the amount of other unsecured
debt or securities we may incur or issue. We may issue debt
securities under either indenture from time to time in one or
more series, each in an amount we authorize prior to issuance.
Marathon derives substantially all its operating income from,
and holds substantially all its assets through, its
subsidiaries. As a result, Marathon will depend on distributions
of cash flow and earnings of its subsidiaries in order to meet
its payment obligations under any debt securities it offers
under this prospectus and its other obligations. These
subsidiaries are separate and distinct legal entities and will
have no obligation to pay any amounts due on Marathons
debt securities or to provide Marathon with funds for its
payment obligations, whether by dividends, distributions, loans
or otherwise. In addition, provisions of applicable law, such as
those limiting the legal sources of dividends, could limit their
ability to make payments or other distributions to Marathon and
they could agree to contractual restrictions on their ability to
make distributions.
Marathons right to receive any assets of any subsidiary,
and therefore the right of the holders of Marathons debt
securities to participate in those assets, will be effectively
subordinated to the claims of that subsidiarys creditors,
including trade creditors. In addition, even if Marathon is a
creditor of any subsidiary, Marathons rights as a creditor
would be subordinate to any security interest in the assets of
that subsidiary and any indebtedness of that subsidiary senior
to that held by Marathon.
We may issue the debt securities of any series in definitive
form or as a book-entry security in the form of a global
security registered in the name of a depositary we designate.
We may issue the debt securities in one or more series with
various maturities. They may be sold at par, at a premium or
with an original issue discount.
7
Terms
The prospectus supplement relating to any series of debt
securities being offered will specify whether the debt
securities are senior debt securities or subordinated debt
securities and will include specific terms relating to the
offering. These terms will include some or all of the following:
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the title of the debt securities;
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any limit on the aggregate principal amount of the debt
securities;
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the person or entity to whom any interest will be payable, if
that person or entity is not the registered owner of the debt
securities;
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the date or dates on which the principal of and any premium on
the debt securities will be payable;
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the rates, which may be fixed or variable, per annum at which
the debt securities will bear interest, if any, and the date or
dates from which any interest will accrue;
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the dates on which the interest, if any, on the debt securities
will be payable, and the regular record dates for the interest
payment dates or the method for determining those dates;
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the place or places where payments on the debt securities will
be payable;
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the terms and conditions on which the debt securities may, under
any optional or mandatory redemption provisions, be redeemed;
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any mandatory or optional sinking fund or similar provisions or
provisions for mandatory redemption or purchase at the option of
the holder;
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the denominations in which the debt securities will be issuable,
if other than denominations of $1,000 or any multiple of that
amount;
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any index, formula or other method used to determine the amount
of payment of principal of or any premium or interest on the
debt securities;
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if other than the currency of the United States of America, the
currency of payment of principal of or any premium or interest
on the debt securities;
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if, at our election or the election of the holder, the principal
of or any premium or interest on any debt securities is to be
payable in one or more currencies or currency units other than
those in which the debt securities are stated to be payable, the
terms and conditions on which that election is to be made and
the amount so payable;
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if other than the full principal amount of the debt securities,
the portion of the principal amount of the debt securities that
will be payable on the declaration of acceleration of the
maturity of the debt securities;
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if the principal amount payable at maturity will not be
determinable as of one or more dates prior to maturity, the
amount that will be deemed to be the principal amount as of any
such date;
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any terms on which the debt securities may be convertible into
or exchanged for securities or indebtedness of any kind of
Marathon or of any other issuer or obligor and the terms and
conditions on which a conversion or exchange will be effected,
including the initial conversion or exchange price or rate, the
conversion period and any other additional provisions;
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the applicability of the defeasance provisions described below
under Satisfaction and Discharge; Defeasance
under the Senior Indenture, and any conditions under which
those provisions will apply;
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if the debt securities will be issuable only in the form of a
global security as described below under
Book-entry Debt Securities, the
depositary for the debt securities;
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any changes in or additions to the events of default or
covenants this prospectus describes;
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8
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the payment of any additional amounts with respect to the debt
securities; and
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any other terms of the debt securities.
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If we sell any of the debt securities for any foreign currency
or currency unit or if payments on the debt securities are
payable in any foreign currency or currency unit, we will
describe in the prospectus supplement the restrictions,
elections, tax consequences, specific terms and other
information relating to those debt securities and the foreign
currency or currency unit.
Restrictive
Covenants Under the Senior Indenture
Marathon has agreed to two principal restrictions on its
activities for the benefit of holders of the senior debt
securities. The restrictive covenants summarized below will
apply to a series of senior debt securities (unless waived or
amended) as long as any of those senior debt securities are
outstanding, unless the prospectus supplement for the series
states otherwise.
Creation
of Certain Liens
If Marathon or any subsidiary of Marathon mortgages or encumbers
as security for money borrowed any property capable of producing
oil or gas which (1) is located in the United States and
(2) is determined to be a principal property by
Marathons board of directors in its discretion, Marathon
will, or will cause such subsidiary to, secure each series of
senior debt equally and ratably with all obligations secured by
the mortgage then being given. This covenant will not apply in
the case of any mortgage:
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existing on the date of the senior indenture;
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incurred in connection with the acquisition or construction of
any property;
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previously existing on acquired property or existing on the
property of any entity when it becomes a subsidiary of ours;
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in favor of the United States, any state, or any agency,
department, political subdivision or other instrumentality of
either, to secure payments to us under the provisions of any
contract or statute;
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in favor of the United States, any state, or any agency,
department, political subdivision or other instrumentality of
either, to secure borrowings for the purchase or construction of
the property mortgaged;
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in connection with a sale or other transfer of (1) oil, gas
or other minerals in place for a period of time until, or in an
amount such that, the purchase will realize a specified amount
of money or a specified amount of minerals or (2) any
interest of the character commonly referred to as an oil
payment or a production payment;
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to secure the cost of the repair, construction, improvement,
alteration, exploration, development or drilling of all or part
of a principal property;
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in various facilities and personal property located at or on a
principal property;
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arising in connection with the sale of accounts receivable
resulting from the sale of oil or gas at the wellhead; or
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that is a renewal of or substitution for any mortgage permitted
under any of the provisions described in the preceding clauses.
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In addition, Marathon may, and may permit its subsidiaries to,
grant mortgages or incur liens on property covered by the
restriction described above as long as the net book value of the
property so encumbered, together with all property subject to
the restriction on sale and leaseback transactions described
below, does not, at the
9
time such Mortgage or lien is granted, exceed 10% of our
Consolidated Net Tangible Assets, which the senior
indenture defines to mean the aggregate value of all assets of
Marathon and its subsidiaries after deducting:
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all current liabilities, excluding all long-term debt due within
one year;
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all investments in unconsolidated subsidiaries and all
investments accounted for on the equity basis; and
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all goodwill, patents and trademarks, unamortized debt discount
and other similar intangibles;
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all determined in conformity with generally accepted accounting
principles and calculated on a basis consistent with our most
recent audited consolidated financial statements.
Limitations
on Certain Sale and Leaseback Transactions
Marathon and its subsidiaries are generally prohibited from
selling and leasing back the principal properties described
above under Creation of Certain Liens.
However, this covenant will not apply if:
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the lease is an intercompany lease between Marathon and one of
its subsidiaries or between any of its subsidiaries;
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the lease is for a temporary period by the end of which it is
intended that the use of the leased property will be
discontinued;
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Marathon or a subsidiary of Marathon could mortgage the property
without equally and ratably securing the senior debt securities
under the covenant described above under the caption
Creation of Certain Liens;
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the transfer is incident to or necessary to effect any
operating, farm-out, farm-in, unitization, acreage exchange,
acreage contribution, bottom-hole or dry-hole arrangement or
pooling agreement or other agreement of the same general nature
relating to the acquisition, exploration, maintenance,
development or operation of oil and gas properties in the
ordinary course of business or as required by any regulatory
agency having jurisdiction over the property; or
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Marathon promptly informs the trustee of the sale, the net
proceeds of the sale are at least equal to the fair value of the
property and within 180 days of the sale the net proceeds
are applied to the retirement or in-substance defeasance of our
funded debt (subject to reduction, under circumstances the
senior indenture specifies).
|
As of the date of this prospectus, neither Marathon nor any
subsidiary of Marathon has any property that Marathons
board of directors has determined to be a principal property.
Merger,
Consolidation and Sale of Assets
The senior indenture provides that Marathon may not merge or
consolidate with any other entity or sell or convey all or
substantially all its assets except as follows:
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Marathon is the continuing corporation or the successor entity
(if other than Marathon) is a corporation or other entity
organized under the laws of the United States or any state
thereof that expressly assumes the obligations of Marathon under
the senior indenture and the outstanding senior debt
securities; and
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immediately after the merger, consolidation, sale or conveyance,
no event of default under the senior indenture shall have
occurred and be continuing.
|
On the assumption by the successor of the obligations under the
indentures, the successor will be substituted for Marathon, and
Marathon will be relieved of any further obligation under the
indentures and the debt securities.
10
Events of
Default Under the Senior Indenture
The senior indenture defines an event of default with respect to
the senior debt securities of any series as being:
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(1)
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Marathons failure to pay interest on any senior debt
security of that series when due, continuing for 30 days;
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(2)
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Marathons failure to pay the principal of or premium on
any senior debt security of that series when due and payable;
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(3)
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Marathons failure to deposit any sinking fund payment when
due by the terms of the senior debt securities of that series;
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(4)
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Marathons failure to perform under any other covenant or
warranty applicable to the senior debt securities of that series
and not specifically dealt with in the definition of event
of default for a period of 90 days after written
notice to Marathon of that failure;
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(5)
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specified events of bankruptcy, insolvency or reorganization of
Marathon; or
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(6)
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any other event of default provided with respect to the senior
debt securities of that series.
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The trustee is required to give holders of the senior debt
securities of any series written notice of a default with
respect to that series as provided by the Trust Indenture
Act. In the case of any default of the character described above
in clause (4) of the immediately preceding paragraph, no
such notice to holders must be given until at least 60 days
after the occurrence of that default.
Marathon is required annually to deliver to the trustee an
officers certificate stating whether or not the signers
have any knowledge of any default by Marathon in its performance
and observance of any terms, provisions and conditions of the
senior indenture.
In case an event of default (other than an event of default
involving an event of bankruptcy, insolvency or reorganization
of Marathon) shall occur and be continuing with respect to any
series, the trustee or the holders of not less than 25% in
principal amount of the senior debt securities of that series
then outstanding may declare the principal amount of those
senior debt securities (or, in the case of any senior debt
securities Marathon issues at an original issue discount, the
portion of such principal amount that we will specify in the
applicable prospectus supplement) to be due and payable. If an
event of default relating to any event of bankruptcy, insolvency
or reorganization of Marathon occurs, the principal of all the
senior debt securities then outstanding (or, in the case of any
senior debt securities Marathon issues at an original issue
discount, the portion of such principal amount that we will
specify in the applicable prospectus supplement) will become
immediately due and payable without any action on the part of
the applicable trustee or any holder. The holders of a majority
in principal amount of the outstanding senior debt securities of
any series affected by the default may in some cases rescind
this accelerated payment requirement. Depending on the terms of
our other indebtedness, an event of default may give rise to
cross defaults on our other indebtedness.
Any past default with respect to a series of senior debt
securities may be waived on behalf of all holders of those
senior debt securities by at least a majority in principal
amount of the holders of the outstanding senior debt securities
of that series, except a default:
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in the payment of principal of or any premium or interest on any
senior debt security of that series; or
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respecting a covenant or provision that cannot be modified
without the consent of the holder of each outstanding senior
debt security of that series.
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Any default that is so waived will cease to exist and any event
of default arising from that default will be deemed to be cured
for every purpose under the senior indenture, but no such waiver
will extend to any subsequent or other default or impair any
right arising from a subsequent or other default.
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A holder of a senior debt security of any series will be able to
pursue any remedy under the senior indenture only if:
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the holder has given prior written notice to the trustee of a
continuing event of default with respect to the senior debt
securities of that series;
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the holders of at least 25% in principal amount of the
outstanding senior debt securities of that series have made a
written request to the trustee to institute proceedings with
respect to the event of default;
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the holders making the request have offered the trustee
reasonable indemnity against costs, expenses and liabilities to
be incurred in compliance with the request;
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the trustee for 60 days after its receipt of the notice,
request and offer of indemnity has failed to institute any such
proceeding; and
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during that
60-day
period, the holders of a majority in principal amount of the
senior debt securities of that series do not give the trustee a
direction inconsistent with the request.
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Holders of senior debt securities, however, are entitled at any
time to bring a lawsuit for the payment of principal and
interest due on their debt securities on or after its due date.
It is intended that rights provided for holders under the senior
indenture are for the equal and ratable benefit of all such
holders.
Modification
of the Senior Indenture
Marathon and the trustee may modify the senior indenture without
the consent of the holders of the senior debt securities for one
or more of the following purposes:
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to evidence the succession of another person to Marathon;
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to add to covenants for the benefit of the holders of senior
debt securities or to surrender any right or power conferred on
Marathon by the senior indenture;
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to add additional events of default for the benefit of holders
of all or any series of senior debt securities;
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to add or change provisions of the senior indenture to allow the
issuance of senior debt securities in other forms;
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to add to, change or eliminate any of the provisions of the
senior indenture respecting one or more series of senior debt
securities under conditions the senior indenture specifies;
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to secure the senior debt securities under the requirements of
the senior indenture or otherwise;
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to establish the form or terms of senior debt securities of any
series as permitted by the senior indenture;
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to evidence the appointment of a successor trustee; or
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to cure any ambiguity or to correct or supplement any provision
of the senior indenture that may be defective or inconsistent
with any other provision in the senior indenture, or to make any
other provisions with respect to matters or questions arising
under the senior indenture as shall not adversely affect the
interests of the holders of senior debt securities of any series
in any material respect.
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Marathon and the trustee may otherwise modify the senior
indenture or any supplemental senior indenture with the consent
of the holders of not less than a majority in aggregate
principal amount of each series of senior debt securities
affected. However, without the consent of the holder of each
outstanding senior debt security affected, no modification may:
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change the fixed maturity or reduce the principal amount, reduce
the rate or extend the time of payment of any premium or
interest thereon, or change the currency in which the senior
debt securities are
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payable, or adversely affect any right of the holder of any
senior debt security to require Marathon to repurchase that
senior debt security; or
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reduce the percentage of senior debt securities required for
consent to any such modification or supplemental indenture.
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Satisfaction
and Discharge; Defeasance Under the Senior Indenture
The senior indenture will be satisfied and discharged if:
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Marathon delivers to the trustee all senior debt securities then
outstanding for cancellation; or
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all senior debt securities have become due and payable or are to
become due and payable within one year or are to be called for
redemption within one year and Marathon deposits an amount of
cash sufficient to pay the principal of and premium, if any, and
interest on those senior debt securities to the date of maturity
or redemption.
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In addition to the right of discharge described above, we may
deposit with the trustee funds or government securities
sufficient to make payments on the senior debt securities of a
series on the dates those payments are due and payable, then, at
our option, either of the following will occur:
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we will be discharged from our obligations with respect to the
senior debt securities of that series (legal
defeasance); or
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we will no longer have any obligation to comply with the
restrictive covenants under the senior indenture, and the
related events of default will no longer apply to us, but some
of our other obligations under the senior indenture and the
senior debt securities of that series, including our obligation
to make payments on those senior debt securities, will survive
(covenant defeasance).
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If we defease a series of senior debt securities, the holders of
the senior debt securities of the series affected will not be
entitled to the benefits of the senior indenture, except for our
obligations to:
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register the transfer or exchange of senior debt securities;
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replace mutilated, destroyed, lost or stolen senior debt
securities; and
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maintain paying agencies and hold moneys for payment in trust.
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As a condition to either legal defeasance or covenant
defeasance, we must deliver to the trustee an opinion of counsel
that the holders of the senior debt securities will not
recognize gain or loss for federal income tax purposes as a
result of the action.
Subordinated
Debt Securities
Although the senior indenture and the subordinated indenture are
generally similar and many of the provisions discussed above
pertain to both senior and subordinated debt securities, there
are many substantive differences between the two indentures.
This section discusses some of those differences.
Subordination
Subordinated debt securities will be subordinate, in right of
payment, to all senior debt, which the subordinated
indenture defines to mean, with respect to Marathon, the
principal of and premium, if any, and interest on:
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all indebtedness of Marathon, whether outstanding on the date of
the subordinated indenture or subsequently created, incurred or
assumed, which is for money borrowed, or evidenced by a note or
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similar instrument given in connection with the acquisition of
any business, properties or assets, including securities;
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any indebtedness of others of the kinds described in the
preceding clause for the payment of which Marathon is
responsible or liable (directly or indirectly, contingently or
otherwise) as guarantor or otherwise; and
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amendments, renewals, extensions and refundings of any
indebtedness described in the two preceding clauses, unless in
any instrument or instruments evidencing or securing that
indebtedness or pursuant to which the same is outstanding, or in
any such amendment, renewal, extension or refunding, it is
expressly provided that such indebtedness is not superior in
right of payment to the subordinated debt securities of any
series.
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Terms
of Subordinated Debt Securities May Contain Conversion or
Exchange Provisions
The prospectus supplement for a particular series of
subordinated debt securities will include some or all of the
specific terms discussed above under
General and
Terms. Additionally, the prospectus
supplement may contain subordination provisions (to the extent
that those provisions might differ from those provided in the
subordinated indenture) and, if applicable, conversion or
exchange provisions.
Modification
of the Subordinated Indenture
The subordinated indenture may be modified by Marathon and the
trustee without the consent of the holders of the subordinated
debt securities for one or more of the purposes we discuss above
under Modification of the Senior
Indenture. Additionally, Marathon and the trustee may
modify the subordinated indenture to make provision with respect
to any conversion or exchange rights as contemplated in that
indenture.
Defeasance
of Subordinated Debt Securities
The subordination of the subordinated debt securities is
expressly made subject to the provisions for legal defeasance
and covenant defeasance (for similar provisions, see
Satisfaction and Discharge; Defeasance Under
the Senior Indenture. On the effectiveness of any legal
defeasance or covenant defeasance with respect to outstanding
subordinated debt securities, those debt securities will cease
to be subordinated.
Governing
Law
New York law will govern the indentures and the debt securities.
The
Trustee
The Bank of New York (as successor to JPMorgan Chase Bank) is
the trustee under each of the indentures. The Bank of New York
also serves as trustee relating to a number of series of debt
and other long-term repayment obligations of Marathon and its
subsidiaries as of December 31, 2006. The Bank of New York
and its affiliates perform certain commercial banking services
for us for which they receive customary fees and are lenders
under Marathons credit facility.
If an event of default occurs and is continuing, the trustee
must use the degree of care and skill of a prudent person in the
conduct of his own affairs. The trustee will become obligated to
exercise any of its powers under the indentures at the request
of any of the holders of any debt securities only after those
holders have offered the trustee indemnity reasonably
satisfactory to it.
Each indenture limits the right of the trustee, if it is one of
our creditors, to obtain payment of claims or to realize on
certain property received for any such claim, as security or
otherwise. The trustee may engage in other transactions with us.
If it acquires any conflicting interest, however, it must
eliminate that conflict or resign.
14
Exchange,
Registration and Transfer
Debt securities of any series will be exchangeable for other
debt securities of the same series with the same total principal
amount and the same terms but in different authorized
denominations in accordance with the applicable indenture.
Holders may present registered debt securities for registration
of transfer at the office of the security registrar or any
transfer agent we designate. The security registrar or transfer
agent will effect the transfer or exchange when it is satisfied
with the documents of title and identity of the person making
the request.
Unless we inform you otherwise in the prospectus supplement, we
will appoint the trustee under each indenture as security
registrar for the debt securities we issue in registered form
under that indenture. If the prospectus supplement refers to any
transfer agent initially designated by us, we may at any time
rescind that designation or approve a change in the location
through which any transfer agent acts. We will be required to
maintain an office or agency for transfers and exchanges in each
place of payment. We may at any time designate additional
transfer agents for any series of debt securities or rescind the
designation of any transfer agent. No service charge will be
made for any registration of transfer or exchange of those
securities. Marathon or the trustee may, however, require the
payment of any tax or other governmental charge payable for that
registration.
In the case of any redemption, neither the security registrar
nor the transfer agent will be required to register the transfer
of or exchange of any debt security:
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during a period beginning 15 business days before the day of
mailing of the relevant notice of redemption and ending on the
close of business on that day of mailing; or
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if we have called the debt security for redemption in whole or
in part, except the unredeemed portion of any debt security
being redeemed in part.
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Payment
and Paying Agents
Unless we inform you otherwise in the prospectus supplement, we
will make payments on the debt securities in U.S. dollars
at the office of the applicable trustee or any paying agent we
designate. At our option, we may make payments by check mailed
to the holders registered address or, with respect to
global debt securities, by wire transfer. Unless we inform you
otherwise in the prospectus supplement, we will make interest
payments to the person in whose name the debt security is
registered at the close of business on the record date for the
interest payment.
Unless we inform you otherwise in the prospectus supplement, we
will designate the trustee under each indenture as our paying
agent for payments on debt securities we issue under that
indenture. We may at any time designate additional paying agents
or rescind the designation of any paying agent or approve a
change in the office through which any paying agent acts.
Subject to the requirements of any applicable abandoned property
laws, the trustee and paying agent will repay to us on our
written request any funds they hold for payments on the debt
securities that remain unclaimed for two years after the date
upon which that payment has become due. After repayment to us,
holders entitled to those funds must look only to us for payment.
Book-entry
Debt Securities
We may issue the debt securities of a series in the form of one
or more global debt securities that would be deposited with a
depositary or its nominee identified in the prospectus
supplement. We may issue global debt securities in either
temporary or permanent form. We will describe in the prospectus
supplement the terms of any depositary arrangement and the
rights and limitations of owners of beneficial interests in any
global debt security.
15
Description
of Capital Stock
Marathons authorized capital stock consists of:
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1,100,000,000 shares of common stock; and
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26,000,000 shares of preferred stock, issuable in series.
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Each authorized share of common stock has a par value of $1.00.
The authorized shares of preferred stock have no par value. As
of June 30, 2007, 681,275,724 shares of common stock
were issued and outstanding, and 54,427,392 shares of
common stock were held as treasury shares. As of June 30,
2007, no shares of Marathons preferred stock were issued
and outstanding.
In the discussion that follows, we have summarized the material
provisions of Marathons restated certificate of
incorporation and by-laws relating to its capital stock. This
discussion is subject to the relevant provisions of Delaware law
and is qualified in its entirety by reference to Marathons
restated certificate of incorporation and by-laws. You should
read the provisions of the restated certificate of incorporation
and by-laws as currently in effect for more details regarding
the provisions described below and for other provisions that may
be important to you. We have filed copies of those documents
with the SEC, and they are incorporated by reference as exhibits
to the registration statement. See Where You Can Find More
Information.
Common
Stock
Each share of common stock has one vote in the election of each
director and on all other matters voted on generally by the
stockholders. No share of common stock affords any cumulative
voting rights. This means that the holders of a majority of the
voting power of the shares voting for the election of directors
can elect all directors to be elected if they choose to do so.
Marathons board of directors may grant holders of
preferred stock, in the resolutions creating the series of
preferred stock, the right to vote on the election of directors
or any questions affecting Marathon.
Holders of common stock will be entitled to dividends in such
amounts and at such times as Marathons board of directors
in its discretion may declare out of funds legally available for
the payment of dividends. Dividends on the common stock will be
paid at the discretion of Marathons board of directors
after taking into account various factors, including:
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our financial condition and performance;
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our cash needs and capital investment plans;
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our obligations to holders of any preferred stock we may issue;
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income tax consequences; and
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the restrictions Delaware and other applicable laws then impose.
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In addition, the terms of the loan agreements, indentures and
other agreements we enter into from time to time may restrict
the payment of cash dividends.
If Marathon liquidates or dissolves its business, the holders of
common stock will share ratably in all assets available for
distribution to stockholders after Marathons creditors are
paid in full and the holders of all series of Marathons
outstanding preferred stock, if any, receive their liquidation
preferences in full.
The common stock has no preemptive rights and is not convertible
or redeemable or entitled to the benefits of any sinking or
repurchase fund. All issued and outstanding shares of common
stock are fully paid and nonassessable. Any shares of common
stock Marathon may offer and sell under this prospectus will
also be fully paid and nonassessable.
16
Marathons outstanding shares of the common stock are
listed on the New York Stock Exchange and the Chicago Stock
Exchange and trade under the symbol MRO. Any
additional shares of common stock Marathon may offer and sell
under this prospectus will also be listed on those stock
exchanges.
The transfer agent and registrar for the common stock is
National City Bank.
Preferred
Stock
At the direction of its board of directors, without any action
by the holders of its common stock, Marathon may issue one or
more series of preferred stock from time to time.
Marathons board of directors can determine the number of
shares of each series of preferred stock and the designation,
powers, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or
restrictions applicable to any of those rights, including
dividend rights, voting rights, conversion or exchange rights,
terms of redemption and liquidation preferences, of each series.
The prospectus supplement relating to any series of preferred
stock Marathon offers will include specific terms relating to
the offering. These terms will include some or all of the
following:
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the series designation of the preferred stock;
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the maximum number of shares of the series;
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the dividend rate or the method of calculating the dividend, the
date from which dividends will accrue and whether dividends will
be cumulative;
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any liquidation preference;
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any optional redemption provisions;
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any sinking fund or other provisions that would obligate us to
redeem or repurchase the preferred stock;
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any terms for the conversion or exchange of the preferred stock
for any other securities;
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any voting rights; and
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any other preferences and relative, participating, optional or
other special rights or any qualifications, limitations or
restrictions on the rights of the shares.
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Any preferred stock Marathon offers and sells under this
prospectus will be fully paid and nonassessable.
The registration statement will include the certificate of
designation as an exhibit or will incorporate the certificate of
designation by reference. You should read that document for
provisions that may be important to you.
The existence of undesignated preferred stock may enable
Marathons board of directors to render more difficult or
to discourage an attempt to obtain control of Marathon by means
of a tender offer, proxy contest, merger or otherwise, and
thereby to protect the continuity of its management. The
issuance of shares of preferred stock may adversely affect the
rights of the holders of common stock. For example, any
preferred stock issued may rank prior to the common stock as to
dividend rights, liquidation preference or both, may have full
or limited voting rights and may be convertible into shares of
common stock. As a result, the issuance of shares of preferred
stock may discourage bids for common stock or may otherwise
adversely affect the market price of the common stock or any
existing preferred stock.
Limitation
on Directors Liability
Delaware law authorizes Delaware corporations to limit or
eliminate the personal liability of their directors to them and
their stockholders for monetary damages for breach of a
directors fiduciary duty of care. The duty
17
of care requires that, when acting on behalf of the corporation,
directors must exercise an informed business judgment based on
all material information reasonably available to them. Absent
the limitations Delaware law authorizes, directors of Delaware
corporations are accountable to those corporations and their
stockholders for monetary damages for conduct constituting gross
negligence in the exercise of their duty of care. Delaware law
enables Delaware corporations to limit available relief to
equitable remedies such as injunction or rescission.
Marathons restated certificate of incorporation limits the
liability of the members of its board of directors by providing
that no director will be personally liable to Marathon or its
stockholders for monetary damages for any breach of the
directors fiduciary duty as a director, except for
liability:
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for any breach of the directors duty of loyalty to
Marathon or its stockholders;
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for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
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for unlawful payments of dividends or unlawful stock repurchases
or redemptions as provided in Section 174 of the Delaware
General Corporation Law; and
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for any transaction from which the director derived an improper
personal benefit.
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This provision could have the effect of reducing the likelihood
of derivative litigation against Marathons directors and
may discourage or deter Marathons stockholders or
management from bringing a lawsuit against Marathons
directors for breach of their duty of care, even though such an
action, if successful, might otherwise have benefited Marathon
and its stockholders. Marathons by-laws provide
indemnification to its officers and directors and other
specified persons with respect to their conduct in various
capacities.
Statutory
Business Combination Provision
As a Delaware corporation, Marathon is subject to
Section 203 of the Delaware General Corporation Law. In
general, Section 203 prevents an interested
stockholder, which is defined generally as a person owning
15% or more of a Delaware corporations outstanding voting
stock or any affiliate or associate of that person, from
engaging in a broad range of business combinations
with the corporation for three years following the date that
person became an interested stockholder unless:
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before that person became an interested stockholder, the board
of directors of the corporation approved the transaction in
which that person became an interested stockholder or approved
the business combination;
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on completion of the transaction that resulted in that
persons becoming an interested stockholder, that person
owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, other than
stock held by (1) directors who are also officers of the
corporation or (2) any employee stock plan that does not
provide employees with the right to determine confidentially
whether shares held subject to the plan will be tendered in a
tender or exchange offer; or
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following the transaction in which that person became an
interested stockholder, both the board of directors of the
corporation and the holders of at least two-thirds of the
outstanding voting stock of the corporation not owned by that
person approve the business combination.
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Under Section 203, the restrictions described above also do
not apply to specific business combinations proposed by an
interested stockholder following the announcement or
notification of designated extraordinary transactions involving
the corporation and a person who had not been an interested
stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the
corporations directors, if a majority of the directors who
were directors prior to any persons becoming an interested
stockholder during the previous three years, or were recommended
for election or elected to succeed those directors by a majority
of those directors, approve or do not oppose that extraordinary
transaction.
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Other
Matters
Some of the provisions of Marathons restated certificate
of incorporation and by-laws discussed below may have the
effect, either alone or in combination with the provisions of
Marathons restated certificate of incorporation discussed
above and Section 203 of the Delaware General Corporation
Law, of making more difficult or discouraging a tender offer,
proxy contest, merger or other takeover attempt that
Marathons board of directors opposes but that a
stockholder might consider to be in its best interest.
Marathons restated certificate of incorporation provides
that its stockholders may act only at an annual or special
meeting of stockholders and may not act by written consent.
Marathons by-laws provide that only its board of directors
may call a special meeting of its stockholders.
Marathons restated certificate of incorporation provides
that the number of directors will be fixed from time to time by,
or in the manner provided in, its by-laws, but will not be less
than three.
Marathons by-laws contain advance-notice and other
procedural requirements that apply to stockholder nominations of
persons for election to the board of directors at any annual
meeting of stockholders and to stockholder proposals that
stockholders take any other action at any annual meeting. A
stockholder proposing to nominate a person for election to the
board of directors or proposing that any other action be taken
at an annual meeting of stockholders must give Marathons
corporate secretary written notice of the proposal not less than
45 days and not more than 75 days before the first
anniversary of the date on which Marathon first mailed its proxy
materials for the immediately preceding years annual
meeting of stockholders. These stockholder proposal deadlines
are subject to exceptions if the pending annual meeting date is
more than 30 days prior to or more than 30 days after
the first anniversary of the immediately preceding years
annual meeting. Marathons by-laws prescribe specific
information that any such stockholder notice must contain. These
advance-notice provisions may have the effect of precluding a
contest for the election of directors or the consideration of
stockholder proposals if the proper procedures are not followed,
and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of directors or
to approve its own proposal, without regard to whether
consideration of those nominees or proposals might be harmful or
beneficial to Marathon and its stockholders.
Marathons restated certificate of incorporation provides
that its stockholders may adopt, amend and repeal its by-laws at
any regular or special meeting of stockholders by an affirmative
vote of the majority of shares present in person or represented
by proxy at the meeting and entitled to vote on that action,
provided the notice of intention to adopt, amend or repeal the
by-laws has been included in the notice of that meeting.
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Description
of Warrants
Marathon may issue warrants to purchase debt securities, common
stock, preferred stock or other securities. Marathon may issue
warrants independently or together with other securities.
Warrants issued with other securities may be attached to or
separate from those other securities. If Marathon issues
warrants, it will do so under one or more warrant agreements
between Marathon and a warrant agent that we will name in the
prospectus supplement.
If Marathon offers any warrants, we will file the forms of
warrant certificate and warrant agreement with the SEC, and you
should read those documents for provisions that may be important
to you.
The prospectus supplement relating to any warrants being offered
will include specific terms relating to the offering. These
terms will include some or all of the following:
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the title of the warrants;
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the aggregate number of warrants offered;
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the designation, number and terms of the debt securities, common
stock, preferred stock or other securities purchasable on
exercise of the warrants, and procedures that may result in the
adjustment of those numbers;
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the exercise price of the warrants;
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the dates or periods during which the warrants are exercisable;
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the designation and terms of any securities with which the
warrants are issued;
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if the warrants are issued as a unit with another security, the
date on and after which the warrants and the other security will
be separately transferable;
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if the exercise price is not payable in U.S. dollars, the
foreign currency, currency unit or composite currency in which
the exercise price is denominated;
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any minimum or maximum amount of warrants that may be exercised
at any one time;
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any terms, procedures and limitations relating to the
transferability, exchange or exercise of the warrants; and
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any other terms of the warrants.
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Warrant certificates will be exchangeable for new warrant
certificates of different denominations at the office indicated
in the prospectus supplement. Prior to the exercise of their
warrants, holders of warrants will not have any of the rights of
holders of the securities subject to the warrants.
Modifications
Marathon may amend the warrant agreements and the warrants
without the consent of the holders of the warrants to cure any
ambiguity, to cure, correct or supplement any defective or
inconsistent provision, or in any other manner that will not
materially and adversely affect the interests of holders of
outstanding warrants.
Marathon may also modify or amend various other terms of the
warrant agreements and the warrants with the consent of the
holders of not less than a majority in number of the then
outstanding unexercised warrants affected. Without the consent
of the holders affected, however, no modification or amendment
may:
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shorten the period of time during which the warrants may be
exercised; or
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otherwise materially and adversely affect the exercise rights of
the holders of the warrants.
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Enforceability
of Rights
The warrant agent will act solely as Marathons agent and
will not assume any agency or trust obligation or relationship
for or with any holder or beneficial owner of warrants. The
warrant agent will not have any duty or responsibility if
Marathon defaults under the warrant agreements or the warrant
certificates. A warrant holder may, without the consent of the
warrant agent, enforce by appropriate legal action on its own
behalf the holders right to exercise the holders
warrants.
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Description
of Stock Purchase Contracts
and Stock Purchase Units
We may issue stock purchase contracts, including contracts
obligating holders to purchase from us, and obligating us to
sell to the holders, a specified number of shares of common
stock at a future date or dates. We may fix the price per share
of common stock and the number of shares of common stock at the
time the stock purchase contracts are issued or by reference to
a specific formula set forth in the stock purchase contracts. We
may issue the stock purchase contracts separately or as part of
units, which we refer to as stock purchase units,
consisting of a stock purchase contract and our debt securities
or debt obligations of third parties, including
U.S. treasury securities, securing the holders
obligations to purchase the common stock under the stock
purchase contracts. The stock purchase contracts may require
holders to secure their obligations under the stock purchase
contracts in a specified manner. The stock purchase contracts
also may require us to make periodic payments to the holders of
the stock purchase units or vice versa, and such payments may be
unsecured or refunded on some basis.
The applicable prospectus supplement will describe the terms of
the stock purchase contracts or stock purchase units. The
description in the prospectus supplement will not necessarily be
complete, and reference will be made to the stock purchase
contracts and, if applicable, collateral or depositary
arrangements relating to the stock purchase contracts or stock
purchase units. The applicable prospectus supplement will also
describe material U.S. federal income tax considerations
applicable to the stock purchase units and the stock purchase
contracts.
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Plan of
Distribution
We may sell the securities in and outside the United States
through underwriters or dealers, directly to purchasers or
through agents.
Sale
Through Underwriters or Dealers
If we use underwriters in the sale of the offered securities,
the underwriters will acquire the securities for their own
account. The underwriters may resell the securities from time to
time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying
prices determined at the time of sale. Underwriters may offer
securities to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by
one or more firms acting as underwriters. Unless we inform you
otherwise in the prospectus supplement, the obligations of the
underwriters to purchase the securities will be subject to
several conditions, and the underwriters will be obligated to
purchase all the offered securities if they purchase any of
them. The underwriters may change from time to time any initial
public offering price and any discounts or concessions allowed
or reallowed or paid to dealers.
During and after an offering through underwriters, the
underwriters may purchase and sell the securities in the open
market. These transactions may include overallotment and
stabilizing transactions and purchases to cover syndicate short
positions created in connection with the offering. The
underwriters may also impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers
for the offered securities sold for their account may be
reclaimed by the syndicate if such offered securities are
repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or
otherwise affect the market price of the offered securities,
which may be higher than the price that might otherwise prevail
in the open market. If commenced, these activities may be
discontinued at any time.
If we use dealers in the sale of securities, we will sell the
securities to them as principals. They may then resell those
securities to the public at varying prices determined by the
dealers at the time of resale. The dealers participating in any
sale of the securities may be deemed to be underwriters within
the meaning of the Securities Act of 1933 with respect to any
sale of those securities. We will include in the prospectus
supplement the names of the dealers and the terms of the
transaction.
Direct
Sales and Sales Through Agents
We may sell the securities directly. In that event, no
underwriters or agents would be involved. We may also sell the
securities through agents we designate from time to time. In the
prospectus supplement, we will name any agent involved in the
offer or sale of the offered securities, and we will describe
any commissions payable by us to the agent. Unless we inform you
otherwise in the prospectus supplement, any agent will agree to
use its reasonable best efforts to solicit purchases for the
period of its appointment.
We may sell the securities directly to institutional investors
or others who may be deemed to be underwriters within the
meaning of the Securities Act of 1933 with respect to any sale
of those securities. We will describe the terms of any such
sales in the prospectus supplement.
Delayed
Delivery Contracts
If we so indicate in the prospectus supplement, we may authorize
agents, underwriters or dealers to solicit offers from various
types of institutions to purchase securities from us at the
public offering price under delayed delivery contracts. These
contracts would provide for payment and delivery on a specified
date in the future. The contracts would be subject only to those
conditions the prospectus supplement describes. The prospectus
supplement will describe the commission payable for solicitation
of those contracts.
General
Information
We may have agreements with the agents, dealers and underwriters
to indemnify them against civil liabilities, including
liabilities under the Securities Act of 1933, or to contribute
with respect to payments that the agents, dealers or
underwriters may be required to make. Agents, dealers and
underwriters may be customers of, engage in transactions with or
perform services for us in the ordinary course of their
businesses.
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Legal
Matters
Baker Botts L.L.P., Houston, Texas, our outside counsel, will
issue an opinion about the legality of any securities we offer
through this prospectus. Any underwriters will be advised about
issues relating to any offering by their own legal counsel.
Experts
The financial statements and managements assessment of the
effectiveness of internal control over financial reporting
(which is included in Managements Report on Internal
Control over Financial Reporting) incorporated herein by
reference to the Annual Report on
Form 10-K
of Marathon Oil Corporation for the year ended December 31,
2006 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
24
$
MARATHON OIL
CORPORATION
®
$ % Notes
due
$ % Notes
due
PROSPECTUS SUPPLEMENT
February , 2009
Joint Book-Running Managers
Morgan Stanley
Banc of America Securities
LLC
J.P. Morgan
Citi
Deutsche Bank
Securities