USX-Marathon declares quarterly earnings of $193 million, up from $121 for 3Q 2000

By the OGJ Online Staff

HOUSTON, Oct. 22 -- USX-Marathon Group, Pittsburgh, declared earnings for the third quarter of $193 million. Revenue for the quarter was $8.3 billion.

For the same quarter 2000, the group earned $121 million on revenue of $9.2 billion.

Net income before special items was $319 million, up from third quarter 2000's $356 million.

For the quarter, Marathon Group took a $126 million after-tax loss on the sale of its heavy oil assets in Canada in an effort to focus on Canadian natural gas.

USX Corp. Chairman Thomas J. Usher said, "Our downstream refining and marketing segment continued to perform very well this quarter, and upstream production levels surpassed our third quarter production targets. However, crude oil and natural gas prices declined by quarter-end."

Upstream segment income was $259 million in the third quarter, compared to $465 million for the same quarter a year ago. Marathon said the decrease was due to lower crude oil and natural gas prices and increased depreciation, which was partially offset by reduced exploration expense from the timing of well expenditures and reduced geophysical contract expenditures.

During the quarter, East Foinaven field in the UK Atlantic Margin began production and is flowing at 16,000 b/d. Marathon owns 28% of Foinaven and 47% interest in East Foinaven.

Marathon had to delay its planned Gulf of Mexico exploration program because it rejected Transocean Sedco Forex's ultradeepwater semisubmersible Cajun Express (OGJ Online, July 27, 2001). It has put off the two wells to December and January.

However, the company is participating in Deep Ozona and Timber Wolf drilling, on Garden Banks 515 and Mississippi Canyon 555 respectively. It also plans to participate in drilling the Paris Carver prospect on Green Canyon 601 in the fourth quarter.

Marathon is participating in a shallow-water Nova Scotia well and expects to participate in spudding Angolan and other Nova Scotia deepwater wells in the fourth quarter.

The company expects fourth quarter production of 415,000-420,000 boe/d and 2002 production of 430,000-435,000 boe/d.

Downstream segment income for the quarter was $575 million, compared to $299 million in the third quarter 2000. The results reflected a higher refining and wholesale marketing gross margin, partially offset by lower gasoline and distillate sales volumes and increased refining and marketing transportation expenses.

Marathon said its Garyville, La., refinery coker achieved mechanical completion in early October and is operating at more than 80% of capacity. It will be at full production during the fourth quarter of this year, allowing the Garyville refinery to use heavier, lower-cost crude and reduce the production of heavy fuel oil.

Marathon said shareholders will vote on the proposed separation of the Marathon Group and the US Steel Group into two independent companies at a special meeting Oct. 25. The separation is also subject a ruling from the Internal Revenue Service on tax-free status. The separation is expected to occur at yearend.

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