Fitch Affirms Marathon's IDR at 'BBB+'; Outlook Negative

CHICAGO--(Business Wire)--
Fitch Ratings has affirmed the ratings of Marathon Oil Corporation
(Marathon) at 'BBB+'. Fitch currently rates Marathon's debt as
follows:

--Issuer Default Rating (IDR) 'BBB+';

--Short-term IDR 'F2'

--Senior unsecured credit facility 'BBB+';

--Senior unsecured notes 'BBB+';

--Industrial revenue bonds 'BBB+';

--Commercial paper 'F2'.

The Ratings Outlook is Negative.

Marathon Oil Corporation's (Marathon) ratings are supported by the
cash flow diversification of the integrated oil model, a strong
downstream presence in the Midwest, a diverse portfolio of upstream
properties, as well as the near-term tailwinds created by very high
commodity prices for Marathon's E&P segment. Key credit concerns
center on the company's sizable multi-year capex program (2008
estimated capex $8.25 billion); the potential for future spending
increases either through cost inflation at existing projects or the
addition of new strategically important projects; and the negative
impact that high oil prices have had to date in terms of demand
destruction and reduced refinery runs. In addition, Marathon's
announcement that it is evaluating the potential separation of the
company into two independent publicly-traded companies - one upstream
and one downstream - creates additional uncertainties about the
long-term shape of the company.

We would note that Marathon has had several credit-positive
developments over the last 12 months, including the successful
completion of the Western Oil Sands (WTO) acquisition; reductions in
announced share buyback programs to accommodate higher capex; progress
on asset sales with the pending sale of Heimdal in Norway; and on the
upstream side, the resolution of operational issues at both the
Alvheim field (peak production to Marathon 75,000 boepd) and Neptune
in the Gulf of Mexico. Fitch's Negative Outlook primarily reflects
Fitch's continuing concerns about the high levels of capital
expenditures contemplated in the near term and the possibility of
additional debt financing to fund capex given the uncertainty around
commodity prices. Capital expenditures are expected to remain high
over the next few years as Marathon completes existing projects
including the $3.2 billion Garyville, LA refinery expansion, $1.9
billion Detroit refinery expansion, a multi-billion dollar development
program of the AOSP Heavy Oil Sands project in Canada, and accelerated
E&P budget. Should the company decide to go forward with additional
projects such as the next stages of the AOSP expansion or the
construction of additional LNG terminals in Equatorial Guinea, capex
would increase further and place additional pressure on the ratings.

As of June 30, 2008, Marathon's total debt stood at approximately
$8.1 billion, more than double the $3.53 billion seen at year end
2006. This figure is primarily composed of unsecured notes, commercial
paper, and revenue bond obligations, and includes approximately $500
million in obligations linked to US Steel (IDR rated 'BBB', with a
Stable Outlook by Fitch) that were consolidated on Marathon's balance
sheet following their separation in 2001. A significant portion of
these obligations terminate at the end of 2011. On a segment basis,
refining continued to sharply underperform due to much higher crude
feedstock prices and operating expenses, as well as lower plant
utilization. In the second quarter, refining and marketing produced
just $158 million in net income, versus $1.25 billion during the same
time last year. This was partially offset by gains in the upstream,
which saw segment net income (net of oil sands output) of $828
million, more than double the $400 million seen a year earlier. Note
that among integrated oil companies, Marathon has the largest
downstream presence relative to its upstream. Marathon's 2007 upstream
output of 353,000 boepd equaled just 35% of its nameplate crude
refining capacity. This contrasts to ExxonMobil (66%), ConocoPhillips
(69%), Shell (82%), and Chevron (123%).

At year end 2007, Marathon's total reserves stood at 1.225 billion
boe (barrels of oil equivalent) of which approximately 72% were proven
developed reserves. Note that these figures exclude net proved bitumen
reserves of 421 million barrels associated with Western Oil Sands
acquisition.

Marathon is a large integrated oil company with exploration and
production operations in several regions, including the North Sea,
Africa, and North America. Marathon also owns and operates seven U.S.
refineries with 1,016,000 barrels per day (bpd) of crude capacity. The
company distributes fuels through approximately 6,000 retail sites
marked under the Marathon and Speedway SuperAmerica brands. Marathon
also has a 50% interest in PTC, a joint venture with Pilot Corporation
that owns and operates 286 travel centers in North America.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, Chicago
Mark Sadeghian, CFA, 312-368-2090
Adam Miller, 312-368-3113
or
Media Relations:
Brian Bertsch, 212-908-0549, New York

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