Marathon Oil Corp.’s 2003 profit more than doubled on gains from asset sales, but its operating earnings dropped because of declining oil and gas production and weak refining earnings. For the year, Marathon reported net income of $1.321 billion ($4.26/share), compared with 2002 net income of $516 million ($1.66/share). Adjusted earnings were $1 billion ($3.33/share), compared with the prior year’s $563 million ($1.81/share).

Thomson First Call analysts had expected the company to earn $3.39/share last year. Excluding $278 million from asset sales and one-time items, fourth quarter earnings were $184 million (59 cents), compared with $194 million (62 cents) a year earlier.

Production numbers were down for the year, and some of the losses followed asset sales, after Marathon divested $1.2 billion of non-core upstream assets with more than 270 million boe of proved reserves. However, production from its core assets also was down. Excluding acquisitions and dispositions, Marathon only replaced approximately 75% of oil and gas production. At year end, Marathon had proved reserves of approximately 1,040 million boe.

The company is forecasting flat oil and gas production this year will average approximately 365,000 boe/d. However, production is expected to grow once recent discoveries ramp up, and Marathon forecast more than 3% growth on an annual basis between 2003 and 2008, with most of the growth coming after 2005.

“While production is expected to remain relatively flat through 2005, significant production growth is expected starting in 2006 from known projects in new core areas and recent exploration successes,” the company said in a statement. Marathon said it made nine out of 13 significant discoveries last year in Angola, Norway, the Gulf of Mexico and Equatorial Guinea.

CEO Clarence Cazalot said the company had “significant” exploration success last year, as it expanded its international upstream portfolio and advanced its integrated natural gas business. He noted during a conference call that most of Marathon’s future exploration success is expected to come from overseas fields.

Upstream production was lower in the quarter than a year ago, but quarterly revenue still climbed 30% to $11.1 billion on asset sales and higher commodity prices. Earnings from its exploration and production segment fell 0.9% to $330 million, which followed a sharp drop in overseas production income. Total oil and gas production fell 10% year-over-year to 373,100 boe/d, reflecting asset sales, the company said. Marathon said it had replaced 120% of its produced volumes.

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