Marathon production rising; profits tumble

By MARK WILLIAMS AP Energy Writer

(AP) - Marathon Oil said Tuesday that its third quarter profit plunged from a year ago when record-high prices sent gasoline prices over $4 per gallon.

Yet Marathon says production has grown throughout the year, becoming just the latest major oil company to show that an earlier plunge in prices has not stalled exploration and drilling.

The price for a barrel of crude has doubled this year and that has helped to support operations even though profits compared with this period last year, the most lucrative in industry history, appear slim in comparison.

The quick rebound in prices has hurt integrated oil companies like Marathon, too, cutting into the profit margins of its refineries.

Marathon, based in Houston, said it made $413 million, or 58 cents per share, for the quarter ended Sept. 30, down from profit of $2.1 billion, or $2.90 per share, in the year ago quarter.

Discounting charges, Marathon said it made 61 cents per share in the quarter. Not including a $101 million gain, the year-ago profit would have been $2 billion, or $2.76 per share.

Revenue for the quarter was $14.5 billion, down 38 percent from revenue of $23.3 billion in the year ago quarter.

More attention is being paid to sequential quarters this year because profits during the same period last year were so extraordinary.

Profit from exploration and production operations in the U.S. totaled $32 million in the quarter, better than the $41 million loss in had in the second quarter. Last year, domestic operations brought in $285 million during the third quarter.

The story was the same for its international operations where profit was $459 million in the quarter, up from $261 million in the second quarter, but down from $584 million in the year ago quarter.

Marathon said production rose 11 percent through the first nine months of the year, primarily the result of its Alvheim/Vilje projects in Norway that started production in mid 2008.

To help offset lower prices for crude, Marathon has been cutting costs. It has operating costs per barrel of oil is down 10 percent for the first nine months of the year.

Marathon said income from its refining, marketing and transportation operations fell to $158 million during the quarter from $771 million a year ago as refining and wholesale marketing margins fell to 7.62 cents per gallon from 25.19 cents in the third quarter of 2008.

Marathon shares rose 3 cents to $32 in trading Tuesday. The shares have traded between $19.34 and $35.71 over the past year.