Marathon Oil Outlook: Refining Spending Drops, Exploration Budget Up 30%

U.S. oil companies continue to shift their dollars away from refining and into exploration and production. Another case in point is Marathon Oil. The company announced Monday a $5.1 billion capital and exploration budget for 2010 -- a 17 percent decrease from last year. It's 2010 spending plan is 33 percent lower than its capital expenditures in 2008.

Marathon also released its fourth-quarter and year-end earnings report Tuesday. The Houston-based company earned $355 million in the fourth quarter compared to a profit loss of $41 million in the same period in 2008.

Marathon's 2010 budget for refining, marketing and transportation will drop by more than half to $1.1 billion. Marathon has pulled back its capital expenditures in the refining sector nearly 63 percent since 2008, when the company spent $2.9 billion.

The bulk of the spending cut from 2009 to this year is due to the completion of a refinery project in Garyville, Louisiana, Marathon said in a release of its capital expenditure plans. The Garyville expansion project will increase the refinery's crude oil throughput capacity from 265,000 barrels per day to 436,000 bpd.

Marathon is pushing up its planned expenditures in its exploration and production budget 24 percent over 2009 capital spending to $2.9 billion. Much of that -- about $1 billion -- will go towards exploration and is 30 percent above last year's spending in that area.

It's exploration spending plan gives a clear signal as to where Marathon's hopes lie. The company plans to drill three or four significant wells in the deepwater Gulf of Mexico and has doubled its budget for the area to $370 million. Unconventional plays also are on its radar with plans to drill or participate in between 20 to 30 wells in the Marcellus Shale out east, the Woodford Shale in Oklahoma and the Haynesville/Bossier pay in Texas. Its overseas exploration budget will include two high-risk deepwater wells in Indonesia.