HOUSTON -- The board of directors of Marathon Oil Corp. said that as part of its continuing focus to enhance shareholder value, it is evaluating the potential separation of Marathon into two independent publicly traded companies, each focused on its own set of business opportunities. One entity would consist of the company's exploration and production, integrated gas and oil sands mining businesses; and the other entity would consist of the company's refining, marketing and transportation business.
While this evaluation has been underway internally for several months, the company has taken [image-nocss] the additional step of engaging financial advisors Morgan Stanley, and the law firms of Baker Botts LLP and McKee Nelson LLP as external advisors. It is anticipated that the results of this effort will be reviewed by the board and a decision will be made during fourth-quarter 2008. Should the decision be made to separate, the separation would likely occur during first-quarter 2009.
Meanwhile, Houston-based Marathon reported second-quarter 2008 net income of $774 million, or $1.08 per diluted share. Net income in second-quarter 2007 was $1.550 billion, or $2.25 per diluted share.
"The second quarter 2008, compared to the second quarter 2007, was a challenging quarter financially, particularly as a result of the significantly lower refining and wholesale marketing realized margins in a very difficult downstream environment," said Clarence P. Cazalot Jr., Marathon president and CEO.
Total segment income was $931 million in second-quarter 2008, compared to $1.658 billion in second-quarter 2007. The exploration and production segment income totaled $828 million in second-quarter 2008, which was more than double the $400 million in second-quarter 2007. U.S. upstream income was $359 million in second-quarter 2008, compared to $173 million in the second quarter of 2007.
The refining, marketing and transportation segment income was $158 million in second-quarter 2008 compared to $1.246 billion in second-quarter 2007, with the decrease primarily a result of the lower refining and wholesale marketing gross margin. The refining and wholesale marketing gross margin per gallon was 8.35 cents in second-quarter 2008, compared to 39.25 cents in second-quarter 2007.
Speedway SuperAmerica (SSA) gasoline and distillates gross margin per gallon averaged 8.62 cents in second-quarter of 2008, compared to 10.29 cents in second-quarter of 2007. SSA same store gasoline sales volume declined by 4.8% during second-quarter 2008 while same-store merchandise sales increased by 1% during the same period. Starting in June 2007, SSA ran a special sales promotion that was estimated to increase SSA's 2007 second-quarter same-store gasoline sales volume by almost 3%. Excluding this special sales promotion, the company estimates that SSA's 2008 second-quarter same-store gasoline sales volume decline would have been about 2.1% compared to the actual 4.8% decline.
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