"Our upstream business achieved strong production performance and [image-nocss] our downstream segment realized strong profitability, in spite of impacts from Hurricanes Gustav and Ike," Cazalot said. "As a prudent approach to the current business environment, and as part of our ongoing capital discipline, we expect our 2009 capital program to be more than 15% lower than 2008 expenditures. We also are continuing the process of evaluating a potential separation of Marathon's businesses, and we're on course for a decision by the end of this year."
He added, "Marathon continues to maintain a strong balance sheet, with substantial cash balances and significant unused credit facility capacity. Furthermore, our liquidity has been further enhanced since September 30 with the proceeds from the sale of our ownership interests in Pilot Travel Centers, which closed in early October.
Total segment income was $2.063 billion in third-quarter 2008, compared to $1.013 billion in third-quarter 2007. The Exploration & Production (E&P) segment income totaled $939 million in third-quarter 2008, almost double the $479 million reported in third-quarter 2007. U.S. upstream income was $285 million in third-quarter 2008, compared to $147 million in third-quarter 2007.
The Refining, Marketing & Transportation (RM&T) segment income was $771 million in third-quarter 2008 compared to $482 million in third-quarter 2007. The increase was primarily a result of a higher refining and wholesale marketing gross margin, in part attributable to a substantial drop in crude oil prices.
The refining and wholesale marketing gross margin per gallon was 25.19 cents in third-quarter 2008, compared to 17.17 cents in third-quarter 2007. Marathon's refining and wholesale marketing gross margin included pre-tax derivative gains of $156 million for third-quarter 2008 compared to losses of $360 million for third-quarter 2007. The variance primarily reflects falling crude futures prices, as well as the fact that the company no longer uses derivatives to mitigate its domestic crude oil acquisition price risk.
Speedway SuperAmerica LLC (SSA) gasoline and distillates gross margin per gallon averaged 16.9 cents in third-quarter 2008, compared to 11.03 cents in third-quarter 2007. SSA same-store gasoline sales volume declined by approximately 12% during third-quarter 2008 while same-store merchandise sales increased by approximately 2% during the same period. During third-quarter 2007, SSA completed a special sales promotion that was estimated to increase SSA's 2007 third-quarter same-store gasoline volume by approximately 6%. Excluding this special sales promotion, the company estimates that SSA's third-quarter same-store gasoline volume decline would have been approximately 6%.
In the third quarter, Marathon announced an agreement to sell its 50% ownership interest in Pilot Travel Centers LLC (PTC) to Pilot Corp. The transaction, valued at approximately $700 million before tax, was completed in October 2008.
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