Variable Interest Entities

The owners of the AOSP, in which we hold a 20 percent undivided interest, contracted with a wholly owned subsidiary of a publicly traded Canadian limited partnership ("Corridor Pipeline") to provide materials transportation capabilities among the Muskeg River and Jackpine mines, the Scotford upgrader and markets in Edmonton. The contract, originally signed in 1999 by a company we acquired, allows each holder of an undivided interest in the AOSP to ship materials in accordance with its undivided interest. Costs under this contract are accrued and recorded on a monthly basis, with a $3 million current liability recorded at December 31, 2013, consistent with December 31, 2012. Under this agreement, the AOSP absorbs all of the operating and capital costs of the pipeline. Currently, no third-party shippers use the pipeline. Should shipments be suspended, by choice or due to force majeure, we remain responsible for the portion of the payments related to our undivided interest for all remaining periods.

The contract expires in 2029; however, the shippers can extend its term perpetually. This contract qualifies as a variable interest contractual arrangement and the Corridor Pipeline qualifies as a variable interest entity ("VIE"). We hold a variable interest but are not the primary beneficiary because our shipments are only 20 percent of the total; therefore the Corridor Pipeline is not consolidated by Marathon Oil. Our maximum exposure to loss as a result of our involvement with this VIE is the amount we expect to pay over the contract term, which was $723 million as of December 31, 2013. The liability on our books related to this contract at any given time will reflect amounts due for the immediately previous month’s activity, which is substantially less than the maximum exposure over the contract term. We have not provided financial assistance to Corridor Pipeline and we do not have any guarantees of such assistance in the future.

5. Acquisitions

During 2013, 2012 and 2011, our business combinations related to properties acquired by our North America E&P segment in the Eagle Ford in south Texas. The pro forma impact of these transactions, individually and in the aggregate, is not material to our consolidated statements of income for any periods presented.

The fair values of assets acquired and liabilities assumed in each of these business combinations were measured primarily using an income approach, specifically utilizing a discounted cash flow analysis. The estimated fair values were based on significant inputs not observable in the market, and therefore represent Level 3 measurements. Significant inputs included estimated reserve volumes, the expected future production profile, estimated commodity prices and assumptions regarding future operating and development costs. The discount rates used in the discounted cash flow analyses were approximately 10 percent for the 2013 and 2012 transactions and 11 percent for the 2011 transaction.

2013

In July 2013, we acquired 4,800 net undeveloped acres in the Eagle Ford in a transaction valued at $97 million, including carried interest of $23 million. The transaction was accounted for as a business combination, with the entire up-front cash consideration of $74 million allocated to property, plant and equipment at the acquisition date.

MARATHON OIL CORPORATION Notes to Consolidated Financial Statements

2012 & 2011

We acquired approximately 25,000 net acres in the core of the Eagle Ford during 2012. The largest transactions were the acquisitions of Paloma Partners II, LLC, which closed in the second quarter of 2012 for cash consideration of $768 million, and an acquisition of proved and unproved properties that closed in the third quarter of 2012 for cash consideration of $232 million.

These transactions were accounted for as business combinations.

During the fourth quarter of 2011, we closed a series of transactions in the Eagle Ford that were accounted for as a business combination. The most significant of these transactions was the acquisition of Hilcorp Resources, LLC. The total cash consideration paid for all the transactions including approximately 167,000 net acres and a gathering system, was $4.5 billion.

The following table summarizes the amounts allocated to the assets acquired and liabilities assumed based upon their fair values at the acquisition dates:

Closed in Quarter Ended

June 30, September 30, December 31,

(In millions) 2012 2012 2011

Current assets:

Cash $ 8 $ — $ —

Receivables 22 8 40

Inventories 1 — 4

Other current assets — — 30

Total current assets acquired 31 8 74

Property, plant and equipment 822 248 4,501

Other noncurrent assets — — 21

Total assets acquired 853 256 4,596

Current liabilities:

Accounts payable 78 23 101

Other current liabilities — — 20

Total current liabilities assumed 78 23 121

Asset retirement obligations 7 1 5

Total liabilities assumed 85 24 126

Net assets acquired $ 768 $ 232 $ 4,470

In addition, during 2011, our North America E&P segment acquired approximately 108,000 net acres in the Eagle Ford for approximately $265 million. These transactions were accounted for as asset acquisitions.

6. Dispositions

2013 - North America E&P

In June 2013, we closed the sale of our interests in the DJ Basin for proceeds of $19 million. A pretax loss of $114 million was recorded in the second quarter of 2013.

In February 2013, we conveyed our interests in the Marcellus natural gas shale play to the operator. A $43 million pretax loss on this transaction was recorded in the first quarter of 2013.

In February 2013, we closed the sale of our interest in the Neptune gas plant, located onshore Louisiana, for proceeds of $166 million. A $98 million pretax gain was recorded in the first quarter of 2013.

In January 2013, we closed the sale of our remaining assets in Alaska, for proceeds of $195 million, subject to a six-month escrow of $50 million which was collected in July 2013. After closing adjustments were made in the second quarter of 2013, the pretax gain on this sale was $55 million.

MARATHON OIL CORPORATION Notes to Consolidated Financial Statements

Assets held for sale in the December 31, 2012 consolidated balance sheet were related to the Neptune gas plant and Alaska dispositions that were pending at that date and included:

(In millions) December 31,

2012

Other current assets $ 50

Other noncurrent assets 248

Total assets $ 298

Deferred credits and other liabilities $ 83

Total liabilities $ 83

2013 - International E&P

In the fourth quarter of 2013, we transfered our 45 percent working interest and operatorship in the Safen block in the Kurdistan Region of Iraq at a pretax loss of $17 million.

In June and December 2013, we entered into agreements, valued in total at $2.1 billion before closing adjustments, to sell our non-operated 10 percent working interests in the Production Sharing Contracts and Joint Operating Agreements for Angola Blocks 31 and 32. The sale of our interest in Block 31 closed in February 2014 and the sale of our interest in Block 32 is expected to close in the first quarter of 2014. Block 31 is presented as held for sale and Block 32 is reflected as unproved property in property, plant and equipment in the December 31, 2013 consolidated balance sheet (See Note 13 for discussion of the capitalized costs related to suspended wells). Our entire Angola operations are reflected as discontinued operations in the consolidated statements of income and the consolidated statements of cash flows for all periods presented.

Assets held for sale in the December 31, 2013 consolidated balance sheet were related to the Angola Block 31 disposition that was pending at that date and included:

(In millions) December 31,

2013

Other current assets $ 41

Other noncurrent assets 1,647

Total assets $ 1,688

Other current liabilities $ 25

Deferred credits and other liabilities 43

Total liabilities $ 68

Related amounts reported in discontinued operations for 2013, 2012 and 2011 were as follows:

(In millions) 2013 2012 2011

Revenues applicable to discontinued operations $ 361 $ — $ —

Pretax income (loss) from discontinued operations $ 247 $ (17) $ (17)

2012 - North America E&P

In the third quarter of 2012, we sold approximately 5,800 net undeveloped acres in the Eagle Ford for proceeds of $9 million.

A pretax loss of $18 million was recorded.

In January 2012, we closed on the sale of our interests in several Gulf of Mexico crude oil pipeline systems for proceeds of

$206 million. This included our equity method interests in Poseidon Oil Pipeline Company, L.L.C. and Odyssey Pipeline L.L.C., as well as certain other oil pipeline interests, including the Eugene Island pipeline system. A pretax gain of $166 million was recorded.

2012 - International E&P

In May 2012, we executed agreements to relinquish our operatorship of and participating interests in the Bone Bay and Kumawa exploration licenses in Indonesia. As a result, we reported a $36 million pretax loss on disposal of assets. Government ratification of the agreements released us from our obligations and further commitments related to these licenses.

2011 - North America E&P

In December 2011, we sold our 50 percent interest in the Burns Point gas plant, a cryogenic processing plant located in St.

Mary Parish, Louisiana, for total consideration of $36 million and a pretax gain of $34 million.

MARATHON OIL CORPORATION Notes to Consolidated Financial Statements

In September 2011, we sold our equity interest in an LNG processing facility in Alaska and a pretax gain on the transaction of $8 million was recorded.

In April 2011, we assigned a 30 percent undivided working interest in approximately 180,000 acres in the Niobrara shale play located within the DJ Basin of southeast Wyoming and northern Colorado for total consideration of $270 million, recording a pretax gain of $37 million. See the discussion of our 2013 disposal of the remaining interest above.