Marathon Oil Corporation

05/04/2022 | Press release | Distributed by Public on 05/05/2022 06:26

1Q 2022 Earnings Investor Package (Excel)

IR Package - Table of Contents

First Quarter 2022
Table of Contents:
Statements of Income 2 Guy Baber 713/296-1892
Balance Sheets 3 [email protected]
Statements of Cash Flows 4
Segment Income Summary 5 John Reid 713/296-4380
United States Segment Supplemental Financial Data 6 [email protected]
International Segment Supplemental Financial Data 7
Non-GAAP Reconciliations 8-12
Investor Relations
990 Town and Country Boulevard
Houston, TX 77024-2217
Additional information regarding Investor Relations,
Financial Highlights, and News Releases can be
reviewed on our website at: https://ir.marathonoil.com/
May 4, 2022

Statements of Income

Consolidated Statements of Income
Marathon Oil Corporation
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr
(In millions, except per share data) 2021 2021 2021 2021 2021 2022
REVENUES AND OTHER INCOME:
Revenues from contracts with customers $ 1,177 $ 1,254 $ 1,438 $ 1,732 $ 5,601 $ 1,761
Net gain (loss) on commodity derivatives (153) (166) (79) 15 (383) (143)
Income (loss) from equity method investments 44 49 86 74 253 127
Net gain (loss) on disposal of assets - 1 7 (27) (19) -
Other income 3 5 1 6 15 8
Total revenues and other income 1,071 1,143 1,453 1,800 5,467 1,753
COSTS AND EXPENSES:
Production 121 126 131 156 534 152
Shipping, handling and other operating 152 167 219 189 727 185
Exploration 21 25 63 27 136 11
Depreciation, depletion and amortization 496 532 522 516 2,066 423
Impairments 1 46 13 - 60 -
Taxes other than income 74 74 88 109 345 104
General and administrative 89 68 70 64 291 73
Total costs and expenses 954 1,038 1,106 1,061 4,159 948
Income (loss) from operations 117 105 347 739 1,308 805
Net interest and other (13) (59) (57) (59) (188) (22)
Other net periodic benefit (costs) credits 3 (1) - 3 5 4
Loss on early extinguishment of debt - (19) (102) - (121) -
Income (loss) before income taxes 107 26 188 683 1,004 787
Estimated income tax provision (benefit)
Current 14 13 29 29 85 31
Deferred (4) (3) (25) 5 (27) (548)
Total provision (benefit) for income taxes 10 10 4 34 58 (517)
NET INCOME (LOSS) $ 97 $ 16 $ 184 $ 649 $ 946 $ 1,304
Effective income tax rate 9 % 38 % 2 % 5 % 6 % (66)%
Per common share data:
Basic:
Weighted average shares (millions) 789 789 789 771 787 730
NET INCOME (LOSS) $ 0.12 $ 0.02 $ 0.23 $ 0.84 $ 1.20 $ 1.79
Diluted:
Weighted average shares (millions) 789 789 789 773 788 732
NET INCOME (LOSS) $ 0.12 $ 0.02 $ 0.23 $ 0.84 $ 1.20 $ 1.78
Dividends paid per common share $ 0.03 $ 0.04 $ 0.05 $ 0.06 $ 0.18 $ 0.07

Balance Sheets

Consolidated Balance Sheets
Marathon Oil Corporation
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31
(In millions) 2021 2021 2021 2021 2022
ASSETS
Current assets:
Cash and cash equivalents $ 1,125 $ 970 $ 485 $ 580 $ 681
Receivables less allowance for doubtful accounts 921 1,008 1,068 1,142 1,443
Inventories 78 78 77 77 78
Other current assets 26 19 25 22 28
Total current assets 2,150 2,075 1,655 1,821 2,230
Equity method investments 460 458 489 450 522
Property, plant and equipment, net 15,313 15,019 14,734 14,499 14,422
Deferred tax assets - - - - 554
Other noncurrent assets 310 248 283 224 253
Total assets $ 18,233 $ 17,800 $ 17,161 $ 16,994 $ 17,981
LIABILITIES
Current liabilities:
Accounts payable $ 918 $ 937 $ 1,028 $ 1,110 $ 1,299
Payroll and benefits payable 37 49 64 74 42
Accrued taxes 78 95 131 157 169
Other current liabilities 366 461 417 260 405
Long-term debt due within one year 500 33 36 36 106
Total current liabilities 1,899 1,575 1,676 1,637 2,021
Long-term debt 4,905 4,875 3,977 3,978 3,908
Deferred tax liabilities 160 156 132 136 144
Defined benefit postretirement plan obligations 176 151 137 137 132
Asset retirement obligations 251 272 286 288 296
Deferred credits and other liabilities 171 137 157 132 114
Total liabilities 7,562 7,166 6,365 6,308 6,615
TOTAL STOCKHOLDERS' EQUITY 10,671 10,634 10,796 10,686 11,366
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 18,233 $ 17,800 $ 17,161 $ 16,994 $ 17,981
Common stock issued 937 937 937 937 937
Common stock held in treasury 149 148 148 194 220
Net shares outstanding at balance sheet date 788 789 789 743 717

Statements of Cash Flows

Consolidated Statements of Cash Flows (YTD)
Marathon Oil Corporation
Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31
(In millions) 2021 2021 2021 2021 2022
OPERATING ACTIVITIES:
Net income (loss) $ 97 $ 113 $ 297 $ 946 $ 1,304
Adjustments to reconcile to net cash provided by operating activities:
Depreciation, depletion and amortization 496 1,028 1,550 2,066 423
Impairments 1 47 60 60 - 0
Exploratory dry well costs and unproved property impairments 17 39 101 125 8
Net (gain) loss on disposal of assets - 0 (1) (8) 19 - 0
Loss on early extinguishment of debt - 0 19 121 121 - 0
Deferred income taxes (4) (7) (32) (27) (548)
Unrealized (gain) loss on derivative instruments 82 157 130 (16) 114
Pension and other post retirement benefits, net (7) (14) (25) (31) (9)
Stock-based compensation 6 17 29 40 9
Equity method investments, net (14) (17) (57) (76) (79)
Changes in:
Current receivables (175) (253) (313) (389) (307)
Inventories (2) (2) (1) (1) (2)
Current accounts payable and accrued liabilities 101 121 228 369 101
Other current assets and liabilities 61 73 66 46 (5)
All other operating, net (37) (43) (53) (13) 58
Net cash provided by operating activities 622 1,277 2,093 3,239 1,067
INVESTING ACTIVITIES:
Additions to property, plant and equipment (209) (483) (772) (1,046) (332)
Acquisitions, net of cash acquired - 0 - 0 - 0 (47) - 0
Disposal of assets, net of cash transferred to the buyer 3 15 29 22 2
Equity method investments - return of capital - 0 6 15 61 7
All other investing, net (1) (1) - 0 - 0 - 0
Net cash used in investing activities (207) (463) (728) (1,010) (323)
FINANCING ACTIVITIES:
Debt repayments - 0 (500) (1,400) (1,400) - 0
Debt extinguishment costs - 0 (19) (117) (117) - 0
Shares repurchased under buyback programs - 0 - 0 - 0 (724) (592)
Dividends paid (23) (55) (94) (141) (52)
Purchases of shares for tax withholding obligations (9) (9) (10) (10) (21)
All other financing, net - 0 (3) (1) 1 22
Net cash provided by (used in) financing activities (32) (586) (1,622) (2,391) (643)
Net increase (decrease) in cash and cash equivalents 383 228 (257) (162) 101
Cash and cash equivalents at beginning of period 742 742 742 742 580
Cash and cash equivalents at end of period $ 1,125 $ 970 $ 485 $ 580 $ 681

Segment Income Statement

Segment Income Summary
Marathon Oil Corporation
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr
(In millions) 2021 2021 2021 2021 2021 2022
Segment income (loss)
United States $ 212 $ 207 $ 305 $ 553 $ 1,277 $ 661
International 50 68 93 106 317 115
Segment income (loss) 262 275 398 659 1,594 776
Not allocated to segments - Corporate items:
Net interest and other (54) (67) (65) (16) (202) 4
Other net periodic benefit (costs) credits 3 4 3 4 14 4
General and administrative (40) (36) (38) (32) (146) (40)
Other income and costs (5) (5) (5) (6) (21) (6)
Income tax (provision) benefit - 0 2 17 (17) 2 11
Not allocated to segments - Adjustments for special items:
Net gain (loss) on disposal of assets - 0 1 7 (27) (19) - 0
Proved property impairments (1) (46) (13) - 0 (60) - 0
Exploratory dry well costs, unproved property impairments and other - 0 (7) (48) (16) (71) - 0
Pension settlement - 0 (5) (3) (1) (9) - 0
Unrealized gain (loss) on derivative instruments (82) (75) 27 146 16 (114)
Unrealized gain (loss) on interest rate swaps (a) 41 8 8 (43) 14 (26)
Reduction in workforce (b) (11) (1) - 0 - 0 (12) - 0 - 0
Loss on early extinguishment of debt - 0 (19) (102) - 0 (121) - 0
Other (c) (16) (13) (2) (5) (36) (27)
Benefit for income taxes related to special items - 0 - 0 - 0 3 3 37
Valuation allowance - 0 - 0 - 0 - 0 - 0 685
Total special items (69) (157) (126) 57 (295) - 0 555
Not allocated to segments - Total (165) (259) (214) (10) (648) 528
Net income (loss) $ 97 $ 16 $ 184 $ 649 $ 946 $ 1,304
(a) Included within Net interest and other on our consolidated statements of income.
(b) Included within General and administrative on our consolidated statements of income.
(c) For the first quarter 2021, balance includes $13 million related to the termination of an aircraft lease agreement, which is included within General and administrative on our consolidated statements of income.

United States Supplemental Fina

United States Segment Supplemental Financial Data
Marathon Oil Corporation
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr
(In millions, except per BOE statistics) 2021 2021 2021 2021 2021 2022
Revenues from contracts with customers (a) $ 1,132 $ 1,189 $ 1,375 $ 1,638 $ 5,334 $ 1,714
Net realized gain (loss) on commodity derivatives (71) (91) (106) (131) (399) (29)
Other income 1 3 - 0 3 7 4
Less Costs and Expenses:
Production 111 113 119 137 480 141
Shipping, handling and other operating (b) 144 153 209 180 686 150
Exploration 21 18 15 11 65 11
DD&A 472 506 499 495 1,972 404
Taxes other than income 74 76 88 108 346 99
General and administrative 23 27 29 28 107 30
Income (loss) before taxes 217 208 310 551 1,286 854
Income tax provision (benefit) 5 1 5 (2) 9 193
Segment income (loss) $ 212 $ 207 $ 305 $ 553 $ 1,277 $ 661
Effective tax rate 2 % - % 2 % - % 1 % 23 %
Net sales volumes (mboed) 275 283 281 304 286 280
Costs and Expenses per BOE (c)
Production $ 4.46 $ 4.41 $ 4.59 $ 4.90 $ 4.60 $ 5.59
Shipping, handling and other operating (d) 5.43 4.81 5.69 5.81 5.44 5.77
Exploration 0.86 0.69 0.57 0.41 0.63 0.44
DD&A 19.05 19.65 19.29 17.71 18.90 16.02
Taxes other than income 2.97 2.98 3.37 3.89 3.32 3.93
General and administrative 0.92 1.04 1.15 1.00 1.03 1.18
(a) Includes marketing revenue.
(b) Includes marketing expense.
(c) Costs and expenses per BOE are based upon volumes sold.
(d) Excludes marketing expense.

International Supplemental Fina

International Segment Supplemental Financial Data
Marathon Oil Corporation
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr
(In millions, except per BOE statistics) 2021 2021 2021 2021 2021 2022
Revenues from contracts with customers $ 45 $ 65 $ 63 $ 94 $ 267 $ 47
Income (loss) from equity method investments 44 49 86 74 253 127
Other income 1 2 - 0 1 4 2
Less Costs and Expenses:
Production 10 13 12 19 54 11
Shipping, handling and other operating 4 2 7 3 16 9
DD&A 19 18 17 14 68 15
General and administrative 2 4 3 4 13 3
Income (loss) before taxes 55 79 110 129 373 138
Income tax provision (benefit) 5 11 17 23 56 23
Segment income (loss) $ 50 $ 68 $ 93 $ 106 $ 317 $ 115
Effective tax rate 9 % 14 % 15 % 18 % 15 % 17 %
Net sales volumes (mboed) 66 65 61 53 61 61
Costs and Expenses per BOE (a)
Production $ 1.68 $ 2.17 $ 2.17 $ 4.05 $ 2.45 $ 1.92
Shipping, handling and other operating 0.72 0.34 1.23 0.54 0.71 1.61
DD&A 3.09 3.08 3.12 2.95 3.07 2.80
General and administrative 0.46 0.46 0.60 0.68 0.54 0.49
Equatorial Guinea
Dividends $ 31 $ 44 $ 47 $ 55 $ 177 $ 47
Return of capital - 0 6 9 46 61 7
Total cash distributions $ 31 $ 50 $ 56 $ 101 $ 238 $ 54
Income (loss) from equity method investments $ 44 $ 49 $ 86 $ 74 $ 253 $ 127
(a) Costs and expenses per BOE are based upon volumes sold.

Non-GAAP Reconciliations

Non-GAAP Reconciliations
Marathon Oil Corporation
Marathon Oil Corporation ("Marathon") supplements its use of GAAP financial measures with non-GAAP financial measures as described on the following pages:
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr
(In millions) 2021 2021 2021 2021 2021 2022
Net income (loss) $ 97 $ 16 $ 184 $ 649 $ 946 $ 1,304
Adjustments for special items (pre-tax):
Net (gain) loss on disposal of assets - 0 (1) (7) 27 19 - 0
Proved property impairments 1 46 13 - 0 60 - 0
Exploratory dry well costs, unproved property impairments and other - 0 7 48 16 71 - 0
Pension settlement - 0 5 3 1 9 - 0
Unrealized (gain) loss on derivative instruments 82 75 (27) (146) (16) 114
Unrealized (gain) on interest rate swaps (41) (8) (8) 43 (14) 26
Reduction in workforce 11 1 - 0 - 0 12 - 0
Loss on early extinguishment of debt - 0 19 102 - 0 121 - 0
Other 16 13 2 5 36 27
Benefit for income taxes related to special items - 0 - 0 - 0 (3) (3) (37)
Valuation allowance - 0 - 0 - 0 - 0 - 0 (685)
Adjustments for special items 69 157 126 (57) 295 (555)
Adjusted net income (loss) (a) $ 166 $ 173 $ 310 $ 592 $ 1,241 $ 749
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr
(In millions, except per share data) 2021 2021 2021 2021 2021 2022
Per common share data:
Diluted:
Weighted average shares (millions) 789 789 789 773 788 732
Adjusted net income (loss) (a) $ 166 $ 173 $ 310 $ 592 $ 1,241 $ 749
Adjusted net income (loss) per share (a) $ 0.21 $ 0.22 $ 0.39 $ 0.77 $ 1.57 $ 1.02
(a) Non-GAAP financial measure.
Our presentation of adjusted net income (loss) and adjusted net income (loss) per share is a non-GAAP measure. Adjusted net income (loss) is defined as net income (loss) adjusted for gains/losses on dispositions, impairments of proved and certain unproved properties, goodwill and equity method investments, changes in our valuation allowance, unrealized derivative gain/loss on commodity and interest rate derivative instruments, effects of pension settlements and curtailments and other items that could be considered "non-operating" or "non-core" in nature. Management believes this is useful to investors as another tool to meaningfully represent our operating performance and to compare Marathon to certain competitors. Adjusted net income (loss) and adjusted net income (loss) per share should not be considered in isolation or as an alternative to, or more meaningful than, net income (loss) or net income (loss) per share as determined in accordance with U.S. GAAP.

Non-GAAP Reconciliations 2

Non-GAAP Reconciliations
Marathon Oil Corporation
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr
(Per share) 2021 2021 2021 2021 2021 2022
Adjusted Net Income (Loss) per Diluted Share
Net income (loss) $ 0.12 $ 0.02 $ 0.23 $ 0.84 $ 1.20 $ 1.78
Adjustments for special items (pre-tax):
Net (gain) loss on disposal of assets - 0 - 0 (0.01) 0.03 0.02 - 0
Proved property impairments - 0 0.06 0.02 - 0 0.08 - 0
Exploratory dry well costs, unproved property impairments and other - 0 0.01 0.06 0.02 0.09 - 0
Goodwill impairment - 0 - 0
Pension settlement - 0 0.01 - 0 - 0 0.01 - 0
Pension curtailment - 0
Unrealized (gain) loss on derivative instruments 0.10 0.10 (0.03) (0.19) (0.02) 0.16
Unrealized (gain) on interest rate swaps (0.05) (0.01) (0.01) 0.06 (0.02) 0.04
Reduction in workforce 0.01 - 0 - 0 - 0 0.02 - 0
Impairment of equity method investment - 0 - 0
Loss on early extinguishment of debt - 0 0.02 0.13 - 0 0.15 - 0
Other 0.03 0.01 - 0 0.01 0.04 0.03
Benefit for income taxes related to special items - 0 - 0 - 0 - 0 - 0 (0.05)
Valuation allowance - 0 - 0 - 0 - 0 - 0 (0.94)
Adjustments for special items 0.09 0.20 0.16 (0.07) 0.37 (0.76)
Adjusted net income (loss) (a) $ 0.21 $ 0.22 $ 0.39 $ 0.77 $ 1.57 $ 1.02
(a) Non-GAAP financial measure.
Our presentation of adjusted net income (loss) and adjusted net income (loss) per share is a non-GAAP measure. Adjusted net income (loss) is defined as net income (loss) adjusted for gains/losses on dispositions, impairments of proved and certain unproved properties, goodwill and equity method investments, changes in our valuation allowance, unrealized derivative gain/loss on commodity and interest rate derivative instruments, effects of pension settlements and curtailments and other items that could be considered "non-operating" or "non-core" in nature. Management believes this is useful to investors as another tool to meaningfully represent our operating performance and to compare Marathon to certain competitors. Adjusted net income (loss) and adjusted net income (loss) per share should not be considered in isolation or as an alternative to, or more meaningful than, net income (loss) or net income (loss) per share as determined in accordance with U.S. GAAP.

Non-GAAP Reconciliations 3

Non-GAAP Reconciliations
Marathon Oil Corporation
(In millions) 1st Qtr 2021 2nd Qtr 2021 3rd Qtr 2021 4th Qtr 2021 Year 2021 1st Qtr 2022
Cash additions to Property, Plant, and Equipment $ 209 $ 274 $ 289 $ 274 $ 1,046 $ 332
Change in capital accrual (25) 15 19 (23) (14) 16
Additions to other assets - 0 - 0 - 0 - 0 - 0 - 0
Total Capital Expenditures (accrued) (a) $ 184 $ 289 $ 308 $ 251 $ 1,032 $ 348
(In millions) 1st Qtr 2021 2nd Qtr 2021 3rd Qtr 2021 4th Qtr 2021 Year 2021 1st Qtr 2022
Adjusted Free Cash Flow
Net cash flow provided by operating activities $ 622 $ 655 $ 816 $ 1,146 $ 3,239 $ 1,067
Adjustments:
Changes in working capital 15 46 (41) (45) (25) 213
Capital expenditures (accrued) (184) (289) (308) (251) (1,032) (348)
EG return of capital and other (10) 8 11 48 57 8
Adjusted Free Cash Flow (a) $ 443 $ 420 $ 478 $ 898 $ 2,239 $ 940
Our presentation of total capital expenditures (accrued) is a non-GAAP measure. Total capital expenditures (accrued) is defined as cash additions to property, plant and equipment adjusted for the change in capital accrual and additions to other assets. Management believes this is useful to investors as an indicator of Marathon's commitment to capital expenditure discipline by eliminating differences caused by the timing of capital accrual and other items. Total capital expenditures (accrued) should not be considered in isolation or as an alternative to, or more meaningful than, cash additions to property, plant and equipment as determined in accordance with U.S. GAAP. Our presentation of adjusted free cash flow is a non-GAAP measure. Adjusted free cash flow before dividend ("adjusted free cash flow") is defined as net cash provided by operating activities before changes in working capital, capital expenditures (accrued), and EG return of capital and other. Management believes this is useful to investors as a measure of Marathon's ability to fund its capital expenditure programs, service debt, and other distributions to stockholders. Adjusted free cash flow should not be considered in isolation or as an alternative to, or more meaningful than, net cash provided by operating activities as determined in accordance with U.S. GAAP.

Non-GAAP Reconciliations 4

Non-GAAP Reconciliations
Marathon Oil Corporation
(In millions) Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31
Cash Flows (QTD) 2021 2021 2021 2021 2022
Net cash provided by operating activities $ 622 $ 655 $ 816 $ 1,146 $ 1,067
Current receivables (175) (78) (60) (76) (307)
Inventories (2) - 1 - (2)
Current accounts payable and accrued expenses 101 20 107 141 101
Other current assets and liabilities 61 12 (7) (20) (5)
Changes in working capital (15) (46) 41 45 (213)
Net cash provided by operating activities before changes in working capital (a) $ 637 $ 701 $ 775 $ 1,101 $ 1,280
(a) Non-GAAP financial measure.
Our presentation of net cash provided by operating activities before changes in working capital is a non-GAAP measure. Management believes this is useful to investors as an indicator of Marathon's ability to generate cash quarterly or year-to-date by eliminating differences caused by the timing of certain working capital items. Net cash provided by operating activities before changes in working capital should not be considered in isolation or as an alternative to, or more meaningful than, net cash provided by operating activities as determined in accordance with U.S. GAAP.
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr
(In millions) 2021 2021 2021 2021 2021 2022
Sources of Cash
Net cash provided by operating activities before changes in working capital $ 637 $ 701 $ 775 $ 1,101 $ 3,214 $ 1,280
EG return of capital and other (10) 8 11 48 57 8
Sources of Cash 627 709 786 1,149 3,271 1,288
Capital expenditures (accrued) $ 184 $ 289 $ 308 $ 251 $ 1,032 $ 348
Reinvestment rate (a) 29 % 41 % 39 % 22 % 32 % 27 %
(a) Non-GAAP financial measure.
Our presentation of reinvestment rate is a non-GAAP measure. The reinvestment rate is defined as total capital expenditures (accrued) divided by net cash provided by operating activities before changes in working capital and EG return of capital and other. Management believes the reinvestment rate is useful to investors to demonstrate the Company's commitment to generating cash for use towards investor-friendly purposes (which includes balance sheet enhancement, base dividend and other return of capital).

Non-GAAP Reconciliations 5

Non-GAAP Reconciliations
Marathon Oil Corporation
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr
(In millions) 2021 2021 2021 2021 2021 2022
Net income (loss) $ 97 $ 16 $ 184 $ 649 $ 946 $ 1,304
Adjustments to net income (loss):
DD&A 496 532 522 516 2,066 423
Tax 10 10 4 34 58 (517)
Exploration 21 25 63 27 136 11
Net interest and other 13 59 57 59 188 22
EBITDAX 637 642 830 1,285 3,394 1,243
EBITDAX special items adjustments:
Net (gain) loss on disposal of assets - 0 (1) (7) 27 19 - 0
Proved property impairments 1 46 13 - 0 60 - 0
Pension settlement - 0 5 3 1 9 - 0
Unrealized (gain) loss on derivative instruments 82 75 (27) (146) (16) 114
Reduction in workforce 11 1 - 0 - 0 12 - 0
Loss on early extinguishment of debt - 0 19 102 - 0 121 - 0
Other 16 13 3 6 38 27
Adjustments for special items 110 158 87 (112) 243 141
Adjusted EBITDAX (a) $ 747 $ 800 $ 917 $ 1,173 $ 3,637 $ 1,384
(a) Non-GAAP financial measure.
Our presentation of Adjusted EBITDAX is a non-GAAP measure. Adjusted EBITDAX is defined as net income (loss) excluding net interest expense, taxes, DD&A, and exploration, further adjusted for gains/losses on dispositions, impairments of proved and certain unproved properties, goodwill and equity method investments, unrealized derivative gain/loss on commodity derivative instruments, effects of pension settlements and curtailments and other items that could be considered "non-operating" or "non-core" in nature. Management believes this provides useful information to investors in evaluating our operating and financial performance because it eliminates the impact of certain items affecting comparability from period to period. Adjusted EBITDAX should not be considered in isolation or as an alternative to, or more meaningful than, net income (loss) as determined in accordance with U.S. GAAP.