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Marathon Petroleum Corporation Reports Second-Quarter 2015 Results

  • Reported second-quarter earnings of $826 million ($1.51 per diluted share)
  • Converted more than half of the 1,245 new retail sites to the Speedway brand since acquisition
  • Returned $544 million of capital to shareholders, including $408 million in share repurchases
  • Board authorized an additional $2 billion of share repurchases
  • Announced transformative MPLX/MarkWest strategic combination

FINDLAY, Ohio, July 30, 2015 - Marathon Petroleum Corporation (NYSE: MPC) today reported 2015 second-quarter earnings of $826 million, or $1.51 per diluted share, compared with $855 million, or $1.48 per diluted share, for the second quarter of 2014. Earnings per share for both periods have been adjusted to reflect the two-for-one stock split that occurred during the quarter.

"Second quarter results reflect a solid performance across our operating platform," said MPC President and Chief Executive Officer Gary R. Heminger. "Refining performance was notable, as our refineries benefited from the combination of high utilization and favorable market conditions." Heminger pointed out that crack spreads were strong throughout the quarter despite tightening crude differentials. He also noted that during the second quarter, the new condensate splitter went on line at the company's Catlettsburg, Ky., refinery. "Along with the splitter recently completed at our Canton, Ohio, refinery, these two new condensate splitters increase our system's refining capacity and our ability to process condensate production from the region's shale plays," he said. "MPC's extensive, high-complexity system and logistics optionality continue to provide opportunities to drive profitability from shifts in North American energy production and transportation, demographic changes in retail markets, and global fuels demand."

Heminger highlighted the announcement of a strategic combination between MPC's sponsored master limited partnership (MLP) MPLX LP (NYSE: MPLX) and MarkWest Energy Partners, L.P. (NYSE: MWE). "This strategic combination complements our operations, expands MPC's commercial opportunities and represents a significant step in executing our strategy to grow our higher-valued, stable cash-flow businesses," he said. "It will enable us to increase our participation in the U.S. energy infrastructure build-out in some of the most attractive regions of the country and will transform MPLX into a diversified, large-cap MLP with a robust opportunity set of growth projects over an extended period of time." Heminger noted that MPLX, as part of the combination, affirmed its anticipated distribution growth guidance of 29 percent in 2015 and expects a 25 percent compound annual limited partner distribution growth rate for the combined entity through 2017, with an annual distribution growth profile of approximately 20 percent in 2018 and 2019. The transaction also enhances the cash flow profile of MPC's general partner interest in MPLX.

Heminger said Speedway, MPC's retail segment, performed well and continues to make tremendous progress integrating the East Coast and Southeast retail locations acquired last year. "We continue to make great strides, with more than half of the total retail sites converted to the Speedway brand since the acquisition last September," he said. "We are on pace to achieve the expected synergies for 2015 from light product supply, as well as from operating and administrative expense savings. Further, the accelerated progress for store conversions and subsequent remodels has allowed us to more rapidly implement Speedway's industry-leading Speedy Rewards loyalty program. This program and other marketing enhancements are expected to drive the anticipated synergies to the business over the next several years."

MPC continues to balance growing the business with returning capital to shareholders. During the second quarter of 2015, MPC returned $544 million of capital to shareholders, including $408 million in share repurchases and $136 million in dividends. Heminger noted that on July 29, the MPC board of directors authorized up to an additional $2 billion of share repurchases over the next two years and announced a 28 percent increase in the quarterly dividend, to $0.32 per share. Since becoming a standalone company, the board has authorized $10 billion of share repurchases and has acquired $6.9 billion of its shares over this time period. He reiterated, "The company maintains a strong financial position and continues to execute its strategy to create value for its shareholders through new investments in the business, continued strong operating performance, and a sustained focus on return of capital to shareholders."

Segment Results

Total income from operations was $1.34 billion in the second quarter of 2015, compared with $1.37 billion in the second quarter of 2014.

Three Months Ended
June 30
(In millions) 2015 2014
Income from Operations by Segment
Refining & Marketing $ 1,206 $ 1,260
Speedway 127 94
Pipeline Transportation 79 81
Items not allocated to segments:
Corporate and other unallocated items (76 ) (61 )
Pension settlement expenses (1 ) (5 )
Income from operations $ 1,335 $ 1,369

Refining & Marketing

Refining & Marketing segment income from operations was $1.21 billion in the second quarter of 2015, compared with $1.26 billion in the second quarter of 2014. The slight decrease in the quarter's results compared to second-quarter 2014 was primarily due to a $1.18 per barrel decrease in gross margin, resulting from less favorable product price realizations compared to the spot market reference prices and less favorable crude oil acquisition costs relative to benchmark Light Louisiana Sweet crude oil. Results were also affected by a charge of $46 million to recognize increased estimated costs for compliance with the recently proposed renewable fuels standards for 2014 and 2015, particularly those for bio-mass based diesel and advanced biofuels. These decreases were almost completely offset by the favorable effects that market structure had on crude oil acquisition prices and lower direct operating costs.

Speedway

Speedway segment income from operations was $127 million in the second quarter of 2015, compared with $94 million in the second quarter of 2014. This increase was primarily the result of higher merchandise and light product margins and the addition of the newly acquired locations, partially offset by higher operating and administrative expenses. Speedway's consolidated light product margin increased to 13.51 cents per gallon in the second quarter of 2015, from 12.82 cents per gallon in the second quarter of 2014.

Pipeline Transportation segment income from operations, which includes all of MPLX's operations, was $79 million in the second quarter of 2015, compared with $81 million for the second quarter of 2014. The decrease was primarily due to lower equity affiliate income and increases in various operating expenses, partially offset by an increase in pipeline transportation revenue reflecting higher crude and light product throughput across the system.

Corporate and other unallocated expenses of $76 million in the second quarter of 2015 were $15 million higher than the second quarter of 2014 largely due to increased annual pension expense resulting from updates to actuarial estimates.

Strong Financial Position and Liquidity

On June 30, the company had $1.9 billion in cash and cash equivalents, an unused $2.5 billion revolving credit agreement and $1.2 billion of availability on its undrawn $1.3 billion trade receivables securitization facility. Availability under the trade receivables facility is a function of eligible accounts receivable, which will be lower in a sustained lower refined product price environment. The company's liquidity should provide it with sufficient flexibility to meet its day-to-day operational needs and continue its balanced approach to investing in the business and returning capital to shareholders.

Conference Call

At 10 a.m. EDT today, MPC will hold a webcast and conference call to discuss the reported results and provide an update on company operations. Interested parties may listen to the conference call on MPC's website at http://www.marathonpetroleum.com by clicking on the "2015 Second-Quarter Financial Results" link. Replays of the conference call will be available on the company's website through Wednesday, Aug. 12. Financial information, including the earnings release and other investor-related materials, will also be available online prior to the webcast and conference call at http://ir.marathonpetroleum.com in the...


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