10-KPeriod: FY2017

Marathon Petroleum Corp Annual Report, Year Ended Dec 31, 2017

Filed February 28, 2018For Securities:MPC

Summary

Marathon Petroleum Corporation (MPC) reported strong financial results for the year ended December 31, 2017, driven by improved refining and marketing margins and the positive impact of the Tax Cuts and Jobs Act (TCJA). Net income attributable to MPC significantly increased year-over-year, largely due to a substantial tax benefit from the TCJA and stronger performance in the Refining & Marketing segment. The company also saw increased income from its Midstream segment, benefiting from higher volumes and strategic acquisitions. MPC continued its commitment to enhancing shareholder value through strategic asset dropdowns to its sponsored master limited partnership, MPLX LP, and share repurchases. The company's integrated business model, encompassing refining, marketing, retail, and midstream operations, demonstrated resilience. Speedway, its retail segment, performed steadily, with merchandise sales providing a stable margin, while the Midstream segment benefited from expansion and acquisition activity. The company maintained a strong financial position with ample liquidity and manageable leverage, supporting its capital allocation strategies, including dividend payments and share repurchases.

Financial Highlights

52 data points
Beta

Revenue

$74.73B

10.2% Gross Margin

Net Income

$3.43B

4.6% Net Margin

EPS (Diluted)

$6.70

Total Assets

$49.05B

Cash & Equivalents

$3.01B

Free Cash Flow

$3.88B

Financial Statements
Beta
Revenue$74.73B
Cost of Revenue$67.09B
Gross Profit$7.64B
SG&A Expenses$1.69B
Operating Expenses$71.35B
Operating Income$4.02B
Interest Expense$688.00M
Net Income$3.43B
EPS (Basic)$6.76
EPS (Diluted)$6.70
Shares Outstanding (Basic)507.00M
Shares Outstanding (Diluted)512.00M

Key Highlights

  • 1Net income attributable to MPC increased significantly in 2017, driven by a $1.5 billion tax benefit from the Tax Cuts and Jobs Act and improved Refining & Marketing segment performance.
  • 2The Refining & Marketing segment saw improved income from operations, primarily due to higher LLS crack spreads, which increased to $9.84 per barrel in 2017 from $6.96 per barrel in 2016.
  • 3Strategic acceleration of midstream asset dropdowns to MPLX LP, including refining logistics and fuels distribution services, was completed in early 2018, aimed at enhancing shareholder value and providing a clearer valuation of the midstream platform.
  • 4Speedway, MPC's retail segment, showed stable performance, with merchandise sales contributing significantly to profitability and a loyalty program driving customer engagement.
  • 5MPLX LP's Midstream segment income from operations increased, supported by higher gathering, processing, and fractionation volumes, as well as contributions from acquisitions like the Ozark pipeline and Bakken Pipeline system.
  • 6MPC maintained a strong financial position with $3.01 billion in cash and cash equivalents and $4.25 billion in unused committed borrowing facilities as of December 31, 2017, providing financial flexibility.
  • 7The company continued its commitment to shareholder returns, repurchasing $2.37 billion of its common stock in 2017 and maintaining a consistent dividend policy.

Frequently Asked Questions

The significant increase in net income attributable to MPC in 2017 was primarily driven by a substantial tax benefit of approximately $1.5 billion resulting from the Tax Cuts and Jobs Act (TCJA), which reduced the federal corporate tax rate. Additionally, improved operating results from the Refining & Marketing segment, largely due to higher crack spreads, contributed to the overall increase.

MPC accelerated the dropdown of midstream assets to its master limited partnership, MPLX LP. These strategic actions, completed in early 2018 with the final dropdown of refining logistics and fuels distribution assets, were designed to provide a clearer valuation of MPC's midstream platform and enhance shareholder value. These transactions involved the exchange of economic interests in MPLX's general partner for MPLX common units, simplifying the structure and enhancing the visibility of the midstream business.

The Speedway segment demonstrated steady performance in 2017. While gasoline and distillate sales volumes saw a slight decrease, this was largely attributed to the contribution of 41 travel centers to the PFJ Southeast joint venture in late 2016. Merchandise sales remained strong and contributed substantially to the segment's profitability, with merchandise margin percentages remaining stable.

For 2018, MPC planned approximately $1.6 billion in capital expenditures and investments, excluding MPLX. The Refining & Marketing segment's forecast was around $950 million, focusing on refinery optimization and upgrades, while Speedway planned about $530 million for new store construction and remodels. MPLX's capital plan was significantly larger, focused on organic growth projects in midstream infrastructure.