01—Abstract
Summary
Summary of the 10-K filed February 28, 2018. Cited figures are marked; the original filing is the authoritative source.
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.
02—Key points
Key Highlights
- Net 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.
- The 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.
- Strategic 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.
- Speedway, MPC's retail segment, showed stable performance, with merchandise sales contributing significantly to profitability and a loyalty program driving customer engagement.
- MPLX 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.
- MPC 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.
- The company continued its commitment to shareholder returns, repurchasing $2.37 billion of its common stock in 2017 and maintaining a consistent dividend policy.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Marathon Petroleum kept $0.05.
- Revenue$74.73B100.0%
- Cost of revenue−$67.09B89.8%
- Gross profit$7.64B10.2%
- Operating costs−$3.63B4.9%
- Operating income$4.02B5.4%
- Interest, other & tax−$586.0M0.8%
- Net income$3.43B4.6%
Where FY2017 revenue went
$74.73B- Cost of revenue: $67.09B, 90% of revenue
- Net income: $3.43B, 4.6% of revenue
- SG&A: $1.69B, 2.3% of revenue
- Other operating costs: $1.93B, 2.6% of revenue
- Interest, other & tax: $586.0M, 0.8% of revenue
Kept 4.6% as net incomeNet income $3.43B · 4.6%Interest, other & tax $586.0M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 28, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $74.73B$63.28B | +18.1% |
| Cost of Revenue | $67.09B$56.68B | +18.4% |
| Gross Profit | $7.64B$6.60B | +15.8% |
| SG&A Expenses | $1.69B$1.60B | +6.1% |
| Operating Expenses | $71.35B$60.98B | +17.0% |
| Operating Income | $4.02B$2.39B | +68.4% |
| Interest Expense | $688.00M$602.00M | +14.3% |
| Net Income | $3.43B$1.17B | +192.3% |
| EPS (Basic) | $6.76$2.22 | +204.5% |
| EPS (Diluted) | $6.70$2.21 | +203.2% |
| Shares Outstanding (Basic) | 507.00M528.00M | −4.0% |
| Shares Outstanding (Diluted) | 512.00M530.00M | −3.4% |
05—Questions
Frequently Asked Questions
What was the primary driver of the significant increase in MPC's net income in 2017?
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.
How did MPC's strategic actions regarding MPLX LP impact its business?
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.
How did the Speedway segment perform in 2017?
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.
What is the company's outlook for capital expenditures and investments?
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.
06—Continue