01—Abstract
Summary
Summary of the 10-K filed February 28, 2019. Cited figures are marked; the original filing is the authoritative source.
Marathon Petroleum Corporation (MPC) presented its 2018 10-K report highlighting significant achievements, most notably the transformative acquisition of Andeavor on October 1, 2018.
This acquisition substantially expanded MPC's operational scale and geographic reach, positioning it as the largest independent petroleum refiner, marketer, and retailer in the United States. The integration of Andeavor is expected to yield significant synergies, estimated at $1.4 billiona annually within three years, enhancing long-term cash flow generation. The company reported a decrease in net income attributable to MPC to $2.78 billion in 2018 from $3.43 billion in 2017.
This decline was primarily due to the absence of a significant tax benefit recorded in 2017 and increased non-controlling interests, despite an increase in operating income driven by the Andeavor acquisition. MPC also returned substantial capital to shareholders through share repurchases ($3.29 billionb in 2018) and dividends ($954 million in 2018), demonstrating a commitment to shareholder returns while strategically investing in its integrated business model.
02—Key points
Key Highlights
- Completed the acquisition of Andeavor on October 1, 2018, creating the largest independent petroleum refiner, marketer, and retailer in the U.S.
- Expects to achieve approximately $1.4 billion in annual gross run-rate synergies within three years from the Andeavor acquisition.
- Operates the largest refining system in the U.S. with 16 refineries and over 3 million barrels per day of crude oil capacity.
- Retail segment is the second-largest chain of company-owned convenience stores, primarily under the Speedway brand, with significant merchandise sales contributing to margins.
- Midstream segment, primarily through MPLX and ANDX, offers integrated logistics infrastructure, including extensive pipeline networks and processing facilities.
- Returned $3.29 billion to shareholders through share repurchases in 2018, with $4.9 billion remaining authorization.
- Maintains a focus on operational excellence, safety, and environmental stewardship, with several facilities certified to RC14001 standards.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Marathon Petroleum kept $0.03.
- Revenue$86.09B100.0%
- Cost of revenue−$77.05B89.5%
- Gross profit$9.04B10.5%
- Operating costs−$4.35B5.1%
- Operating income$4.69B5.4%
- Interest, other & tax−$1.91B2.2%
- Net income$2.78B3.2%
Where FY2018 revenue went
$86.09B- Cost of revenue: $77.05B, 90% of revenue
- Net income: $2.78B, 3.2% of revenue
- SG&A: $2.28B, 2.6% of revenue
- Other operating costs: $2.07B, 2.4% of revenue
- Interest, other & tax: $1.91B, 2.2% of revenue
Kept 3.2% as net incomeNet income $2.78B · 3.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 28, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $86.09B$74.73B | +15.2% |
| Cost of Revenue | $77.05B$67.09B | +14.8% |
| Gross Profit | $9.04B$7.64B | +18.2% |
| SG&A Expenses | $2.28B$1.69B | +34.4% |
| Operating Expenses | $81.90B$71.35B | +14.8% |
| Operating Income | $4.69B$4.02B | +16.7% |
| Interest Expense | $1.02B$688.00M | +49.0% |
| Net Income | $2.78B$3.43B | −19.0% |
| EPS (Basic) | $5.36$6.76 | −20.7% |
| EPS (Diluted) | $5.28$6.70 | −21.2% |
| Shares Outstanding (Basic) | 518.00M507.00M | +2.2% |
| Shares Outstanding (Diluted) | 526.00M512.00M | +2.7% |
05—Questions
Frequently Asked Questions
What was the impact of the Andeavor acquisition on Marathon Petroleum Corporation's operations and financial performance in 2018?
The acquisition of Andeavor on October 1, 2018, significantly expanded MPC's refining capacity and geographic diversification. While it led to an increase in income from operations due to the integration of Andeavor's assets, net income attributable to MPC decreased year-over-year primarily due to the absence of a substantial tax benefit recorded in 2017 and increased non-controlling interests. MPC anticipates significant synergies from this acquisition.
How does Marathon Petroleum manage its commodity price risk?
Marathon Petroleum utilizes various strategies, including commodity derivative instruments (futures and options) on crude oil and refined products, to hedge against price volatility. These derivatives are used to hedge price risk associated with inventories and certain contractual sales, and their fair value changes are recognized in net income as they are not designated as accounting hedges.
What is the significance of MPLX and ANDX to Marathon Petroleum's business?
MPLX and ANDX are master limited partnerships in which MPC holds majority ownership and controls through its general partner interests. They are crucial to MPC's integrated model, owning and operating extensive midstream infrastructure for crude oil, refined products, natural gas, and NGLs, providing essential transportation, storage, gathering, and processing services that primarily support MPC's refining and marketing segment.
What is Marathon Petroleum's strategy for capital allocation and shareholder returns?
MPC's strategy focuses on disciplined capital allocation, balancing strategic investments in growth opportunities across its refining, retail, and midstream segments with returns to shareholders. This includes significant share repurchases and a growing dividend policy, while maintaining an investment-grade credit profile.
06—Continue