10-QPeriod: Q2 FY2011

Marathon Petroleum Corp Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 9, 2011For Securities:MPC

Summary

Marathon Petroleum Corporation (MPC) reported strong financial performance for the quarter and six months ended June 30, 2011, largely driven by a significant increase in its Refining & Marketing segment's profitability. This segment benefited from wider crack spreads and favorable crude oil differentials, particularly the widening gap between West Texas Intermediate (WTI) and other light sweet crudes like LLS, as well as a strong sweet/sour crude differential. Key to understanding MPC's results is recognizing that this period reflects its emergence as an independent, publicly traded company following its spin-off from Marathon Oil Corporation on June 30, 2011. Consequently, financial statements prior to this date represent the historical Refining, Marketing & Transportation (RM&T) business. The company also highlighted robust operating statistics, with notable improvements in refining and marketing gross margins and increased throughputs. Liquidity appears strong, supported by operating cash flows, a revolving credit facility, and a trade receivables securitization facility.

Financial Highlights

46 data points
Beta

Revenue

$20.76B

Net Income

$802.00M

3.9% Net Margin

EPS (Diluted)

$1.12

Total Assets

$23.96B

Cash & Equivalents

$1.62B

Free Cash Flow

-$237.00M

Financial Statements
Beta
Revenue$20.76B
SG&A Expenses$288.00M
Operating Expenses$19.47B
Operating Income$1.39B
Interest Expense$42.00M
Net Income$802.00M
EPS (Basic)$1.13
EPS (Diluted)$1.12
Shares Outstanding (Basic)712.00M
Shares Outstanding (Diluted)716.00M

Key Highlights

  • 1Net income significantly increased to $802 million for the quarter and $1.331 billion for the six months ended June 30, 2011, up from $405 million and $116 million in the prior year periods, respectively.
  • 2The Refining & Marketing segment's income from operations saw a substantial rise, increasing by $670 million for the quarter and $1.92 billion for the six months compared to the prior year, driven by improved refining margins.
  • 3Refining and marketing gross margin per gallon improved dramatically to $0.2566 for the quarter and $0.2090 for the six months ended June 30, 2011, from $0.1306 and $0.0428 in the prior year periods.
  • 4The company completed its spin-off from Marathon Oil Corporation on June 30, 2011, becoming an independent publicly traded entity with its common stock beginning to trade on the NYSE on July 1, 2011.
  • 5Total revenues increased by approximately 30% for the quarter and 26% for the six months, reflecting higher commodity prices and sales volumes, particularly in the Refining & Marketing segment.
  • 6Cash and cash equivalents stood at $1.622 billion as of June 30, 2011, a significant increase from $118 million at the end of 2010, reflecting the capital structure established at spin-off.
  • 7The company ended the period with a strong liquidity position, with $1.622 billion in cash and cash equivalents and an undrawn $2.0 billion revolving credit facility.

Frequently Asked Questions

The spin-off from Marathon Oil Corporation on June 30, 2011, marks the creation of MPC as an independent, publicly traded company. Financial results prior to this date represent the historical Refining, Marketing & Transportation (RM&T) business of Marathon Oil. This transition is crucial for understanding the historical context and the standalone performance of MPC from July 1, 2011, onwards.

The significant increase in profitability was primarily driven by the Refining & Marketing segment. This segment benefited from wider refining margins, as indicated by improved crack spreads, and favorable crude oil pricing differentials, specifically a larger gap between WTI and LLS crude, and a wider sweet/sour crude differential. These factors led to a substantial improvement in the refining and marketing gross margin per gallon.

The spin-off resulted in MPC establishing its own capital structure. Notably, its cash and cash equivalents increased significantly to $1.622 billion by June 30, 2011, from $118 million at the end of 2010, reflecting the capitalisation at spin-off. The company also entered into a new $2.0 billion revolving credit facility and a $1.0 billion trade receivables securitization facility to ensure adequate liquidity as an independent entity.

MPC is involved in several legal proceedings, including a notable lawsuit from the Kentucky Attorney General concerning alleged price gouging in 2005 and related to 2011 pricing, and ongoing MTBE contamination lawsuits. While MPC is vigorously defending these actions and does not currently expect them to materially impact its financial position, the ultimate outcomes remain uncertain and could potentially be material.