10-QPeriod: Q3 FY2016

Marathon Petroleum Corp Quarterly Report for Q3 Ended Sep 30, 2016

Filed October 31, 2016For Securities:MPC

Summary

Marathon Petroleum Corporation (MPC) reported a significant decrease in net income attributable to MPC for the nine months ended September 30, 2016, compared to the same period in 2015. This decline was primarily driven by lower segment income from operations in the Refining & Marketing segment, largely due to reduced crack spreads. Despite the overall earnings drop, the Midstream segment saw substantial growth, benefiting from the inclusion of MarkWest's operations following the merger with MPLX and contributions from new and existing investments. MPC is actively pursuing strategic initiatives to unlock value from its midstream assets, including planned asset "dropdowns" to MPLX. The company is also focused on enhancing shareholder value through ongoing share repurchases and dividend payments. The financial results reflect a challenging operating environment in the refining sector, but the company's diversified business model, particularly its growing midstream segment, provides a degree of resilience.

Financial Highlights

48 data points
Beta

Revenue

$16.62B

Net Income

$145.00M

0.9% Net Margin

EPS (Diluted)

$0.27

Total Assets

$43.29B

Cash & Equivalents

$709.00M

Free Cash Flow

-$311.00M

Financial Statements
Beta
Revenue$16.62B
SG&A Expenses$420.00M
Operating Expenses$16.02B
Operating Income$435.00M
Interest Expense$153.00M
Net Income$145.00M
EPS (Basic)$0.28
EPS (Diluted)$0.27
Shares Outstanding (Basic)527.00M
Shares Outstanding (Diluted)530.00M

Key Highlights

  • 1Net income attributable to MPC decreased significantly to $947 million for the nine months ended September 30, 2016, down from $2.67 billion in the prior year period, primarily due to lower Refining & Marketing segment results.
  • 2Refining & Marketing segment income from operations saw a substantial decline of $2.58 billion for the nine months ended September 30, 2016, driven by lower crack spreads and unfavorable product price realizations.
  • 3The Midstream segment demonstrated strong growth, with income from operations increasing by $340 million for the nine months ended September 30, 2016, largely due to the full inclusion of MarkWest's results post-merger with MPLX.
  • 4MPC announced strategic initiatives to enhance shareholder value, including planned asset 'dropdowns' to MPLX, which are expected to contribute to MPLX's growth and MPC's stake in the partnership.
  • 5Total capital expenditures and investments for the nine months ended September 30, 2016, were $2.23 billion, with a significant portion directed towards the Midstream segment, reflecting strategic investments in growth assets.
  • 6The company maintained a strong liquidity position with $4.95 billion in liquidity as of September 30, 2016, including cash and cash equivalents and available credit facilities.
  • 7Shareholder returns included $177 million spent on share repurchases and $1.00 per share in dividends paid for the nine months ended September 30, 2016.

Frequently Asked Questions

The significant decrease in net income attributable to MPC for the nine months ended September 30, 2016, compared to the same period in 2015, was primarily due to a substantial decline in the Refining & Marketing segment's income from operations. This decline was largely driven by lower crack spreads and less favorable product price realizations, reflecting a challenging market environment for refining operations.

The Midstream segment showed robust performance, with income from operations increasing significantly. Key drivers included the full inclusion of MarkWest's operational results following its merger with MPLX on December 4, 2015, and positive contributions from new and existing pipeline and marine equity investments. This segment's growth is a key factor in offsetting weaknesses in the refining business.

MPC is pursuing several strategic initiatives focused on its midstream assets, primarily through MPLX. These include planned "dropdowns" of assets to MPLX, which are expected to support increased distributions from MPLX and enhance the value of MPC's partnership interests. The company is also exploring strategic opportunities to highlight and capture the value of its general partner interest in MPLX and optimize its cost of capital.

MPC maintained a strong liquidity position as of September 30, 2016, with approximately $4.95 billion in total liquidity, comprising $709 million in cash and cash equivalents and substantial availability under its credit facilities. The company believes its liquidity is adequate to fund operations, capital expenditures, debt obligations, and shareholder returns, supported by internally generated cash flow and access to capital markets.