10-QPeriod: Q1 FY2020

Marathon Petroleum Corp Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 7, 2020For Securities:MPC

Summary

Marathon Petroleum Corporation (MPC) reported a significant net loss of $9.23 billion for the first quarter of 2020, a sharp decline from a net loss of $7 million in the prior year's quarter. This substantial loss was primarily driven by unprecedented impairment charges totaling $9.14 billion, including $7.82 billion for goodwill and long-lived assets and $1.32 billion for equity method investments. These impairments were largely attributed to the severe economic disruption caused by the COVID-19 pandemic and a sharp decline in commodity prices. Additionally, MPC recorded a $3.22 billion inventory valuation adjustment due to falling refined product prices. Despite the significant impairments, the company's operational performance showed mixed results. The Refining & Marketing segment experienced a wider loss, impacted by lower refined product sales volumes and prices. Conversely, the Retail segment saw improved profitability due to higher fuel and merchandise margins. MPC has implemented cost-saving measures, including deferring capital expenditures and reducing operating expenses, and has also increased its liquidity through credit facilities and debt issuance to navigate the challenging market conditions.

Financial Highlights

48 data points
Beta

Revenue

$22.20B

8.4% Gross Margin

Net Income

-$9.23B

-41.6% Net Margin

EPS (Diluted)

$-14.25

Total Assets

$86.32B

Cash & Equivalents

$1.60B

Free Cash Flow

-$1.72B

Financial Statements
Beta
Revenue$22.20B
Cost of Revenue$20.34B
Gross Profit$1.86B
SG&A Expenses$742.00M
Operating Expenses$33.15B
Operating Income-$12.15B
Interest Expense$355.00M
Net Income-$9.23B
EPS (Basic)$-14.25
EPS (Diluted)$-14.25
Shares Outstanding (Basic)648.00M
Shares Outstanding (Diluted)648.00M

Key Highlights

  • 1Reported a net loss attributable to MPC of $9.23 billion for Q1 2020, a significant increase from a $7 million loss in Q1 2019.
  • 2Recorded substantial impairment charges totaling $9.14 billion, including $7.82 billion for goodwill and long-lived assets and $1.32 billion for equity method investments, primarily due to COVID-19 and commodity price declines.
  • 3Incurred a $3.22 billion inventory market valuation adjustment due to lower refined product prices, impacting cost of revenues.
  • 4Revenues decreased by $4.52 billion, mainly due to lower refined product sales volumes and prices in the Refining & Marketing segment.
  • 5The Retail segment showed improved income from operations, driven by higher fuel and merchandise margins.
  • 6MPC took actions to preserve liquidity, including suspending share repurchases and reducing planned capital expenditures by approximately $1.35 billion for 2020.
  • 7Secured additional liquidity through new credit facilities and senior note issuances in April 2020.

Frequently Asked Questions

The significant net loss of $9.23 billion was primarily due to substantial non-cash impairment charges totaling $9.14 billion, which included impairments of goodwill ($7.33 billion), equity method investments ($1.32 billion), and long-lived assets ($0.49 billion). These impairments were triggered by the economic impact of the COVID-19 pandemic and the sharp decline in commodity prices. Additionally, a $3.22 billion inventory valuation adjustment to account for lower market values further impacted results.

COVID-19 has had a significant adverse impact. It led to reduced demand for refined petroleum products due to decreased travel and business operations, resulting in lower sales volumes and prices for the Refining & Marketing segment. The company also experienced increased commodity price volatility. In response, MPC has reduced refinery throughput, idled some capacity, deferred capital expenditures, reduced operating expenses, and temporarily suspended share repurchases to preserve liquidity.

Marathon Petroleum announced its intention to separate its retail transportation fuel and convenience store business (primarily Speedway) into an independent company. This transaction is targeted for completion in the fourth quarter of 2020, but the timing could change due to COVID-19 impacts on the business environment and capital markets. The transaction is subject to various conditions, including board approval and regulatory requirements.

MPC took several steps to enhance liquidity. This included drawing $2.0 billion on its five-year revolving credit facility in Q1 2020, entering into an additional $1 billion 364-day revolving credit facility in April 2020, and closing on the issuance of $2.5 billion in senior notes in April 2020, using the proceeds to repay amounts under its revolving credit facility. The company also suspended share repurchases.