10-QPeriod: Q3 FY2020

Marathon Petroleum Corp Quarterly Report for Q3 Ended Sep 30, 2020

Filed November 6, 2020For Securities:MPC

Summary

Marathon Petroleum Corporation (MPC) reported a significant net loss attributable to MPC of $886 million ($1.36 per diluted share) for the third quarter of 2020, a substantial decline from the $1.1 billion net income in the same period of 2019. This downturn was primarily driven by a substantial loss in the Refining & Marketing segment, impacted by reduced refined product sales volumes, prices, and margins due to the ongoing COVID-19 pandemic and declining commodity prices. The company also recorded significant impairment charges totaling $433 million related to long-lived assets and $348 million in restructuring expenses associated with idling two refineries and workforce reductions. For the first nine months of 2020, MPC reported an even larger net loss attributable to MPC of $10.11 billion ($15.58 per diluted share), a stark contrast to the $2.19 billion net income in the comparable 2019 period. This extended period of loss was heavily influenced by massive impairment charges, including $7.39 billion for goodwill, $1.32 billion for equity method investments, and $886 million for long-lived assets, all attributed to the challenging economic environment and commodity price declines. The sale of the Speedway business continues to be presented as discontinued operations, contributing positively to earnings in the current period, though overall results were deeply impacted by ongoing market headwinds.

Financial Statements
Beta
Revenue$17.41B
Cost of Revenue$16.67B
Gross Profit$735.00M
SG&A Expenses$673.00M
Operating Expenses$18.61B
Operating Income-$1.06B
Interest Expense$376.00M
Net Income-$886.00M
EPS (Basic)$-1.36
EPS (Diluted)$-1.36
Shares Outstanding (Basic)650.00M
Shares Outstanding (Diluted)650.00M

Key Highlights

  • 1Significant net loss attributable to MPC of $886 million in Q3 2020 ($1.36/share), down from a $1.1 billion profit in Q3 2019 ($1.66/share), largely due to the Refining & Marketing segment's performance impacted by COVID-19 and lower commodity prices.
  • 2Year-to-date net loss attributable to MPC of $10.11 billion ($15.58/share) reflects substantial impairments, including $7.39 billion in goodwill and $1.32 billion in equity method investments, driven by adverse market conditions.
  • 3The company recorded $433 million in long-lived asset impairment charges and $348 million in restructuring expenses in Q3 2020 related to refinery idling and workforce reductions.
  • 4Sales and other operating revenues decreased by $10.14 billion in Q3 2020 compared to Q3 2019, driven by lower refined product sales volumes and prices, primarily due to the pandemic's impact on travel and business operations.
  • 5The sale of the Speedway business continues to be reported as discontinued operations, contributing $371 million in net income for Q3 2020.
  • 6Midstream segment income from operations increased to $960 million in Q3 2020 from $919 million in Q3 2019, benefiting from organic growth projects and reduced operating expenses, demonstrating resilience.
  • 7MPC maintained a strong liquidity position with $8.44 billion available at September 30, 2020, despite temporary suspension of share repurchases and strategic debt management.

Frequently Asked Questions

The substantial net losses reported by Marathon Petroleum Corporation (MPC) are primarily attributed to the severe impact of the COVID-19 pandemic on refined product demand, prices, and margins, which led to significant operational losses in the Refining & Marketing segment. Additionally, large impairment charges, including goodwill and equity method investments, totaling billions of dollars were recognized due to the challenging macroeconomic environment and declining commodity prices.

The sale of Speedway, which is presented as discontinued operations, is expected to provide significant cash proceeds ($21 billion agreement) that MPC plans to use for strengthening its balance sheet and returning capital to shareholders. While Speedway's earnings are reported separately, the divestiture signifies a strategic shift for MPC, allowing it to focus on its core refining, marketing, and midstream operations. MPC will retain a fuel supply agreement with the buyer, 7-Eleven.

The Midstream segment, primarily consisting of MPLX, demonstrated relative strength and resilience, with an increase in income from operations to $960 million in Q3 2020 from $919 million in Q3 2019. This segment benefited from organic growth projects and cost reductions. In contrast, the Refining & Marketing segment experienced a significant loss of $1.57 billion in Q3 2020, heavily impacted by market headwinds, highlighting a divergent performance between the two segments.

MPC has taken several measures to manage its financial position and liquidity. These include temporarily suspending share repurchases, strategically managing debt by issuing new notes and repaying existing ones, securing revolving credit facilities for financial flexibility, and implementing significant cost reduction initiatives. The company also announced strategic actions to optimize assets and lower costs, including idling certain refineries and workforce reductions.