Why did MPC's earnings decline so sharply in Q1 2024?

The decline was driven mainly by the Refining & Marketing segment, where weaker market crack spreads and lower throughputs reduced margins from $26.15 to $18.99 per barrel. Record planned turnaround activity of $648 million, which MPC excludes from adjusted EBITDA but includes in GAAP results, further pressured reported earnings.

Are the turnaround costs a recurring concern for investors?

They are planned and periodic, but they were the largest in company history this quarter. MPC guides Q2 2024 turnaround costs down to $200 million, which should help near-term results. Investors should note that MPC's adjusted EBITDA excludes these costs, so the adjusted figure presents a more favorable view than GAAP income.

How is MPC returning capital to shareholders?

In Q1 2024 MPC returned $2.5 billion through $2.2 billion of share repurchases and $299 million of dividends. It repurchased another $0.8 billion through April 26 and approved an incremental $5 billion authorization, leaving about $8.8 billion available. Repurchases may be suspended or discontinued at any time and depend on market and business conditions.

How is the Midstream business performing?

Midstream adjusted EBITDA increased to $1.6 billion from $1.5 billion, driven by higher rates and processing volumes. MPLX is expanding in the Marcellus and Permian basins, including the 200 mmcf/d Harmon Creek II plant and the Preakness II plant starting up, and acquired Utica assets for $625 million. The planned Whistler/Rio Bravo joint venture is expected to close in Q2 2024, subject to regulatory approvals.

What is MPC's liquidity and balance sheet position?

As of March 31, 2024, MPC had $7.6 billion of cash, cash equivalents, and short-term investments and $5 billion available under its bank revolving credit facility. Total consolidated debt was about $27.3 billion, with $6.8 billion at MPC and $20.4 billion at MPLX, and equity declined to $29.2 billion from $30.5 billion at year-end 2023, largely reflecting buybacks.

MPC 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed April 30, 2024. Cited figures are marked; the original filing is the authoritative source.

Marathon Petroleum (MPC) reported first-quarter 2024 net income attributable to MPC of $937 million^a, or $2.58 per diluted share, down sharply from $2.7 billion, or $6.09 per diluted share, in Q1 2023.

Adjusted EBITDA fell to $3.3 billion^b from $5.2 billion. The decline was driven mainly by the Refining & Marketing segment, where adjusted EBITDA dropped to $1.9 billion from $3.9 billion as lower market crack spreads and lower throughputs compressed per-barrel economics: R&M margin fell to $18.99 per barrel from $26.15, and segment adjusted EBITDA fell to $7.73 per barrel from $15.09. The quarter also absorbed a record $648 million of planned refinery turnaround activity, which lowered crude capacity utilization to about 82% from 89% a year earlier.

Including the turnaround costs, which MPC excludes from adjusted EBITDA, the impact on reported results was larger than the headline adjusted figures suggest. Midstream, operated largely through MPLX, was a relative bright spot, with segment adjusted EBITDA rising to $1.6 billion^c from $1.5 billion on higher rates and processing volumes. Cash generation and capital returns remained substantial.

Net cash provided by operating activities was $1.5 billion^d, and MPC returned $2.5 billion to shareholders in the quarter through $2.2 billion of buybacks and $299 million of dividends. The board also approved an incremental $5 billion share repurchase authorization, bringing available authorization to roughly $8.8 billion, and MPC repurchased another $0.8 billion of shares through April 26. Liquidity was solid, with $7.6 billion of cash and short-term investments and $5 billion available under the bank revolver.

Share count fell to 355 million from 368 million at year-end 2023, a reduction that partly offsets lower earnings on a per-share basis. Looking ahead, management highlighted continued midstream growth, including new processing plants in the Marcellus and Permian, a $625 million Utica acquisition, and a planned Whistler/Rio Bravo pipeline joint venture expected to close in Q2 2024.

The second-quarter outlook calls for refinery throughput of 2,965 thousand barrels per day and refining operating costs of $4.95 per barrel excluding turnarounds, with planned turnaround costs falling to $200 million. Investors should weigh the cyclical weakness in refining margins against the company's strong capital return program and the stabilizing midstream business.

02—Key points

Key Highlights

Net income attributable to MPC fell 66% year over year to $937 million ($2.58 per diluted share), versus $2.7 billion ($6.09) in Q1 2023, which included a $0.20 per-share charge from stock compensation remeasurement.
Adjusted EBITDA declined to $3.3 billion from $5.2 billion, with Refining & Marketing adjusted EBITDA down to $1.9 billion from $3.9 billion as crack spreads weakened.
R&M margin compressed to $18.99 per barrel from $26.15, and segment adjusted EBITDA to $7.73 per barrel from $15.09.
Record $648 million of planned refinery turnaround costs cut crude utilization to about 82% from 89%, a key drag on the quarter.
Midstream adjusted EBITDA rose to $1.6 billion from $1.5 billion on higher rates and processing volumes, supported by new Marcellus and Permian plants.
Capital return of $2.5 billion in the quarter, plus a new $5 billion buyback authorization leaving about $8.8 billion available; total capital returned since May 2021 is $35 billion.
Share count reduced to 355 million from 368 million at year-end 2023, while liquidity remained strong at $7.6 billion in cash and short-term investments.

03—Questions

Frequently Asked Questions

Why did MPC's earnings decline so sharply in Q1 2024?
The decline was driven mainly by the Refining & Marketing segment, where weaker market crack spreads and lower throughputs reduced margins from $26.15 to $18.99 per barrel. Record planned turnaround activity of $648 million, which MPC excludes from adjusted EBITDA but includes in GAAP results, further pressured reported earnings.
Are the turnaround costs a recurring concern for investors?
They are planned and periodic, but they were the largest in company history this quarter. MPC guides Q2 2024 turnaround costs down to $200 million, which should help near-term results. Investors should note that MPC's adjusted EBITDA excludes these costs, so the adjusted figure presents a more favorable view than GAAP income.
How is MPC returning capital to shareholders?
In Q1 2024 MPC returned $2.5 billion through $2.2 billion of share repurchases and $299 million of dividends. It repurchased another $0.8 billion through April 26 and approved an incremental $5 billion authorization, leaving about $8.8 billion available. Repurchases may be suspended or discontinued at any time and depend on market and business conditions.
How is the Midstream business performing?
Midstream adjusted EBITDA increased to $1.6 billion from $1.5 billion, driven by higher rates and processing volumes. MPLX is expanding in the Marcellus and Permian basins, including the 200 mmcf/d Harmon Creek II plant and the Preakness II plant starting up, and acquired Utica assets for $625 million. The planned Whistler/Rio Bravo joint venture is expected to close in Q2 2024, subject to regulatory approvals.
What is MPC's liquidity and balance sheet position?
As of March 31, 2024, MPC had $7.6 billion of cash, cash equivalents, and short-term investments and $5 billion available under its bank revolving credit facility. Total consolidated debt was about $27.3 billion, with $6.8 billion at MPC and $20.4 billion at MPLX, and equity declined to $29.2 billion from $30.5 billion at year-end 2023, largely reflecting buybacks.

04—Continue

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