01—Abstract
Summary
Summary of the 8-K filed August 6, 2024. Cited figures are marked; the original filing is the authoritative source.
Marathon Petroleum (MPC) reported second-quarter 2024 net income attributable to MPC of $1.5 billiona, or $4.33 per diluted share, down from $2.2 billion, or $5.32 per diluted share, a year earlier.
Adjusted net income was $1.4 billionb, or $4.12 per diluted share, after excluding a $151 million pre-tax gain on sale of assets. Adjusted EBITDA fell to $3.4 billion from $4.5 billion, and management attributed the decline primarily to lower market crack spreads in the Refining & Marketing (R&M) segment. R&M segment adjusted EBITDA was $2.0 billion, or $7.07 per barrel, versus $3.2 billion, or $11.88 per barrel, a year earlier.
R&M margin compressed to $17.37c per barrel from $22.10, although crude capacity utilization rose to about 97% from 93%. The Midstream segment was a relative bright spot. Segment adjusted EBITDA rose to $1.6 billion from $1.5 billion, driven by higher rates, higher volumes, and recently acquired assets.
MPC received a $550 milliond quarterly distribution from MPLX. Operating cash flow was $3.2 billion for the quarter. MPC returned $3.2 billion to shareholders through $2.9 billion of buybacks and $290 million of dividends, and it repurchased another $0.9 billion of shares through July 31, leaving $5.8 billion available under its authorizations.
Year-to-date, share count fell to 341 million from 355 million at March 31, 2024, which supports per-share results. For the third quarter, management guided to total refinery throughput of 2,845 thousand barrels per day, refining operating costs of $5.35 per barrel (excluding turnarounds and D&A), and planned turnaround costs of $330 million.
Growth updates included the start of operations at the 200 mmcf/d Preakness II processing plant in the Permian, MPLX's acquisition of an additional 20% interest in the BANGL NGL pipeline, and a final investment decision on the Blackcomb natural gas pipeline. Investors will be focused on whether margin pressure eases and whether the buyback pace is sustained.
02—Key points
Key Highlights
- Net income attributable to MPC was $1.5 billion ($4.33 per diluted share), down from $2.2 billion ($5.32) in Q2 2023; adjusted diluted EPS was $4.12 after excluding a $151 million pre-tax asset sale gain.
- Adjusted EBITDA declined to $3.4 billion from $4.5 billion, driven mainly by R&M, where segment adjusted EBITDA fell to $2.0 billion from $3.2 billion on lower market crack spreads.
- R&M margin fell to $17.37 per barrel from $22.10, while refining operating costs improved to $4.97 per barrel from $5.15 and crude utilization rose to about 97%.
- Midstream segment adjusted EBITDA grew to $1.6 billion (up about 6% year over year), supported by higher rates, higher volumes, and recent acquisitions; MPC received a $550 million distribution from MPLX.
- Capital return of $3.2 billion in Q2 ($2.9 billion buybacks, $290 million dividends) and an additional $0.9 billion of repurchases through July 31; $5.8 billion remains under authorizations.
- Balance sheet liquidity was $8.5 billion of cash and short-term investments plus $5 billion of undrawn revolver capacity as of June 30, 2024; total consolidated debt rose to $28.9 billion, with MPLX debt accounting for $22.1 billion.
- Q3 2024 outlook calls for 2,845 mbpd total throughput, $5.35 per barrel refining operating costs, $330 million of planned turnaround costs, and $1.55 billion of distribution costs; growth projects include Preakness II, the BANGL stake increase, and Blackcomb FID.
03—Questions
Frequently Asked Questions
Why did MPC's earnings and EBITDA decline so sharply year over year?
The decline was driven primarily by weaker refining economics. R&M margin fell to $17.37 per barrel from $22.10, and R&M segment adjusted EBITDA dropped to $2.0 billion from $3.2 billion, which management attributed to lower market crack spreads. Consolidated adjusted EBITDA fell to $3.4 billion from $4.5 billion. Midstream partially offset the decline with higher EBITDA of $1.6 billion.
What is the difference between reported and adjusted results this quarter?
Reported net income attributable to MPC was $1.5 billion ($4.33 per diluted share). Adjusted net income was $1.4 billion ($4.12 per diluted share), which excludes a $151 million pre-tax gain on the sale of assets, net of tax and noncontrolling interest impacts. Adjusted EBITDA excludes refining planned turnaround costs ($183 million in Q2 2024) and the asset sale gain.
How is MPC returning capital to shareholders, and how much capacity remains?
MPC returned $3.2 billion in Q2 2024, including $2.9 billion of share repurchases and $290 million of dividends. It repurchased an additional $0.9 billion of shares through July 31, and $5.8 billion remains available under its authorizations. Shares outstanding fell to 341 million at June 30 from 355 million at March 31.
What should investors expect for the third quarter of 2024?
Management guided to total refinery throughput of 2,845 mbpd, refining operating costs of $5.35 per barrel (excluding turnarounds and D&A), distribution costs of $1.55 billion, planned turnaround costs of $330 million, and corporate expense of $200 million, including $20 million of D&A. Midstream growth is supported by the Preakness II plant starting operations, the additional 20% BANGL interest, and the Blackcomb pipeline FID.
How strong is MPC's liquidity and debt position?
At June 30, 2024, MPC held $8.5 billion of cash, cash equivalents, and short-term investments, plus $5 billion of availability on its bank revolver. Total consolidated debt rose to $28.9 billion from $27.3 billion, with MPC-level debt roughly flat at $6.9 billion and MPLX debt increasing to $22.1 billion. Operating cash flow of $3.2 billion in the quarter covered capital spending of $569 million and shareholder returns.
04—Continue