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Marathon Petroleum Corp. Reports Third-Quarter 2021 Results

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Cision

FINDLAY, Ohio, Nov. 2, 2021 /PRNewswire/ --

  • Reported third-quarter net income of $694 million, or $1.09 per diluted share; reported adjusted net income of $464 million, or $0.73 per diluted share

  • Progressing portfolio optimization by pursuing strategic alternatives for the Kenai refinery and related operations, which could include a sale; and continuing focus on lowering the cost structure

  • Completed ~25% of $10 billion capital return program through Oct 31; committed to complete remaining $7.5 billion by year-end 2022

  • Exceptionally strong year-to-date cash flow at MPLX supports a third quarter distribution consisting of a 2.5% increase to the base distribution amount and a special distribution amount; MPC expects to receive a total of $829 million

Marathon Petroleum Corp. (NYSE: MPC) today reported net income of $694 million, or $1.09 per diluted share, for the third quarter of 2021, compared with a net loss of $886 million, or $(1.36) per diluted share, for the third quarter of 2020.

Adjusted net income was $464 million, or $0.73 per diluted share, for the third quarter of 2021. This compares to an adjusted net loss of $649 million, or $(1.00) per diluted share, for the third quarter of 2020. For the third quarter of 2021, the adjustments exclude $48 million of pre-tax charges and include an incremental $272 million of tax expense to adjust all results to a 24% rate. The pre-tax charges were primarily related to Hurricane Ida, impairments, and idling costs. The accompanying release tables show these adjustments.

"This quarter we advanced several key initiatives while remaining committed to improving the aspects of the business within our control," said President and Chief Executive Officer Michael J. Hennigan. "We are pursuing a strategic transaction for the Kenai refinery, have added a new strategic partnership to progress our access to advantaged feedstocks across our renewables operations, achieved another project milestone for our Martinez renewable diesel conversion, and demonstrated the sustainability of our cost reduction initiatives.

"The year-to-date cash flow across the midstream business supported MPLX's decision to increase its base distribution amount and include a special distribution amount for the third quarter.

"Through today, we have completed 25% of our Speedway proceeds capital return program, which puts us well on track to meet our commitment of returning the full $10 billion by the end of 2022."

Results from Operations

Income from operations was $1.3 billion in the third quarter of 2021, compared to a loss of $619 million in the third quarter of 2020.


Three Months Ended

September 30,

(In millions)


2021



2020

Income (loss) from continuing operations by segment






Refining & Marketing

$

509



$

(1,569)


Midstream


1,042




960


Corporate


(186)




(197)


Income (loss) from continuing operations before items not allocated to segments


1,365




(806)


Items not allocated to segments:






LCM inventory valuation adjustment





530


Impairment and idling expenses


(25)




(433)


Restructuring expenses





(348)


Income (loss) from continuing operations

$

1,340



$

(1,057)








Income from discontinued operations






Speedway

$



$

456


Transaction-related costs





(18)


Income from discontinued operations

$



$

438








Income (loss) from continuing and discontinued operations

$

1,340



$

(619)


Adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) was $2.4 billion in the third quarter of 2021, compared with $1.0 billion for the third quarter of 2020. As detailed in the table below, adjusted EBITDA is shown for both continuing and discontinued operations. Adjusted EBITDA from continuing operations excludes refining planned turnaround costs.

Reconciliation of Income (Loss) from Operations to Adjusted EBITDA


Three Months Ended
September 30,

(In millions)


2021



2020

Refining & Marketing Segment






Segment income (loss) from operations

$

509



$

(1,569)


Add: Depreciation and amortization


462




456


Refining planned turnaround costs


205




234


Storm impacts


19





LIFO liquidation charge





256


Segment Adjusted EBITDA


1,195




(623)


Midstream Segment






Segment income from operations


1,042




960


Add: Depreciation and amortization


329




335


Storm impacts


4





Segment Adjusted EBITDA


1,375




1,295








Segment Adjusted EBITDA


2,570




672


Corporate


(186)




(197)


Add: Depreciation and amortization


32




39


Adjusted EBITDA from continuing operations

$

2,416



$

514








Speedway






Speedway

$



$

456


Add: Depreciation and amortization(a)





36


Adjusted EBITDA from discontinued operations

$



$

492








Adjusted EBITDA from continuing and discontinued operations

$

2,416



$

1,006








(a)

As of August 2, 2020, MPC ceased recording depreciation and amortization for Speedway.

Refining & Marketing (R&M)

R&M segment income from operations was $509 million in the third quarter of 2021, compared with a loss of $1.6 billion for the third quarter of 2020. Segment results include a LIFO liquidation charge of $256 million in the third quarter of 2020.

Segment adjusted EBITDA was $1.2 billion in the third quarter of 2021, versus a loss of $623 million for the third quarter of 2020. Segment adjusted EBITDA excludes refining planned turnaround costs, which totaled $205 million in the third quarter of 2021 and $234 million in the third quarter of 2020. It also excludes storm impacts of $19 million in the third quarter of 2021 and a non-cash LIFO liquidation charge of $256 million in the third quarter of 2020. The increase in R&M earnings was primarily due to higher crack spreads in all regions, wider differentials and higher throughput.

R&M margin was $14.51 per barrel for the third quarter of 2021, versus $8.28 per barrel, excluding the LIFO liquidation charge, for the third quarter of 2020. Crude capacity utilization was 93%, resulting in total throughput of 2.8 million barrels per day. If adjusted to include capacity idled in 2020, utilization would have been approximately 88%.

Midstream

Midstream segment income from operations, which primarily reflects the results of MPLX LP (NYSE: MPLX), was $1.0 billion in the third quarter of 2021, compared with $960 million for the third quarter of 2020.

Segment adjusted EBITDA was $1.4 billion in the third quarter of 2021, versus $1.3 billion for the third quarter of 2020. Third-quarter 2021 segment adjusted EBITDA excludes storm impacts of $4 million. Results for the quarter benefited from higher revenue and lower operating expenses.

Corporate and Items Not Allocated

Corporate expenses totaled $186 million in the third quarter of 2021, compared with $197 million in the third quarter of 2020.

Items not allocated to segments included net charges of $25 million in the third quarter of 2021 for facility idling costs and non-cash impairments. This is compared with net charges of $251 million in the third quarter of 2020.

Speedway

This business was sold on May 14, 2021. Historic results are reported as discontinued operations.

Financial Position and Liquidity

As of Sept. 30, 2021, MPC had $13.2 billion of cash, cash equivalents, and short-term investments. There are no borrowings outstanding under the company's $5 billion five-year bank revolving credit facility.

MPC debt at the end of the third quarter of 2021 totaled $9.1 billion, excluding MPLX debt. MPC's debt-to-capital ratio, excluding MPLX, was 24% at the end of the third quarter of 2021.

MPC intends to redeem all of the $1.25 billion outstanding aggregate principal amount of MPC's 4.5% senior notes due May 1, 2023, and the $850 million outstanding aggregate principal amount of MPC's 4.75% senior notes due December 15, 2023, including the portion of such notes for which Andeavor LLC, a wholly-owned subsidiary of MPC, is the obligor. The notes are expected to be redeemed on December 2, 2021, at a price equal to par, plus a make-whole premium calculated in accordance with the terms of the senior notes and accrued and unpaid interest to, but not including, the redemption date. MPC expects to fund the redemption amount with cash on hand.

Strategic and Operations Update

MPC continues to progress its portfolio optimization by pursuing strategic alternatives for the Kenai refinery, including a potential sale.

Since the end of the second quarter of 2021 through October 31, MPC repurchased approximately $1.5 billion of shares. The company has now completed approximately 25% of its $10 billion capital return program and reiterated its commitment to repurchase the remaining $7.5 billion of shares by the end of 2022.

MPC may utilize various methods to effect the repurchases, which could include open market repurchases, negotiated block transactions, accelerated share repurchases, tender offers or open market solicitations for shares, some of which may be effected through Rule 10b5-1 plans. The timing of repurchases will depend upon several factors, including market and business conditions, and repurchases may be discontinued at any time.

The company progressed its renewables initiatives. On October 15, 2021, the draft environmental impact report for the Martinez renewables fuels project was published by Contra Costa County in California. The Martinez facility is expected to produce 260 million gallons per year of renewable diesel by the second half of 2022, with pretreatment capabilities coming online in 2023. The facility is expected to be capable of producing 730 million gallons per year by the end of 2023.

During the quarter, the Dickinson renewable diesel facility has been running above its design charge rate, continues to increase its use of advantaged feedstocks, and continues to focus on actions to lower its carbon intensity.

In August, MPC announced an agreement to form a joint venture with Archer-Daniels-Midland Company ("ADM") for the production of soybean oil to supply rapidly growing demand for renewable diesel fuel. Under the terms of the agreement, the joint venture will own and operate ADM's previously announced soybean processing complex in Spiritwood, North Dakota, with ADM owning 75% of the joint venture and MPC owning 25 percent. When complete in 2023, the Spiritwood facility will source and process local soybeans and supply the resulting soybean oil exclusively to MPC. The Spiritwood complex is expected to produce approximately 600 million pounds of refined soybean oil annually, enough feedstock for approximately 75 million gallons of renewable diesel per year.

The Midstream segment remains focused on executing the strategic priorities of strict capital discipline, lowering the cost structure, and portfolio optimization. Several projects advanced during the quarter, including the Wink to Webster crude oil pipeline, the Whistler natural gas pipeline, and the reversal of the Capline crude pipeline. MPLX continues to evaluate opportunities to expand its logistics to meet the needs of today and participate in an energy-diverse future.

Today, MPLX declared a quarterly cash distribution of $1.28 per common unit for the third quarter of 2021, including a base distribution amount of $0.705 per common unit and a special distribution amount of $0.575 per common unit. The base distribution amount represents a 2.5% increase over the second quarter 2021 distribution. MPC expects to receive a total of $829 million.

Fourth Quarter 2021 Outlook


Refining & Marketing Segment:



Refining operating costs per barrel(a)(b)

$

5.40


Distribution costs (in millions)

$

1,300


Refining planned turnaround costs (in millions)

$

200


Depreciation and amortization (in millions)

$

465





Refinery throughputs (mbpd):



Crude oil refined


2,595


Other charge and blendstocks


200


Total


2,795



(a) Excludes refining planned turnaround and depreciation and amortization expense


(b) Includes impact from expected higher natural gas prices for the fourth quarter


Corporate (in millions)

$

170





Conference Call

At 11:00 a.m. EDT today, MPC will hold a conference call and webcast to discuss the reported results and provide an update on company operations. Interested parties may listen by visiting MPC's website at www.marathonpetroleum.com. A replay of the webcast will be available on the company's website for two weeks. Financial information, including the earnings release and other investor-related material, will also be available online prior to the conference call and webcast at www.marathonpetroleum.com.

About Marathon Petroleum Corporation

Marathon Petroleum Corporation (MPC) is a leading, integrated, downstream energy company headquartered in Findlay, Ohio. The company operates the nation's largest refining system. MPC's marketing system includes branded locations across the United States, including Marathon brand retail outlets. MPC also owns the general partner and majority limited partner interest in MPLX LP, a midstream company that owns and operates gathering, processing, and fractionation assets, as well as crude oil and light product transportation and logistics infrastructure. More information is available at www.marathonpetroleum.com.

Investor Relations Contacts: (419) 421-2071
Kristina Kazarian, Vice President
Brian Worthington, Manager
Kenan Kinsey, Analyst

Media Contact: (419) 421-3312
Jamal Kheiry, Communications Manager

References to Earnings and Defined Terms

References to earnings mean net income attributable to MPC from the statements of income. Unless otherwise indicated, references to earnings and earnings per share are MPC's share after excluding amounts attributable to noncontrolling interests.

Forward-Looking Statements

This press release contains forward-looking statements regarding Marathon Petroleum Corporation (MPC). These forward-looking statements may relate to, among other things, MPC's expectations, estimates and projections concerning its business and operations, financial priorities, strategic plans and initiatives, capital return plans, including the completion of the Speedway sale proceeds capital return program within the anticipated timeframe, operating cost and capital expenditure reduction objectives, and environmental, social and governance goals. You can identify forward-looking statements by words such as "anticipate," "believe," "commitment," "could," "design," "estimate," "expect," "forecast," "goal," "guidance," "imply," "intend," "may," "objective," "opportunity," "outlook," "plan," "policy," "position," "potential," "predict," "priority," "project," "proposition," "prospective," "pursue," "seek," "should," "strategy," "target," "will," "would" or other similar expressions that convey the uncertainty of future events or outcomes. MPC cautions that these statements are based on management's current knowledge and expectations and are subject to certain risks and uncertainties, many of which are outside of the control of MPC, that could cause actual results and events to differ materially from the statements made herein. Factors that could cause MPC's actual results to differ materially from those implied in the forward-looking statements include but are not limited to: general economic, political or regulatory developments, including inflation, changes in governmental policies relating to refined petroleum products, crude oil, natural gas or NGLs, or taxation; the magnitude, duration and extent of future resurgences of the COVID-19 pandemic and its effects, including the continuation or re-imposition of travel restrictions, business and school closures, increased remote work, stay at home orders and other actions taken by individuals, government and the private sector to stem the spread of the virus; the regional, national and worldwide demand for refined products and related margins; the regional, national or worldwide availability and pricing of crude oil and other feedstocks and related pricing differentials; the success or timing of completion of ongoing or anticipated projects or transactions, including the conversion of the Martinez Refinery to a renewable fuels facility and contemplated joint venture with ADM; the availability of desirable strategic alternatives for the Kenai refinery or other portfolio assets and the ability to obtain regulatory and other approvals with respect thereto; accidents or other unscheduled shutdowns affecting our refineries, machinery, pipelines, processing, fractionation and treating facilities or equipment, means of transportation, or those of our suppliers or customers; the impact of adverse market conditions or other similar risks to those identified herein affecting MPLX; and the factors set forth under the heading "Risk Factors" in MPC's Annual Report on Form 10-K for the year ended Dec. 31, 2020, and in other filings with the SEC. Any forward-looking statement speaks only as of the date of the applicable communication and we undertake no obligation to update any forward-looking statement except to the extent required by applicable law.

Copies of MPC's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other SEC filings are available on the SEC's website, MPC's website at https://www.marathonpetroleum.com/Investors/ or by contacting MPC's Investor Relations office. Copies of MPLX's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other SEC filings are available on the SEC's website, MPLX's website at http://ir.mplx.com or by contacting MPLX's Investor Relations office.


Consolidated Statements of Income (Unaudited)



Three Months Ended

September 30,


Nine Months Ended

September 30,

(In millions, except per-share data)


2021



2020



2021



2020

Revenues and other income:












Sales and other operating revenues(a)

$

32,321



$

17,408



$

84,647



$

51,807


Income (loss) from equity method investments(b)


122




117




306




(1,037)


Net gain on disposal of assets





1




3




6


Other income


170




22




366




69


Total revenues and other income


32,613




17,548




85,322




50,845


Costs and expenses:












Cost of revenues (excludes items below)(a)


29,563




16,673




77,824




48,517


LCM inventory valuation adjustment





(530)







1,185


Impairment expense





433







8,280


Depreciation and amortization


836




830




2,551




2,526


Selling, general and administrative expenses


681




673




1,881




2,080


Restructuring expenses





348







348


Other taxes


193




178




544




546


Total costs and expenses


31,273




18,605




82,800




63,482


Income (loss) from continuing operations


1,340




(1,057)




2,522




(12,637)


Net interest and other financial costs


328




359




1,053




1,032


Income (loss) from continuing operations before income taxes


1,012




(1,416)




1,469




(13,669)


Provision (benefit) for income taxes on continuing operations


(18)




(436)




21




(2,237)


Income (loss) from continuing operations, net of tax


1,030




(980)




1,448




(11,432)


Income from discontinued operations, net of tax





371




8,448




881


Net income (loss)


1,030




(609)




9,896




(10,551)


Less net income (loss) attributable to:












Redeemable noncontrolling interest


38




20




79




61


Noncontrolling interests


298




257




853




(501)


Net income (loss) attributable to MPC

$

694



$

(886)



$

8,964



$

(10,111)














Per share data












Basic:












Continuing operations

$

1.10



$

(1.93)



$

0.80



$

(16.93)


Discontinued operations





0.57




13.10




1.35


Net income (loss) per share

$

1.10



$

(1.36)



$

13.90



$

(15.58)














Weighted average shares outstanding (in millions)


633




650




645




649


Diluted:












Continuing operations

$

1.09



$

(1.93)



$

0.79



$

(16.93)


Discontinued operations





0.57




13.02




1.35


Net income (loss) per share

$

1.09



$

(1.36)



$

13.81



$

(15.58)














Weighted average shares outstanding (in millions)


637




650




649




649




(a)

In accordance with discontinued operations accounting, Speedway sales to retail customers and net results are reflected in income from discontinued operations, net of tax, and Refining & Marketing intercompany sales to Speedway prior to May 14, 2021, are presented as third-party sales.

(b)

The YTD 2020 period includes $1.3 billion of impairment expense.


Income Summary for Continuing Operations (Unaudited)


Three Months Ended

September 30,


Nine Months Ended

September 30,

(In millions)


2021



2020



2021



2020

Income (loss) from continuing operations by segment












Refining & Marketing

$

509



$

(1,569)



$

135



$

(3,610)


Midstream


1,042




960




2,991




2,734


Corporate


(186)




(197)




(523)




(625)


Income (loss) from continuing operations before items not allocated to segments


1,365



...