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MPC Refinery Unit on Way to Recovery

Zacks Equity Research

According to a person related with the development, independent oil refiner and marketer, Marathon Petroleum Corp.’s (MPC) Detroit based refinery is steadily returning to full-scale production. The refinery has a production capacity of 114,000 barrels per day.

Earlier the operations of a hydrotreater unit of the Detroit refinery, utilized to eliminate sulfur from diesel, came to a halt after a gasket blew up on Dec 19. However, the plant resumed partial operations on Dec 20 and the repair work is in progress. But on Dec 23, the repair work was completed and the refinery was expected to start full scale operations.

Marathon Petroleum’sDetroit refinery manufactures gasoline, diesel, propane, propylene, slurry and fuel-grade coke after processing a wide variety of crudes oil, ranging from light-sweet to heavy-sour.  

Findlay, Ohio-based Marathon Petroleum is a leading independent refiner, transporter and marketer of petroleum products. The company, in its current form, came into existence following the 2011 spin-off of Houston, Texas-based Marathon Oil Corporation’s (MRO) refining/sales business into a separate, independent and publicly traded entity. Marathon Petroleum operates through three segments: Refining and Marketing, Speedway (Retail), and Pipeline Transportation.

Since the pricing environment of crude is low this month, as compared to the abnormally high price before, refiners like Marathon Petroleum will be able to utilize the situation to increase earnings.

However, the requirement of policies to reformulate fuel and lower emission from refinery operations make the industry a highly regulated one. As a result, Marathon Petroleum is often forced to divert cash flows to ensure regulatory compliance, which can adversely impact profitability.

Marathon Petroleum holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the energy sector like Parker Drilling Co. (PKD) and Harvest Natural Resources Inc. (HNR). Both the stocks sport a Zacks Rank #1 (Strong Buy).

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Read the Full Research Report on PKD
Read the Full Research Report on HNR
Read the Full Research Report on MPC

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